Ward and Ors; Secretary, Department of Family and Community Services

[2004] AATA 605

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 605

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2003/429

GENERAL ADMINISTRATIVE  DIVISION

Re: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And:FREDERICK WARD AND

MARY WARD

Respondents

DECISION

Tribunal:       G. D. Friedman, Member

Date:             15 June 2004   

Place:            Melbourne

Decision:The Tribunal sets aside the decision under review and substitutes a decision that Mr Frederick Ward owes a debt of $4366.57 to the Commonwealth for overpayment of age pension between 20 March 1996 and 19 June 2001, and that Mrs Mary Ward owes a debt of $4398.37 to the Commonwealth for overpayment of age pension between 16 May 1996 and 19 June 2001, and that the debts be recovered.

(sgd) G.D. Friedman

Member

SOCIAL SECURITY ‑ age pension ‑ earnings from business ‑ deduction of expenses ‑ failure to notify changes in income ‑ overpayment ‑ debt to Commonwealth ‑ waiver

Social Security Act 1991 s1075(1), 1224(1), 1237A, 1237AAD

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

REASONS FOR DECISION

15 June 2004   G. D. Friedman, Member

1.      This is an application by the Secretary to the Department of Family and Community Services (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 19 March 2003.  The SSAT set aside a decision of an authorised review officer of Centrelink dated 16 October 2002.  The authorised review officer had affirmed a Centrelink decision, dated 25 June 2002, that Mr Frederick Ward had been overpaid age pension of $12,048.04 between 20 March 1996 and 19 June 2001, and Mrs Mary Ward had been overpaid age pension of $11,793.34 between 16 May 1996 and 19 June 2001; and as a result, Mr and Mrs Ward (the respondents) owed a recoverable debt to the Commonwealth of $12,048.04 and $11,793.34 respectively.  The SSAT substituted a decision that neither respondent had a debt to the Commonwealth as a consequence of the amounts received by Mrs Ward in remuneration during the period in question.

2.      At the hearing of this matter the applicant was represented by Mr M. Todd, a Centrelink advocate and Practice Specialist, on 6 November 2003; by Mr S. Meehan, a Centrelink advocate, on 6 April 2004; and by Ms P. Heffernan, a solicitor with the Australian Government Solicitor, on 27 May 2004.  Mr P. Testart of counsel represented the respondents.

3. The Tribunal had before it the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T1‑T47), plus four exhibits (Exhibits A1‑A4) lodged by the applicant and three exhibits (Exhibits R1‑R3) lodged by the respondents.

BACKGROUND

4.      Mrs Ward worked as a music therapist for aged care and similar institutions, and in 1995 she registered a business name Creative Sound and Music Therapy ‑ Mary Ward.   Between 1996 and 2001 she received payments from the Kingston Centre and the Trewint Nursing Home for sessional or part‑time work, and she generated other income through the business.  On 19 March 1996 Mr Ward applied for age pension and on 9 May 1996 Mrs Ward lodged her application for age pension. 

5.      Centrelink sent a number of notices to the respondents advising them of their obligation to notify Centrelink of any changes in their circumstances.  The respondents did not advise Centrelink of any changes.  In May 2002 Mrs Ward provided Centrelink with information about the business, including an Income and Assets Review form.  On 25 June 2002 Centrelink decided that, because the gross amount received by Mrs Ward as salary was assessable income for the purposes of calculating the respondents’ entitlement to age pension, and expenses or business losses incurred by her could not be deducted, the respondents had been overpaid age pension in the amounts of $12,048.84 for Mr Ward and $11,793.34 for Mrs Ward.  As a result of which, Centrelink decided to raise and recover debts in those sums.  On 16 October 2002 an authorised review officer affirmed the decision.  On 11 November 2002 the respondents lodged an application with the SSAT for review of the decision.  Following the SSAT decision, on 17 April 2003 the applicant lodged an application with the Tribunal for review of the SSAT decision.    

6.      On 6 June 2003 Centrelink re‑calculated the debts at $4618.08 for Mr Ward and $4401.08 for Mrs Ward (Exhibit A3).  On 8 October 2003 Centrelink further re‑calculated the debts at $4366.57 for Mr Ward and $4398.37 for Mrs Ward (Exhibit A4).

7.      The issues before the Tribunal were whether the respondents owed a debt to the Commonwealth and, if so, whether there were grounds for the debts to be waived or written off.     

EVIDENCE

8.      Ms Hwa Ing Hi (Doris) Lim, Administrative Service Officer, Centrelink, gave oral evidence that she carried out the re‑calculation of the debt on 8 October 2003 using information on Mrs Ward’s salary and her allowable deductions for business expenses.  Under cross‑examination she agreed that in re‑calculating the debt she used the figures for the rates of payment to the respondents held on Centrelink’s database, and she assumed that those figures were accurate.  Ms Lim said that she did not carry out the earlier re‑calculation, and indicated that her re‑calculation differed because the officer who carried out the earlier re‑calculation did not include deemed income.

9.      Ms Lim agreed that on 19 March 2004 Centrelink advised the respondents that, as a result of the re‑calculations, Centrelink had recovered approximately $1000 in excess from each of the respondents (Exhibit A2).  That money was repaid to them.

10.     Mr Todd gave oral evidence that he was the Centrelink advocate who had responsibility for the conduct of the matter.  Under cross‑examination he agreed that he had made assumptions about the intentions of the parties with respect to the amount of the debts, if any, owed by the respondents.  Mr Todd stated that he had attempted to resolve the matter through negotiation.

CONSIDERATION OF THE ISSUES

11. Ms Heffernan stated that the applicant now conceded that Mrs Ward had been conducting a business. Therefore, under s 1075(1) of the Social Security Act 1991 (the Act), deductions allowable under the taxation legislation are allowable in relation to assessing income for the purposes of calculating rates of age pension payable to the respondents.  She submitted that after taking into account permissible deductions of business income, Mrs Ward had still generated income between 1996 and 2001, and that Centrelink had not been notified of this income, resulting in an overpayment of age pension to the respondents in the amounts of $4366.57 for Mr Ward and $4398.37 for Mrs Ward.  Ms Heffernan said that the overpayment was a debt to the Commonwealth, and that there were no grounds for the debts to be written off or waived.

12.     Mr Testart submitted that the Tribunal should have no confidence in either of the re‑calculations because the accuracy of the payments to the respondents had not been verified by Centrelink before carrying out the re‑calculations.  He said that on this basis the Tribunal should find that there was no debt owed by the respondents.  On the question of waiver, Mr Testart submitted that there was no material to dispute the finding of the SSAT concerning the credibility of the respondents.  He said that the respondents had acted in good faith by providing all relevant information to Centrelink at the time of their application for age pension.  He said that the respondents did not contact Centrelink to advise of changed circumstances because during the relevant period there were no material changes in Mrs Ward’s net business income, which was below the estimated figure provided at the time of application for age pension.

13.     Mr Testart said that the respondents had suffered significant distress and anxiety when Centrelink originally informed the respondents that they owed debts of approximately $12,000 each.  He said that the respondents had been inconvenienced and treated poorly, and that Centrelink had unnecessarily prolonged the matter by acting unreasonably in its conduct of the proceedings.  Mr Testart stated that these matters constituted special circumstances for the purposes of the Act.

14.     In reaching its decision the Tribunal takes into account the oral evidence and written material, including the submissions made by the parties at the hearing.

15.     The Tribunal notes that the key issue before the SSAT was whether the work performed by Mrs Ward for the Kingston Centre and the Trewint Nursing Home was work performed by the owner of a business.  The Tribunal agrees with the findings of the SSAT, and the submission by Ms Heffernan, that Mrs Ward conducted a business.  She was therefore entitled to deduct amounts allowable under taxation legislation, for the purposes of determining the rate of age pension payable to her and Mr Ward.  The Tribunal notes that the SSAT found the respondents to be credible witnesses, and that this was not disputed by the applicant.  Therefore, the Tribunal accepts that the respondents believed that they had provided Centrelink with correct information at all times and that they assumed they had received the correct amount of age pension. 

16.     The SSAT found that the amounts received by Mrs Ward from the Kingston Centre and the Trewint Nursing Home, during the period in question, were income received as a person carrying on a business. Therefore, under s 1075(1) of the Act deductions allowable under taxation legislation were allowable in relation to treatment of her income for the purposes of her and her husband’s age pension entitlement.  Consequently, the SSAT stated that there was no debt owed by the respondents.  It noted that the letters received by the respondents set out the combined yearly income on which the respondents’ pensions were calculated, and that the respondents did not check the figures to verify that the amounts accurately reflected their income.  The SSAT concluded that if the respondents had done so and had contacted Centrelink, the overpayment may have been identified at an earlier stage.

17.      The Tribunal concludes that, after taking into account permissible reductions in business income, Mrs Ward generated income between 1996 and 2001, and that not all of her income was notified to Centrelink or taken into account in calculating the rate of age pension payable to the respondents.  In respect of the debt re‑calculations, the Tribunal acknowledges that the respective Centrelink officers did not verify the accuracy of each payment made to the respondents before carrying out the re‑calculations.  However, the Tribunal does not accept Mr Testart’s submission that this general statement should lead the Tribunal to conclude that there is no debt.

18.     The Tribunal accepts the evidence of Ms Lim that she used the correct Centrelink computer program in her re‑calculation, and that she included the income generated by Mrs Ward during the relevant period.  There was no specific material placed before the Tribunal to suggest that her calculations were incorrect.  Therefore, the Tribunal finds that, when measured against the respondents’ entitlements, there was an overpayment of age pension to Mr Ward in the amount of $4366.57 between 20 March 1996 and 19 June 2001, and to Mrs Ward in the amount of $4398.37 between 16 May 1996 and 19 June 2001.

19. The Tribunal finds that these overpayments are debts to the Commonwealth under s 1224(1) of the Act.

20.     Section 1236 of the Act provides that debts may be written off under certain circumstances.  The Tribunal finds that the respondents are receiving social security payments, they have the capacity to repay the debts, and the debts are recoverable at law.  Therefore, there are no grounds to write off the debts.

21. Section 1237A of the Act provides for waiver of a debt arising from administrative error:

1237A.(1)   Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt

1237A.(1A)     Subsection (1) only applies if:

(a)the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b)if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

The Tribunal accepts that the amount of the debts as originally calculated by Centrelink and affirmed by the authorised review officer were incorrect. However, in accepting the accuracy of the re‑calculation as carried out by Ms Lim in October 2003, the Tribunal finds that these re‑calculated amounts were based on the earnings and allowable business deductions of the business operated by Mrs Ward. Therefore, the debts were not attributable solely to administrative error by the Commonwealth. As a result, the debts cannot be waived under s 1237A of the Act.

22. Section 1237AAD of the Act provides for waiver of the debt in certain circumstances:

1237AAD.  The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a)the debt did not result wholly or partly from the debtor or another person knowingly:

(i)        making a false statement or false representation; or

(ii)failing or omitting to comply with a provision of this Act or the 1947 Act; and

(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c)it is more appropriate to waive than to write off the debt or part of the debt.

23.     In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the Tribunal held that the special circumstances, referred to in s 1237AAD(b) of the Act, must be unusual, uncommon or exceptional. The Tribunal accepts Mr Testart’s submission that the respondents were credible witnesses, who had suffered distress and anxiety when the debts were calculated incorrectly at around $12,000 each, before the applicant lodged its application for review with the Tribunal. The Tribunal also accepts that the proceedings before the Tribunal were prolonged through no fault of the respondents and that they believed that they had acted in good faith at all times.

24.     On the other hand, the Tribunal notes that the respondents received competent legal assistance in the preparation of the matter, and were represented by experienced counsel who had the opportunity to cross‑examine the applicant’s witnesses and present all relevant material at the hearing.  For these reasons the Tribunal is satisfied, on balance, that the circumstances in this case are not unusual, uncommon or exceptional, and do not constitute special circumstances (other than financial hardship alone). Therefore, the waiver provisions of s 1237AAD of the Act cannot apply, and the Tribunal finds that Mr Ward owes a debt of $4366.57 to the Commonwealth, and Mrs Ward owes a debt of $4398.37 to the Commonwealth.

DECISION

25.      The Tribunal sets aside the decision under review and substitutes a decision that Mr Ward owes a debt of $4366.57 to the Commonwealth for overpayment of age pension between 20 March 1996 and 19 June 2001, and Mrs Ward owes a debt of $4398.37 to the Commonwealth for overpayment of age pension between 16 May 1996 and 19 June 2001, and that the debts be recovered.

I certify that the twenty-five [25] preceding paragraphs are a true copy of the reasons for the decision of:

G.D.Friedman, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Dates of hearing:  6 November 2003, 6 April 2004, 27 May 2004
Date of decision:  15 June 2004

Advocates for applicant:              Mr M. Todd, Centrelink (6 November 2003), Mr S. Meehan, Centrelink (6 April 2004), Ms P. Heffernan, Australian Government Solicitor (27 May 2004)

Counsel for respondents:            Mr P. Testart
Solicitor for respondents:             Victoria Legal Aid