WFNV and Secretary, Department of Social Services (Social security second review)

[2025] ARTA 1000

WFNV and Secretary, Department of Social Services (Social security second review) [2025] ARTA 1000 (24 June 2025)

Applicant:RE WFNV

Respondent:                   Secretary, Department of Social Services

Tribunal Number:           2022/10548

Tribunal:Senior Member J Longo (second review)

Place:Melbourne

Date:24 June 2025

Decision:The decision under review is set aside and, in substitution, the Tribunal decides that the Applicant does have debts of family tax benefit due to the Commonwealth in the amount totalling $38,910.52, but the recovery of the debts is written off for a period of 12 months from the date of this decision.

Statement made on 24 June 2025 at 12:25pm

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 201(1A) - 201(1B) of the Social Security (Administration) Act 1999.

Catchwords

Family tax benefit – eligibility – whether care determination of Child Support Registrar should apply to family tax benefit – whether there is eligibility to family tax benefit where there is no care – whether there are debts owed to the Commonwealth – whether the debts are recoverable – write off decision set aside

Legislation

A New Tax System (Family Assistance) Act 1999 (Cth)

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth)

Administrative Review Tribunal Act 2024 (Cth)

Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (Cth)

Electronic Transactions Act 1999 (Cth)

Cases

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

Dranichnikov v Centrelink [2003] FCAFC 133

G v MIBP [2018] FCA 1229

Groth v Secretary, Department of Social Security [1995] FCA 1708

Jonauskas and Secretary, Department of Family and Community Services [2001] AATA 72

Lumsden and Secretary Department of Social Security [1986] AATA 228

Milne and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1027

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Re Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729

Secondary Materials

Family Assistance Guide

Statement of Reasons

BACKGROUND

1.   This application is about whether the Applicant was overpaid family tax benefit for the 2015-16, 2016-17, 2017-18, 2018-19, and 2019-20 financial years.

2.   Family tax benefit is a payment paid to assist with the costs of a child or children. It is paid to a recipient where they have the care of a child or children. The level of entitlement depends, amongst other things, on whether the recipient has an eligible child in their care.

3.   On 30 July 2020, the Child Support Registrar made a determination that the Applicant had 0% care of her son from 20 December 2015.[1]

[1] [ST2].

4.   As a result of the determination of care by the Child Support Registrar, from 15 December 2015, Services Australia – Centrelink (the Agency) applied the 0% care determination to the Applicant’s entitlement to family tax benefit and decided that the Applicant was not eligible for family tax benefit for the period from 20 December 2015 to 30 June 2020. Consequently, on 18 August 2020 the Agency decided to raise and recover debts consequential to overpayments of family tax benefit for the financial years as follows:

·$8,902.35 for the 2017-18 financial year;

·$9,530.15 for the 2018-19 financial year; and

·$10,533.48 for the 2019-20 financial year.

5.   On 10 November 2020, the Agency decided to raise and recover debts consequential to overpayments of family tax benefit for the following financial years:

·$2,928.87 for the 2015-16 financial year; and

·$7,015.67 for the 2016-17 financial year.

6.   On 11 November 2020, an authorised review officer affirmed the raising and recovery of the debts for 2015-16, 2016-17, 2017-18, 2018-19, and 2019-20.[2] On 15 March 2021, the Applicant sought review of the decision by the Social Services and Child Support Division (first review) of the Administrative Appeals Tribunal (the AAT).

[2] [T15].

7.   On 4 June 2021, on first review the AAT set aside the decision and decided that the Applicant had debts of family tax benefit for the 2015-16, 2016-17, 2017-18, 2018-19, and 2019-20 financial years but that recovery of the debts was written off for a period of nine months from 4 June 2021.

8.   The Applicant sought review of the decision on 19 December 2022 with the General and Other Division of the AAT (second review) and sought an extension of time for the lodgement of the application. On 30 August 2023 the AAT made an order to extend the time for lodgement of the application for review until 19 December 2022.

9.   From 14 October 2024, the AAT became the Administrative Review Tribunal (‘the Tribunal’). Under the transitional provisions[3]applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal.

[3] Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024.

10.   For the reasons that follow, I have set aside the decision under review. The evidence before the Tribunal comprises the documents provided by the Applicant and the Respondent and the oral evidence and submissions of the Applicant.[4] The Respondent’s legal representative also made written and oral submissions.

[4] T-documents, pages 1 to 289; Supplementary T-document pages 290-382.

ISSUES

11.   The issues that arise in this application are whether:

·There is jurisdiction to review the care determination of the Child Support Registrar dated 30 July 2020;

·The Applicant has been overpaid family tax benefit; and, if so

·The Applicant is required to repay the consequential debt or debts.

CONSIDERATION

12.   The legislation relevant to this matter is contained in the A New Tax System (Family Assistance) Act 1999 (Cth) (the Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the Administration Act). In conducting this review, I have also considered the Family Assistance Guide (the Guide) where relevant. However, I am not bound to follow it.[5]

[5] Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634; G v MIBP [2018] FCA 1229.

Is there jurisdiction to review the care determination of the Child Support Registrar?

13. Subsection 21(1) of the Act provides the eligibility criteria for family tax benefit. One of the requirements for eligibility is that the family tax benefit recipient has at least one FTB child. Section 22 of the Act provides as follows:

When an individual is an FTB child of another individual

(1)  An individual is an FTB child of another individual (the adult) in any of the cases set out in this section.

Individual aged under 16

(2)  An individual is an FTB child of the adult if:

(a)  the individual is aged under 16; and

(b)  the individual is in the adult's care; and

(c)  the individual is an Australian resident, is a special category visa holder residing in Australia or is living with the adult; and

(d)  the circumstances surrounding legal responsibility for the care of the individual are those mentioned in paragraph (5)(a), (b) or (c).

Individual aged 16 - 17

(3)  An individual is an FTB child of the adult if:

(a)  the individual has turned 16 but is aged under 18; and

(b)  the individual is in the adult's care; and

(c)  the individual is an Australian resident, is a special category visa holder residing in Australia or is living with the adult; and

(d)  the circumstances surrounding legal responsibility for the care of the individual are those mentioned in paragraph (5)(a), (b) or (c); and

(e)  the individual is a senior secondary school child.

Individual aged 18 - 19

(4)  An individual is an FTB child of the adult if:

(a)  the individual is aged 18 or is aged 19 and the calendar year in which the individual turned 19 has not ended; and

(b)  the individual is in the adult's care; and

(c)  the individual is an Australian resident, is a special category visa holder residing in Australia or is living with the adult; and

(d)  the individual is a senior secondary school child.

Legal responsibility for the individual

(5)  The circumstances surrounding legal responsibility for the care of the individual are:

(a)  the adult is legally responsible (whether alone or jointly with someone else) for the day - to - day care, welfare and development of the individual; or

(b)  under a family law order, registered parenting plan or parenting plan in force in relation to the individual, the adult is someone with whom the individual is supposed to live or spend time; or

(c)  the individual is not in the care of anyone with the legal responsibility for the day - to - day care, welfare and development of the individual.

Percentage of care at least 35%

(7)  If an individual's percentage of care for a child during a care period is at least 35%, the child is taken to be an FTB child of that individual for the purposes of this section on each day in that period, whether or not the child was in that individual's care on that day.

Note:  If an individual's percentage of care for a child during a care period is less than 35%, the child is taken not to be an FTB child (see section 25).

14. Subsection 25(1) of the Administration Act outlines a person’s obligations to notify of events affecting eligibility for family tax benefit payments:

Obligation to notify change of circumstances

(1)  If, after a claimant becomes entitled to be paid family tax benefit by instalment:

(a)  anything happens that causes the claimant to cease to be eligible for family tax benefit on the days for which the claimant will become entitled to be paid the benefit under the determination concerned, or to become eligible for a daily rate of family tax benefit that is less than that specified in the determination; or

(b)  the claimant becomes aware that anything is likely to happen that will have that effect;

the claimant must, in the manner set out in a written notice given to the claimant under section 25A, as soon as practicable after the claimant becomes aware that the thing has happened or is likely to happen, notify the Secretary that it has happened or is likely to happen.

Penalty:  Imprisonment for 6 months.

(2)  Strict liability applies to the element of an offence against subsection (1) that a notice is a notice given under section 25A.

(3)  If, after the Secretary determines under subsection 23(3B) that a claimant has instalment periods of 7 days:

(a)  anything happens that causes the claimant to cease to be a member of a class of persons specified under subsection 23(3A); or

(b)  the claimant becomes aware that anything is likely to happen that will have that effect;

the claimant must, in the manner set out in a written notice given to the claimant under section 25A, as soon as practicable after the claimant becomes aware that the thing has happened or is likely to happen, notify the Secretary that it has happened or is likely to happen.

(4)  If a thing that is described in both subsections (1) and (3) happens or is likely to happen, subsection (1) applies in relation to the thing but subsection (3) does not.

15. Section 35T of the Act relevantly provides as follows:

Percentages of care determined under the child support law that apply for family assistance purposes

(1)  If:

(a)  the Secretary is required by a provision of Subdivision D of this Division to determine an individual's percentage of care for a child in relation to a claim for payment of family tax benefit; and

(b)  the Child Support Registrar has determined the individual's percentage of care for the child (the child support care determination) under a provision of Subdivision B of Division 4 of Part 5 of the Child Support (Assessment) Act 1989 ; and

(c)  the child support care determination has not ceased to apply or been revoked;

then:

(d)  the child support care determination has effect, for the purposes of this Act as it applies to such a claim, as if it were a determination of the individual's percentage of care for the child that has been made by the Secretary under a corresponding provision of Subdivision D of this Division; and

(e)  the individual's percentage of care for the child applies, for the purposes of this Act as it applies to such a claim, in the same way, and in the same circumstances, in which it would apply if it had been determined by the Secretary under such a provision; and

(f)  the child support care determination may cease to apply, or be revoked, under Subdivision D or E of this Division in the same way, and in the same circumstances, in which a determination made under Subdivision D of this Division may cease to apply, or be revoked.

(2) This section ceases to apply to the child support care determination if the determination ceases to apply, or is revoked, under Subdivision B or C of Division 4 of Part 5 of the Child Support (Assessment) Act 1989.

16.   Both before me and before the AAT on first review, the Applicant raised the issue of the care of the child and stated that the care as determined by the Child Support Registrar was not correct. As stated above, the Child Support Registrar made a determination that the Applicant had 0% care of the child and that the child was in the 100% care of the father from 20 December 2015.

17.   I note that the initial decision regarding the care of the child was made by a delegate of the Child Support Registrar on 30 July 2020[6] and that the Applicant objected to this decision. A decision on objection, which was disallowed by the delegate of the Child Support Registrar, was made on 29 September 2020.[7]

[6] [ST1].

[7] [ST2].

18. At the time of the objection decision referred to above, section 89 of the Child Support (Registration and Collection) Act 1988 (Cth) (the Collection Act) provided as follows:

89 Application for AAT first review

An application may be made to the AAT for review (AAT first review) of a decision of the Registrar if:

(a) the decision is set out in an item of the following table; and

(b) the person is set out in that item.

19. Item 2 of the table to section 89 of the Collection Act specified that the person who objected to the original decision of ‘a decision under subsection 87(1) on an objection to a decision (the original decision) of the Registrar’ could seek ‘AAT first review’ of the decision. Accordingly, the Applicant had the right to seek review of the decision on objection made on 29 September 2020 disallowing her objection to the original decision of the Child Support Registrar which determined the care percentage of the child in this matter. As at the date of the hearing, no application for review has been made with the AAT or this Tribunal of that decision on objection.

20.   The Applicant gave evidence at hearing as to the care of her son. She conceded that he was not in her care 100% of the time but said he was in her care the majority of the time. The Applicant also stated that she was travelling to Victoria to look for work.

21.   In submissions to the Tribunal, which I accept, the Respondent stated that the decision in relation to the care determination as made by the Child Support Registrar could not be reviewed on second review in this application, as the AAT first review did not review a decision of the Registrar on an objection to a decision of the Registrar. Rather, the AAT first review found that the ‘for the purposes of the family assistance legislation with effect from 20 December 2015 in accordance with section 35T of the Act…it is not open to the tribunal in this review to review the care percentage determination…’.[8]

[8] [T2] page 8 (at paragraph 10).

22.   It was further submitted that the AAT first review decision did not make a decision affirming, varying or setting aside the care determination and consequently the decision cannot be reviewed on second review. I am satisfied that the AAT first review did not make a decision affirming, varying or setting aside the care determination. The AAT on first review specifically stated that it was not open to the AAT on first review to review the care percentage determination.[9] As stated in the AAT first review decision, the Tribunal cannot make a decision regarding the care determination. As already noted, the Applicant has not sought review of the objection decision made on 29 September 2020.

[9] [T2] page 8 (at paragraph 11).

Has the Applicant been overpaid family tax benefit and should the debt or debts be repaid?

23. Subsection 71(1) of the Act provides that there is a debt to the Commonwealth if an amount was paid to an individual by way of family tax benefit to which they were not entitled. As it has been determined that the Applicant did not have at least 35% of the care of her son from 20 December 2015, the Applicant had no entitlement to family tax benefit from 20 December 2015. Therefore, as the Applicant was not entitled to any family tax benefit, the amounts received as stated below, are debts to the Commonwealth:

·$2,928.87 for the 2015-16 financial year;

·$7,015.67 for the 2016-17 financial year;

·$8,902.35 for the 2017-18 financial year;

·$9,530.15 for the 2018-19 financial year; and

·$10,533.48 for the 2019-20 financial year.

24. Section 82 of the Administration Act provides that a debt due to the Commonwealth under the family assistance law is recoverable by one or more of the methods set out in that section. Usually, a debt must be repaid unless the law provides otherwise. As referred to by the Respondent in their Statement of Facts Issues and Contentions (SFIC), French J recognised this general premise in Secretary, Department of Social Security v Hales [1998] FCA 210 (‘Hales’) where it was stated as follows:

The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act 1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.

25. Sections 95, 97 and 101 of the Administration Act permit writing off or waiving of a debt or part of a debt in certain circumstances and are of potential relevance.

Sole administrative error waiver

26. Section 97 of the Administration Act provides that a debt (or the relevant proportion thereof) must be waived if it was attributable solely to an administrative error made by the Commonwealth, where the amount overpaid was received by the person in good faith. Further, where the debt is raised before specified time periods, including the end of the income year after the income year in respect of which the debt accrued, for waiver to occur under section 97 of the Administration Act, the debtor must demonstrate that being required to repay the debt would cause them severe financial hardship.

27.   The Respondent’s contentions were that there was no administrative error on the part of the Commonwealth. It was submitted that notification was provided to the Applicant as to the care percentages used for the calculation of the rate of family tax benefit and that the letters obliged the Applicant to notify the Agency if that information was incorrect. In essence, the Respondent submits that the debts arose because the Applicant failed to advise that the care percentages as used to calculate the rate of family tax benefit were incorrect.

28. I am satisfied that there was no administrative error on the part of the Respondent. The cause of the debt is attributable to the Applicant not advising of the correct care of the child for the period. Therefore, the debts cannot be waived pursuant to section 97 of the Administration Act. As I have found that there was no error by the Respondent, it is not necessary for me to consider whether the overpaid amounts were received in good faith by the Applicant or whether repayment would cause her severe financial hardship for the purposes of this section.

Special circumstances waiver

29. There is one further provision that requires consideration in the circumstances of the Applicant’s matter. Section 101 of the Administration Act provides for the discretionary waiver of a debt if, amongst other things, the debt did not result in any part from a person knowingly making a false statement or a false representation, and there are special circumstances (other than financial hardship alone) that make it desirable to waive the debt.

30.   I have relied upon the evidence of the Applicant at hearing. The Applicant stated that she could not recall receiving notifications relating to her family tax benefit which stated that she had 100% care of her son. She stated that she had subscribed to receive correspondence through myGov but could not recall receiving email notifications and did not recall reading the letters sent to her between 2015 and 2020. I note that the Respondent’s SFIC states that the notices issued to the Applicant were emailed via her myGov inbox.[10] I accept that, pursuant to section 14A of the Electronic Transactions Act 1999 (Cth), the Applicant is deemed to have received the notifications sent to her between December 2015 and 2020.

[10] [T18].

31.   The Respondent has submitted that the Applicant did not comply with her notification requirements to advise of the care percentages of the child. The Applicant’s evidence was that she could not recall either receiving or reading the letters sent to her. I have considered the Respondent’s submissions in this regard, and the case authorities referred to in relation to the issue.[11] I am, however, satisfied based on the Applicant’s sworn oral evidence that the Applicant genuinely could not recall receiving or reading the letters sent to her and am satisfied that she did not knowingly make a false statement or a false representation or knowingly fail or omit to comply with a provision of the family assistance law and find that the debts did not result wholly or partly from the Applicant or any other person knowingly making a false statement or false representation or knowingly failing or omitting to comply with one of the Acts.

[11] See Jonauskas and Secretary, Department of Family and Community Services [2001] AATA 72 at para (73); Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at para (74).

32.   It is open, then, to consider whether there are special circumstances that make it desirable to waive the debt. ‘Special circumstances’ is not a term defined in the legislation. Previous decisions of courts and tribunals establish that for special circumstances to be found to exist it is necessary to examine the individual circumstances of the case and find something about a person’s circumstances to take their situation out of the usual or ordinary course.[12] That may be where it would be unfair, unintended or unjust for the debt or the entirety of a debt to stand.[13] The Federal Court in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 emphasised that it is not the intention of Parliament that the exercise of this discretion be confined to the “exceptional” case, but rather that there is something that distinguishes the case from the ordinary or usual case. The presumptive position is that a debt that is properly raised must be paid and a person should not keep the benefit of funds to which there was no entitlement.

[12] For example, Dranichnikov v Centrelink [2003] FCAFC 133.

[13] Groth v Secretary, Department of Social Security [1995] FCA 1708 at [12] in relation to the usage of the term in another legislative context.

33.   As already noted the Applicant’s evidence at hearing included that although her son was not in her care 100% of the time, he was in her care the majority of the time. She was travelling to Victoria to look for work and stated that, on occasion, she would drive to Victoria and occasionally flew to Victoria and when in Victoria she was living in Hadfield or with her sister. On occasion, her son would travel with her. She was paying some rent for the property in Hadfield but could not recall specific details. She stated that she had used the Hadfield address for her correspondence during the period under review.

34.   The Applicant stated at hearing that she was hit by a motor vehicle while riding her bicycle in October 2020, and as a result of this accident sustained a number of injuries, including lacerations to her face, teeth being knocked loose and pain in her right hand and right knee. I note that the documents before me contained a medical report by Associate Professor Robert King, Neurologist, dated 5 April 2023,[14] which outlines her injuries and ongoing symptoms as a result of this accident. In addition to this report, I have a Job Capacity Assessment report[15] and a government contracted doctor disability medical assessment addressing the Applicant’s medical conditions and circumstances.[16] The Applicant has also provided other medical reports, some of which are only extracts of the report, which also discuss her medical conditions, symptoms and treatment.

[14] [S3].

[15] [S4].

[16] [S5].

35.   The Applicant gave evidence that she has difficulty with her right wrist, elbow and knee and has had further scans and investigations regarding these injuries. She stated that she has trouble walking and is experiencing constant headaches. Associate Professor King’s report diagnoses traumatic brain injury which is confirmed in the disability medical assessment.

36.   In a previous ‘verification of medical conditions’ form completed on 22 April 2024, the Applicant’s GP states that the Applicant has been diagnosed with severe chondral degeneration of the right knee, severe osteoarthritis of the right hip and low mood/depression. In a further letter dated 16 May 2024, her GP states that the Applicant has been diagnosed with post-traumatic stress disorder, depression, osteoarthritis and chondral degeneration. This letter also states that the Applicant is taking medication for pain, insomnia and depression. A medical summary from 1 December 2022 also states that the Applicant takes medication for nasal congestion; it was confirmed at hearing that this medication was continuing.

37.   The Applicant stated that she is still getting her teeth repaired because they are loose. She stated that she is struggling to cover her medication costs with her current disability support pension payments. She has difficulty walking and has had further scans of her wrist, elbow and knee, at her own cost. She has made a personal injury claim to the Transport Accident Commission (TAC), and has a lawyer engaged to assist in this process, but the TAC is disputing her injuries to her wrist, elbow and knee. There has been no settlement of the TAC claim and this matter is ongoing.

38.   She stated that while she is living alone, she is reliant on her daughter who lives nearby to help with daily activities. She is reliant on her daughter and parents and has a number of outstanding utility bills, including gas and electricity, for which she has payment plans. She stated that she has a Zip Pay loan of $10,000 and an Afterpay loan of $500. She has not been repaying these debts and is not on a repayment plan. They are seeking repayment but as yet have not commenced any enforcement process of the debts. The Applicant also stated that she has a debt to the Australian Taxation Office (ATO), of approximately $65,000 but that this debt is not being recovered. I note that the Agency sought information from the ATO regarding any potential debt. A copy of the response from the ATO was provided to the Applicant and the Tribunal, which stated that there was no information to provide and that the Applicant’s ABN was cancelled from 31 December 2012.

39.   The Applicant further stated that she receives around $1,355 per fortnight in disability support pension payment and her rent is $1,100 per fortnight which does not leave much for her other expenses. She stated that she is potentially looking at bankruptcy due to her debts and is also considering moving in with her elderly parents due to her ongoing costs. The hearing papers do not reveal any payment having been made towards the family tax benefit debts.

40. The Respondent submits that the Applicant’s circumstances are not sufficiently unusual, uncommon or exceptional as to make it appropriate to exercise the discretion under section 101 of the Administration Act. The Respondent also referred to the potential for a settlement of the Applicant’s compensation claim with TAC in relation to the accident and the payment of eligible treatment for her medical conditions and also her personal injury claim due to her injuries. The Respondent stated that even if there were special circumstances, it would be more appropriate to write off part or all of the debts rather than waive the debt or debts.

41. I accept that the psychosocial and health circumstances of the Applicant are major factors in her day to day life. I accept the Applicant’s evidence that the family tax benefit debts are causing anxiety and that the potential requirement for repayment will affect her ability to meet day to day costs. The Applicant’s financial capacity is limited to her disability support pension payments, there are ongoing medical treatment expenses and there are significant other debts which she is not presently repaying. However, I am not satisfied that these are circumstances which are sufficiently uncommon or unusual as to make it appropriate to exercise the discretion under section 101 of the Administration Act. Accordingly, I find that it is not appropriate to exercise the discretion under section 101 of the Administration Act.

Write off

42. Section 95 of the Administration Act states that recovery of a debt can be written off – that is, recovery can be temporarily suspended – only if certain criteria are met:

Secretary may write off debt

(1)  The Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period or otherwise, but only if subsection (2), (4A) or (4B) applies.

Secretary may write off debt if debt irrecoverable or debt will not be repaid etc.

(2)  The Secretary may decide to write off a debt under subsection (1) if:

(a)  the debt is irrecoverable at law; or

(b)  the debtor has no capacity to repay the debt; or

(c)  the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

(d)  it is not cost effective for the Commonwealth to take action to recover the debt.

…

(4)  For the purposes of paragraph (2)(b), if a debt is recoverable by means of:

(a)  deductions under section   84; or

(aa) deductions under section 1231 of the Social Security Act 1991 ; or

(b)  setting off under section   84A family assistance; or

(c)  application of an income tax refund under section   87; or

(d)  setting off under section   87A against a payment referred to in paragraph   82(1)(c) (child care service payments);

the person is taken to have a capacity to repay the debt unless recovery by those means would cause the person severe financial hardship.

43.   The Applicant is currently in receipt of disability support pension payments. Part 6.7.3.10 of the Guide states that ‘A debtor is taken to have capacity to repay unless recovery would result in the debtor being in severe financial hardship. The test for financial hardship is based on the debtor's individual circumstances.’ The term ‘severe financial hardship’ is not defined in the Act or Administration Act. What constitutes severe financial hardship in the context of the repayment of debts has been considered by the AAT. In Lumsden and Secretary Department of Social Security [1986] AATA 228 [19], the AAT said as follows:

19. The expression "severe financial hardship" is not defined. In its relevant sense "severe" means "hard to sustain or endure; arduous" (The Shorter Oxford English Dictionary 1973, pp. 1957-8). "Financial" means "of or pertaining to finance or money matters" (ibid p. 752). "Hardship" includes severe suffering; extreme privation. (ibid p. 926). "Severe financial hardship" is the equivalent of "arduous financial suffering". The meaning of the words is not in doubt: they are a clear direction by the legislature that the section is only to be applicable when the requisite severity of financial hardship is present.

44.   In Re Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729, the AAT observed:

Severe financial hardship, while not implying destitution, goes beyond straitened financial circumstances and imports a need for the particular case of a person to include financial suffering of a severe or extreme nature.[17]

[17] [2003] AATA 729 at [20].

45.   In Milne and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1027, which was a decision relating to the recovery of a newstart allowance debt, the AAT said as follows:

31. The term “severe financial hardship” is not defined in the SS Act. However, in Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225, the Tribunal found that for this requirement to be satisfied a person’s entire financial position would need to be materially less than the current rate of pension.[18]

[18] [2010] AATA 1027 at [31].

46.   As already noted, the Applicant stated that that she is currently in receipt of disability support pension payments of approximately $1,355 per fortnight, with her rent being $1,100 per fortnight. She stated that she is on a payment plan for her utilities and is struggling to meet her medication costs, and has outstanding debts to Afterpay ($500) and Zip Pay ($10,000) and is in arrears for her mobile phone handset repayments of $160 per month. These debts are not currently being repaid but she is being sent reminders for the repayments to be made towards these debts. She is reliant on her parents and daughter as she cannot afford her expenses.

47.   In the present circumstances the Applicant has other outstanding debts towards which she is not making any payments. I have no evidence of these debts in the documents before me, but I accept that the Applicant owes these debts to Afterpay and Zip Pay and is not meeting these repayments. Even if I did not accept these debts, the Applicant’s financial circumstances are very strained. After the payment of fortnightly rent, the Applicant has available approximately $255 per fortnight for food, medication, utilities and other expenses.

48. It was submitted by the Respondent that as the Applicant is in receipt of disability support pension payments, there is some capacity to repay, even though limited. While I accept this general proposition, in the particular circumstances of the Applicant at present I am of the view that the Applicant does not have the capacity to repay the debt and if recovery were to commence this would cause severe financial hardship. Accordingly, I find that the requirements for write off of the debts under section 95 of the Administration Act are met.

Conclusion

49.   I am satisfied that the present circumstances of the Applicant and her financial hardship make it appropriate for the debts to be written off. I am satisfied that the write off of the debts for a period of 12 months will assist the Applicant regain control of her financial situation, provide space to focus on her health and may also allow time for the resolution of her TAC claim, which will alleviate some, if not all, of her financial hardship. A delay in having to repay the debts will serve the purpose of giving the Applicant respite from debts and an opportunity to improve her situation.  

DECISION

50.   The decision under review is set aside and, in substitution, the Tribunal decides that the Applicant does have debts of family tax benefit due to the Commonwealth in the amount totalling $38,910.52, but the recovery of the debts is written off for a period of 12 months from the date of this decision.

Date of hearing:         20 March 2025

Applicant:                   WFNV

Respondent:              Secretary, Department of Social Services