White and Secretary, Department of Family and Community Services

[2004] AATA 13

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 13

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2003/597

GENERAL ADMINISTRATIVE DIVISION		)
Re		KATHLEEN WHITE

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Michael Sassella, Senior Member

Date9 January 2004

PlaceSydney

Decision

The decision under review is set aside. The tribunal substitutes its own decision that the applicant’s debt is waived in accordance with s 101 of the A New Tax System (Family Assistance)(Administration) Act 1999.

  [SGD] Mr M Sassella   
  Senior Member

CATCHWORDS

SOCIAL SECURITY - Family Tax Benefit - overpayment  - debt due to Commonwealth – debt waived – special circumstances as ground for waiver – severe financial hardship not demonstrated should waiver be refused – administrative error present

Social Security Act 1991 ss 19C, 19D, 1129, 1237A, 1237AAD

A New Tax System (Family Assistance) Act 1999 Schedule 1 clause 17, Schedule 3 clause 2(1), (7)

A New Tax System (Family Assistance) (Administration) Act 1999 ss 20, 71(2), 95, 96, 97, 101

Re Vitalone and Secretary, Department of Social Security (1995) 38 ALD 169

Re Secretary, Department of Social Security and Hoy (1998) 52 ALD 477

Re Drake and Minister for Immigration and Ethnic Affairs (1978) 2 ALD 634

Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62

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

Re Secretary, Department of Social Security and McAvoy (1996) 44 ALD 721

Re McDonald and Secretary, Department of Family and Community Services [1999] AATA 438

Re Powell and Secretary, Department of Family and Community Services [2001] AATA 195

Re Mills and Secretary, Department of Social Security (AAT 12000, 18 July 1997)

Re Webb and Secretary, Department of Social Security (1998) 50 ALD 569

REASONS FOR DECISION

9 January 2004 Michael Sassella, Senior Member           

RESULT

The tribunal has decided to waive Mrs White’s debt because of the special circumstances of the case.

BACKGROUND

1.      Mrs Kathleen White (“the applicant”) has been in receipt of Family Tax Benefit (“FTB”) from Centrelink since the inception of the payment in July 2000.  In November 2002 an officer in Centrelink, acting as delegate of the Secretary of the Department of Family and Community Services (“the Secretary”, “the respondent”), decided that Mrs White had received excess payments of FTB Part B in the year 1 July 2001 to 30 June 2002 and owed the Commonwealth $1,919.90.  This decision was reviewed and confirmed by a Centrelink authorised review officer and by the Social Security Appeals Tribunal (“the SSAT”).  Mrs White has appealed to the Administrative Appeals Tribunal (“the tribunal”) seeking not to have to repay this money.

ISSUES

2.      The issues arising are:

(a)Is there a FTB debt?

(b)If the answer to (a) is yes, what is the correct quantum of the debt?

(c)If the answer to (a) is yes, can the debt be waived because of administrative error by Centrelink and Mrs White’s receipt of the FTB money in good faith?

(d)If the answer to (c) is no, can the debt be waived because of special circumstances?

FINDINGS ON MATERIAL QUESTIONS OF FACT WITH REFERENCE TO THE EVIDENCE AND OTHER MATERIAL IN SUPPORT OF THOSE FINDINGS

(A)Is there a FTB debt?

3.      I find that there is a FTB debt.

4.      FTB is paid according to provisions in the A New Tax System (Family Assistance) Act 1999 (“the FAA”)[1]. Schedule 1 of the FAA provides a rate calculator for FTB. The Schedule clarifies the following:

(a)FTB is paid at an “annual rate”.

(b)There is a FTB Part A rate and a FTB Part B rate.  FTB Part A is payable to any person with a dependent child under 21 or a student child aged 21 to 24.  Mrs White has two children; one aged 16 and another aged eight.  An income test applies.  FTB Part B is payable in addition to FTB Part A to a family with one main income and with at least one child aged under 16 or a student child aged under 18 who does not receive Youth Allowance.  Thus the one family can attract payment of both Part A and Part B.  In Mrs White’s case she does not work.  She receives Disability Support Pension (“DSP”) from Centrelink, a pension paid in accordance with the Social Security Act 1991 (“the SSA”)[2], an Act also administered by the Secretary. Mr White was paid Newstart Allowance (“NSA”) under the SSA from 18 April 2001 and through the 2001-2002 financial year.

(c)Clause 17 of Schedule 1 applies to a person who is a pension or benefit recipient or whose partner is a pension or benefit recipient. Clause 17 applied wholesale to Mrs White in 2001-2002 as both she and Mr White were in receipt of pension/benefit payments. Clause 17 deems each pension/benefit recipient’s income excess to be nil. It also deems each to have an income tested rate the same as his or her maximum rate of pension/benefit.

(d)The way the rate calculator for FTB Part A works is that the person’s maximum rate of FTB Part A is identified. This is the total of the maximum rates payable for each child. A child attracts a maximum rate, expressed as an annual rate in the FAA, according to age. As at 20 September 2003, for example, a child aged under 13 years attracts an annual rate of $3,401.80 and a child aged 18-24 years attracts $1,470.95 a year. There is a “base rate” also which applies to each child. This was $1,095 a year for a child under 18 years and $1,470.95 for a child aged 18-24 years. This maximum rate is then affected by the person’s adjusted taxable income. If taxable income is $31,755 or less (as at 20 September 2003) the maximum rate is payable. Above $31,755 the person loses 30 cents in the dollar until the person is paid only at the base rate. The person then receives the base rate until adjusted taxable income reaches the higher income free area. Above that level FTB Part A is reduced by 30 cents in each dollar until a nil rate is reached.

(e)FTB Part B is simpler to calculate.  The maximum rate for a person is $2,920 a year, as of 20 September 2003, where the youngest child is under five years.  Where the youngest child is aged 5 to 15 (or 16-18 but a student child) the maximum rate is $2,036.70 a year.  The income test applies to the “secondary earner”, ie usually the member of a couple who is in employment.  The secondary earner can earn, as of 20 September 2003, up to $1,825 a year before FTB Part B is affected.  Above that figure the annual FTB Part B rate is reduced by 30 cents in each dollar. 

[1] can be received fortnightly or at the end of the financial year.  Mrs White was paid fortnightly in the relevant year.  The A New Tax System (Family Assistance) (Administration) Act 1999 (“the FA Admin Act”)[3] deals with the processes for determining whether a claimant qualifies for FTB and, if so, at what rate. Payment in a particular financial year, in Mrs White’s case in this application in 2001-2002, is at a rate based on the claimant’s situation in that year. The claimant’s number of children and their ages and the income of the claimant and her partner are two of a number of relevant considerations. Centrelink has to make a determination based on Mrs White’s estimate of her taxable income. Section 20 of the FA Admin Act permits the respondent to utilise an estimate in assessing a person’s rate of FTB for the year. Section 20(1)(d) requires that the Secretary must, in using an estimate, consider the estimate to be reasonable.

[3] 26 April 2001 Mrs White advised Centrelink that her estimated income for 2001-2002 was $12,000.  This was on the basis that her partner, Mr White, would receive that sum and she would receive no income. 

7.      Matters became confused on 16 June 2001 when Centrelink, after reviewing Mrs White’s situation, wrote to Mrs White confirming ongoing arrangements.  She was to receive $333.69 a fortnight, made up of FTB Part A paid at $278.84 and Part B paid at $73.64, less fortnightly repayments of $18.69 resulting from a lump sum advance payment.  About income she was informed:

·     That FTB Part A was exempt from an income test because her partner was receiving an income support payment.

·     For FTB Part B the “secondary earner” income amount was nil. 

·     That if her or her partner’s income changed she should tell Centrelink when aware that a change was going to happen or as soon as possible after a change.

·     That, if she was receiving FTB Part A and “your combined income” fell below $35,000 or rose above $77,234, she had to notify Centrelink.

·     That, if she was receiving FTB Part B and was a “member of a couple”, she should tell Centrelink if the “secondary earner’s annual income” went over $1,679 or, if it was already over that amount, it changed.

8.      The problem was that both Mr and Mrs White were receiving social security payments from Centrelink, some of which were not being accounted as income when they should have been.  The payments totalled $18,468.51. 

9. Calculation of the amount overpaid was simple. Mrs White had received $7,267.15 as FTB Part A in 2001-2002. She was entitled to all of this. However, she had received $1,919.90 as FTB Part B. She was entitled to none of this because of the level of Mr White’s NSA and her DSP. Thus $1,919.90 was the recoverable debt due to the Commonwealth under s 71(2) of the FA Admin Act.

(B) If the answer to (a) is yes, what is the correct quantum of the debt?

10.     As explained above in [9] the quantum of the debt is $1,919.90.

(C) If the answer to (a) is yes, can the debt be waived because of administrative error by Centrelink and Mrs White’s receipt of the FTB money in good faith?

11. Section 96 of the FA Admin Act contemplates the possible waiver of the Commonwealth’s right to recover a FTB debt but only in certain circumstances set out in succeeding sections of the FA Admin Act. Of these ss 97 (because of Centrelink error) and 101 (because of the presence of special circumstances) were invoked for Mrs White.

Administrative error

12.     There were several elements of Centrelink administrative error:

(a)Centrelink was administering Mrs White’s DSP payments and so was aware of them but did not check them when assessing her estimate of income.

(b)When providing the estimate of $12,000 to Centrelink on 26 April 2001 Mrs White told the Centrelink officer that she was in receipt of DSP. That officer is alleged to have told her not to worry about the DSP as it not taxable. While this is correct the advice was misguided as DSP is taken into account as income for FTB purposes (see the FAA, Schedule 3, clauses 2(1) and (7)).

(c)The example in (b) was illustrative of the general problem that Centrelink staff were unfamiliar with the administration of FTB at the time and were dealing with FTB issues incorrectly.

(d)Centrelink’s acceptance of the estimate of $12,000 was unreasonable and contrary to the Secretary’s obligation in s 20(1)(d) of the FA Admin Act because Centrelink knew that Mr and Mrs White received a total of more than that each year in DSP and NSA payments made by Centrelink.

(e)The letter in [7] above was poorly drafted and could not be properly understood by Mrs White.  She did not understand the term of art embodied in the reference to “secondary earner”..  Both she and Mr White were in receipt of social security so who was the primary earner?  Centrelink’s authorised review officer accepted that either member of a couple could be the secondary earner where both receive social security.  For Mrs White it was contended that she would not be aware from the letter in [7] that she had any unmet notification obligations. 

13.     Mrs White’s legal representative cited the tribunal decision in Re Vitalone and Secretary, Department of Social Security (1995) 38 ALD 169 for the proposition that recipient notification notices are to be construed strictly, in favour of the recipient, having regard to the serious adverse consequences that may result in the event of failure to comply with such a notice. The Vitalone case related to notices issued under the Social Security Act 1947, however I accept that notices issued under the FA Admin Act serve the same purpose and the Vitalone principle applies to these more recent notices.

14.     The tribunal decision in Secretary, Department of Social Security and Hoy (1998) 52 ALD 477 was also cited. At page 480 the tribunal stated that the Department of Social Security (the predecessor to Centrelink) has a primary responsibility to ensure that the notification obligations imposed by recipient notification notices under social security legislation (such as the FA Admin Act) are expressed with sufficient certainty as to leave the recipient in no reasonable doubt as to the content of the relevant obligation.

15.     Ms Finlay, for Mrs White, submitted that the Vitalone and Hoy decisions mean that recipient notification advices sent to FTB recipients should specify what payments are assessable for FTB purposes and that in Mrs White’s case she should have been advised in the notices that DSP, although not taxable, is assessable as income for FTB Part B purposes.

16.     I find these arguments wholly convincing.

Good faith

17.     It was submitted that Mrs White received her FTB payments in good faith.  As a result of her conversation with the Centrelink officer in April 2001 she was justified in believing that she was receiving the correct rate of FTB.  I find that Mrs White did receive her FTB payments, at the rate at which they were paid in 2001-2002, in good faith.

Severe financial hardship

18. For there to be waiver of FTB based on Centrelink’s sole administrative error Mrs White must, under s 97(2)(b) of the FA Admin Act, be in “severe financial hardship”.. Ms Finlay made the following submissions on the application of that principle. First, there is no statutory definition of severe financial hardship. Second, the explanatory memorandum and Minister’s Second Reading Speech did not elaborate on the meaning of the phrase when the FA Admin Act was a Bill passing through Parliament. Third, the Department of Family and Community Services in the Family Assistance Guide (“the guide”) has provided policy advice on the meaning of the phrase.

19. The policy in the guide is to consider a person’s fortnightly after-tax income. From that is deducted his or her reasonable fortnightly expenses. If he or she is left with only $10 or less to spend over a fortnight then he or she is taken to be in severe financial hardship. Ms Finlay described this as too strict a test to be applied to the many types of family in receipt of FTB. She described it as more restrictive than the tests for severe financial hardship applied to ss 19C, 19D and 1129 of the SSA.

20.     These SSA provisions apply to hardship experienced by persons shut out for various reasons from major forms of income support payments.  FTB tends to be regarded in policy terms as a special purpose allowance to assist with family expenses rather than as a form of essential income support. 

21. Ms Finlay submitted that, if anything, the definition of severe financial hardship in the family payments context should be more flexible and accommodating than definitions applying to income support. Family payments are made to families in a much broader array of circumstances than income support payments. She stated, “For example, it is possible in some cases that a family earning over $100,000 can receive Family Tax Benefit Part A [albeit at a low rate]. On the other hand, families receiving nothing more than social security payments will also receive maximum Family Tax Benefit payments. Such families will rarely receive more than $18,000 per annum from their social security payments, and will generally be seen to be in ‘severe financial hardship’ when compared to families who are also earning additional income.” She pressed that the tribunal must examine the individual circumstances of each person when applying s 97 of the FA Admin Act with consideration being given to each person’s type of payment in issue. Ms Finlay noted that the criteria for waiver based on administrative error relevant to payments made under the SSA make no mention of a requirement that there be severe financial hardship if waiver is refused. She suggested that the inclusion of that requirement in s 97 is probably a reflection of the possibility that FTB can be paid to a family that is well off in relative terms whereas that is not possible for payments made under the SSA.

22.     The tribunal is not bound to apply departmental policy, although Mrs White appears to fall within the declared policy in this case.  She does seem to have less than $10 a fortnight after allowance is made for reasonable expenditure.  The tribunal does apply such policy in a particular case where that seems appropriate because of the innate sense of the policy.  It is also well established in judicial pronouncements that policy statements can serve a useful purpose in promoting decision-making consistency.  However, Ms Finlay correctly reminded the tribunal that in Re Drake and Minister for Immigration and Ethnic Affairs (1978) 2 ALD 634 President Brennan (as he then was) stated the position at page 645. Brennan J said that the tribunal has adopted the practice of applying lawful ministerial policy unless there are cogent reasons to the contrary.  He said that, if it were shown that the application of ministerial policy would work an injustice in a particular case, a cogent reason would be shown.  He said that consistency in decision-making is not preferable to justice.  I pause to emphasise that Brennan J was addressing a situation where the policy applied was ministerial and had been tabled in Parliament.  The departmental policy in question in the present case enjoys a considerably inferior status being neither ministerial nor scrutinised by Parliament.

23.     On a more positive front Ms Finlay introduced evidence regarding the White family’s income and outgoings.  The SSAT had access to some of this material.  The SSAT found that Mrs White had $225 a fortnight left from her income after her fortnightly expenses were deducted.  Ms Finlay informed the tribunal that the SSAT had acted on incorrect figures.  For the tribunal Mrs White had kept receipts relating to her expenses over three fortnightly periods and this information was the basis for a statement of estimated income and expenses received by the tribunal.  This showed that the family’s total income was about $85 too little to cover the family’s total expenses over two weeks.  Further, it was submitted that there was no prospect of any improvement in the situation.

24.     In evidence it emerged that Mrs White has medical expenses of $40 a fortnight because of diabetes, hypertension and Mr White’s heart condition.  There were a number of outstanding debts at the time of the hearing.  These included large telephone bills and an outstanding driving fine.  I was impressed by the frankness demonstrated in the presentation of the financial statement in that it identified a number of elements of discretionary expenditure.  These included a mobile telephone for one of the children (aged 16), provision for Christmas expenses, birthday gifts, entertainment, cigarettes and pocket money.  I expect that some of these discretionary expenditures are sacrificed from time to time in order to live within means.  Mrs White has been repaying $20 a fortnight from her social security payments.

25.     If the Whites are not to live in penury it is reasonable that they have access to most of these expenditures.

26.     Ms Finlay referred me to the recent decision in Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62 where Member Carstairs, in paragraph 25, said, correctly as I see it, that the term, severe financial hardship, must be seen in the context of the legislation. In that case Member Carstairs decided that severe financial hardship was not present because the family income in that case was $50,000, well in excess of the level of income support payments made under social security law.

Findings on s 97

27. The respondent’s strongest argument against a favourable decision for Mrs White under s 97 of the FA Admin Act was that Centrelink’s administrative error was not the only error in the case. Mr Thistlethwaite, for the Secretary, argued that Mrs White had provided an erroneous income estimate. She had estimated income as $12,000 when it was actually more than $18,000.

28.     It is significant, however, that the estimate of $12,000 was expressed to apply only to Mr White’s income and the Centrelink officer understood this.  Mrs White was led by the Centrelink officer, albeit innocently on the part of that officer, into the “trap” of not estimating her own DSP income.  The $12,000 estimate was in reality an overestimate of Mr White’s income which was only $9,000 odd.  It is conceivable that she would have overestimated her own DSP income if Centrelink had been minded to record such an estimate. 

29.     I find it difficult in the context of beneficial legislation to accept that there was any meaningful contribution by Mrs White to the errors that occurred in this case.  To find that she did contribute would be to impose on recipients a strict liability that they could satisfy only by refusing to accept advice proffered by Centrelink in response to particular questions from recipients.  It would be odd if the legislation was intended to work in this fashion.

30.     I therefore find that the overpayment arose because of Centrelink’s sole administrative error.

31.     I have already found in [17] that Mrs White received her payments of FTB in good faith.

32.     I have more difficulty finding that Mrs White would be in severe financial hardship if required to repay the debt.  I am somewhat concerned by some of the expenditures listed in Mrs White’s income and expenditure statement.  The family, for instance, spends $130 a fortnight on tobacco for roll-your-own cigarettes smoked by Mr and Mrs White..  $40 a fortnight for entertainment relates in part to items including Powerball and bingo.  The latter item is not of great concern because it amounts to only $10 each for Mr and Mrs White each week.  The cigarette item is a concern, however.  This is in one sense an expensive luxury and is probably especially ill-advised in a household where adults suffer from diseases such as diabetes, hypertension and heart disease.

33.     At the same time it is notorious from Australian Heart Foundation literature and other sources that smoking occurs more frequently in lower socioeconomic environments.  It is a readily available source of relaxation.  I am conscious also of the fact that smoking is a habit difficult to break.  The problem is that if that $130 a fortnight were not spent on tobacco the money would be available for repayment of debts to Centrelink and to the telephone companies.

34. On balance I would prefer to resolve the waiver issue on the basis of the existence of special circumstances and I refrain from finding that the applicant here would experience severe financial hardship in the sense meant by s 97 if required to repay the FTB debt. I have therefore decided that the debt cannot be waived under s 97 of the FA Admin Act.

(D) If the answer to (c) is no, can the debt be waived because of special circumstances?

35. Section 101 of the FA Admin Act allows waiver where special circumstances exist and if several other requirements are met. The first of these other requirements is that the debt did not result wholly or partly from Mrs White or another person knowingly making a false statement or false representation.

36.     I find that there is no evidence to suggest that Mrs White or any other person knowingly made a false statement or false representation from which the FTB debt wholly or partly resulted.

37.     Second, the debt cannot have resulted wholly or partly from Mrs White or another person knowingly failing or omitting to comply with a provision of family assistance law.  I find that there is no evidence to suggest that Mrs White or any other person knowingly failed or omitted to comply with a provision of family assistance law, from which failure the FTB debt wholly or partly resulted.

38. Third, it must not be more appropriate to write off the FTB debt than to waive it. Waiver is more attractive to a debtor because it extinguishes the debt. Writing off the debt is less attractive because it leaves open a power in the Secretary to seek to recover the debt at a later date. Write off of FTB debts is covered in s 95 of the FA Admin Act. It is available only where one of four situations exists. None of these situations applies in the present case:

(a)Mrs White’s debt is not “irrecoverable at law” (s 95(2)(a)) because Centrelink can recover it by deducting money from her social security payments.

(b)Mrs White is not in a situation where she has “no capacity to repay” the debt (s 95(2)(b)) because it can be recovered from her ongoing payments.

(c)Mrs White’s whereabouts are not unknown (s 95(2)(c)).

(d)Mrs White’s debt is not one that cannot be recovered by deductions from social security payments (s 95(2)(d)).

Write off would therefore not be a preferable outcome in the present case.

39.     Four, there must be “special circumstances" (other than financial hardship alone) that make it desirable to waive (s 101(c)).  There is a particular circumstance in the present case that I consider sufficiently special to justify waiver under this section.  This is the failure of the Centrelink officer to give Mrs White accurate advice in April 2001 and that officer’s role in discouraging Mrs White from providing an estimate of her own income.

40. This was an issue in relation to waiver because of administrative error. Generally I see no role for matters of administrative error when considering this section of the FA Admin Act or s 1237AAD of the SSA. It seems to me clear that Parliament generally intended s 97 of the FA Admin Act and s 1237A of the SSA to “cover the field” in matters of possible waiver because of administrative error. However, I think the matter different where the special circumstance consists of bad advice from Centrelink. The policy and procedure manuals in the Department of Social Security as long ago as the mid-1980s accepted that incorrect advice provided by that department amounted to a special circumstance.

41.     As tribunal Member Carstairs helpfully summarised in the Jones case ( [26] above) in paragraph 26, court and tribunal decisions have established that special circumstances are circumstances having a particular quality of unusualness that sets one case apart from the usual.  In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 this was described as circumstances that are unusual, uncommon or exceptional. It may be that the provision of incorrect advice by Centrelink officers is not as unusual as one might require from a literal application of the Beadle principle.  However, it clearly should be. 

42.     It would appear that the Department of Social Security was prepared to see such circumstances as special even if that represented something of a departure from the standard set in Beadle..  A number of decided cases have adopted a similar approach.  I refer to such examples as Re Secretary, Department of Social Security and McAvoy (1996) 44 ALD 721, Re McDonald and Secretary, Department of Family and Community Services [1999] AATA 438, Re Powell and Secretary, Department of Family and Community Services [2001] AATA 195, Re Mills and Secretary, Department of Social Security (AAT 12000, 18 July 1997) and Re Webb and Secretary, Department of Social Security (1998) 50 ALD 569. That is the approach I am adopting in this case.

43. As foreshadowed in [39] above, I find that the requirements of s 101 of the FA Admin Act are met and that Mrs White’s FTB debt is waived.

CONCLUSION

44.     The tribunal has decided that Mrs White’s FTB debt is to be waived because of the special circumstances of her case.  The decision under review will be set aside.

DECISION

45. The decision under review is set aside. The tribunal substitutes its own decision that the applicant’s debt is waived in accordance with s 101 of the A New Tax System (Family Assistance)(Administration) Act 1999.

I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Michael Sassella, Senior Member

Signed:         .......................................................................................
  Associate

Date of hearing  19 September 2003
Date of decision  9 January 2004
Counsel for the applicant          Ms J Finlay
Solicitor for the applicant          Welfare Rights Centre, Surry Hills
Advocate for the respondent     Mr E Thistlethwaite, Centrelink