Wicke-Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations

[2008] AATA 1141

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 1141

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/0174

GENERAL ADMINISTRATIVE  DIVISION		)
Re		MARGARET WICKE-FITZGERALD

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mr S. Webb, Member

Date19 December 2008

PlaceCanberra

Decision The decision under review is affirmed.

...............Signed...............................

Mr S. Webb, Member

CATCHWORDS

SOCIAL SECURITY - Parenting Allowance - Parenting Payment - private company - change in circumstances - assets not declared - shareholder loan to company - real estate owned by partner - loan not repaid - asset - overpayment debt - debt not solely the result of administrative error - no special circumstances - decision affirmed

Social Security Act 1991 ss 9, 11, 500Q, 1122, 1236, 1237A, 1237AAD

Secretary, Department of Employment and Workplace Relations v Vanderpluym [2007] FCA 876

Re Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225.

Unicomb v Secretary, Department of Social Security (1998) 50 ALD 405 at 407

REASONS FOR DECISION

19 December 2008 Mr S. Webb, Member         

1.      Margaret Wicke-Fitzgerald and her late husband, Mr R. Wicke, established Tasman Dental Casting Proprietary Limited (TDC) in 1984. They made a shareholder loan to TDC. Mr Wicke died in 1991. Mrs Wicke-Fitzgerald did not proceed with the businesses conducted by TDC and made arrangements to finalise those affairs. She used the proceeds from Mr Wicke’s life insurance and the sale of equipment to pay out TDC creditors and a mortgage on her residence. TDC ceased trading but was not wound up and the shareholder loan remained on the balance sheet. In 1995 Mrs Wicke-Fitzgerald married her present husband, Mr Michael Fitzgerald. Mrs Wicke-Fitzgerald claimed parenting allowance in 1996. There were four children: Mrs Wicke-Fitzgerald’s two sons and Mr Fitzgerald’s two sons, all of whom lived in the family home at that time. Mrs Wicke-Fitzgerald did not declare the shareholder loan and Mr Fitzgerald failed to declare a real estate asset. Mr Fitzgerald became a shareholder and director of TDC and, together they started a new business. Mrs Wicke-Fitzgerald omitted to inform Centrelink about the new business, Capital Coast Cycles. When information concerning the shareholder loan and Mr Fitzgerald’s real estate asset came to light Parenting Payment was cancelled and an overpayment debt was raised against Mrs Wicke-Fitzgerald. Recovery action commenced. Mrs Wicke-Fitzgerald was unhappy about this decision and pursued her right of review to the Social Security Appeals Tribunal, without success. She lodged an application for review of that decision, but later withdrew the application. Subsequently TDC was wound up. The shareholder loan was not repaid and Mrs Wicke-Fitzgerald lodged a further application for review; the subject of these proceedings.

2.      At the outset Mrs Wicke-Fitzgerald conceded the existence of a shareholder loan she and her previous husband made to TDC. Mrs Wicke-Fitzgerald agreed that the following balances of the shareholder loan are correct:

1995-1996  $179,795
1996-1997  $181,032
1997-1998  $139,742
1998-1999  $141,078
1999-2000  $128,141

2000-2001  $128,996

She also conceded that the valuations for the property owned by Mr Fitzgerald at 13 Ryrie Street, Braidwood and other asset values set out at T1 folio 9 are correct. I will proceed on that basis.

3.      Mrs Wicke-Fitzgerald confirmed that she does not dispute that she was overpaid Parenting Allowance and Parenting Payment in the period from 11 April 1996 to 29 May 2001 in the amount of $26,831.38, and that amount is a debt to the Commonwealth for which she is liable. Having carefully considered all of the material presently before the tribunal I am satisfied that is in all likelihood correct. That being so I will proceed on the basis of Mrs Wicke-Fitzgerald’s concessions and find that Mrs Wicke-Fitzgerald has a Parenting Allowance/Payment overpayment debt in the amount of $26,831.38.

4.      The issues remaining for determination go to the Commonwealth’s right to recover this debt from Mrs Wicke-Fitzgerald. Specifically, whether there are grounds that make it appropriate to write off or waive recovery of the debt.

5.      Mrs Wicke-Fitzgerald says that the shareholder loan was never intended to be repaid. When TDC was wound up the loan was not repaid. This, she says, is a special circumstance that should reduce the amount of her debt. Furthermore, Mrs Wicke-Fitzgerald asserts that she was not advised at any stage to waive the shareholder loan. Mrs Wicke-Fitzgerald claimed that she did not understand, nor did her accountant explain, the implications of the loan in relation to her assets or any social security payments. In Mrs Wicke-Fitzgerald’s submission it is simply unfair to hold her responsible for a debt that arose from a debt ‘on paper’. Also, she asserts that she and Mr Fitzgerald are in financially constrained circumstances. Their income derives solely from Centrelink payments: Mr Fitzgerald’s Disability Support Pension and Mrs Wicke-Fitzgerald’s Carer Allowance. Mrs Wicke-Fitzgerald says that they are unable to earn money to repay the debt and they struggle to make ends meet on a week to week basis. In Mrs Wicke-Fitzgerald’s submission these circumstances are sufficient for the Commonwealth to forgive the debt.

6.      As will appear, I do not agree.

7.      Under the Social Security Act 1991 a debt to the Commonwealth may only be written off or waived in certain circumstances.

8.      In the present circumstances, there are no grounds on which Mrs Wicke-Fitzgerald’s debt can be written off pursuant to s 1236.

9.      Two relevant grounds for waiver are pressed: waiver as a result of Commonwealth error[1]  and waiver as a result of special circumstances.[2]

[1] Social Security Act 1991 s 1237A.

[2] Social Security Act 1991 s1237AAD.

10. Under s 1237A a debt must be written off if it results, in whole or in part, solely from Commonwealth error. Mrs Wicke-Fitzgerald correctly asserts that she declared herself to be a shareholder and director of a company in her Parenting Allowance claim form[3], to which was attached a statement from her accountant, Garland Hales and Wheatley Pty Ltd. This statement declared that TDC had not traded since 30 June 1991.[4]

[3] T4 folio 115.

[4] T4 folio 110.

11.     The fact that Mrs Wicke-Fitzgerald provided this information to Centrelink in April 1996 does not assist her case for waiver on the grounds of administrative error.

12. The balances of Mrs Wicke-Fitzgerald’s shareholder loan and the value of Mr Fitzgerald’s property at 13 Ryrie Street, Braidwood in the period from 1996 to 2001 are not in dispute. As can be seen, Mrs Wicke-Fitzgerald did not declare the existence of the shareholder loan and Mr Fitzgerald did not declare his ownership of the property at Braidwood in the relevant sections of the claim form. This omission resulted in an incorrect assessment of the value of their combined assets for the purposes of s 500Q of the Act, with the result that the amount of Parenting Allowance was calculated at a higher rate than would otherwise have been the case. Plainly enough, these omissions were material factors that led to the overpayment of Parenting Allowance. It cannot be said, therefore, that Mrs Wicke-Fitzgerald’s overpayment debt is solely attributable to Commonwealth error. The debt cannot be waived pursuant to s 1237A of the Act.

13. Under s 1237AAD there is discretion to waive a debt if there are special circumstances that make it desirable to do so. Waiver in special circumstances is permitted only if the debtor or another person did not knowingly make a false declaration or a false representation, or knowingly failed or omitted to comply with a provision of the Act.

14.     Mrs Wicke-Fitzgerald says that the shareholder loan was not a real loan that was ever intended to be repaid and points to her ignorance about the implications of the shareholder loan in relation to the Parenting Allowance/Payment payments she had claimed and received.

15.     There are two things to say about this. Firstly, the shareholder loan was not declared. I will proceed on the basis that Mrs Wicke-Fitzgerald did not do this knowingly.

16.     Secondly, as can be seen, the balance of the shareholder loan varied from year to year: in 1997-1998 the balance reduced by, in excess of, $40,000 and in 1999-2000, in excess of $10,000.[5] Mrs Wicke-Fitzgerald was not able to adequately explain these reductions, but stated that her accountant dealt with those matters. As it appears to me the reduction in the loan balances during these years indicates partial repayment of the loan to Mrs Wicke-Fitzgerald, possibly in the context of the business that she and Mr Fitzgerald were undertaking at those times. Mrs Wicke-Fitzgerald may not have understood the details of TDC accounts prepared by her accountant, but that does not excuse the fact that the shareholder loan was an operative factor in the company balance sheet. It cannot be said, therefore, that there was never an intention that the loan would be repaid. That is plainly not the case. As the profitability of the Capital Coast Cycles business improved, the amount of the loan reduced and when the business faltered, no further reductions or repayments were made. I note in passing that these variations in the balance of the loan were not declared to Centrelink at the time.

Mrs Wicke-Fitzgerald’s assertion that the loan was an ‘on paper’ contrivance that was not intended to be repaid is not made out. The loan was real and it was repaid in part. The remaining balance was not repaid when the business faltered and TDC was wound up. The irrecoverability of the outstanding amount is not a reason to exclude that part of the loan from her assets at an earlier time. To do so would be inconsistent with s 1122 of the Act and the settled authorities on this point, concerning the inclusion of the unpaid part of such a loan as an asset, for the purposes of ss 9, 11, 500Q and 1122 and the assets value limit calculation.[6] The total of the loan must be included even if Mrs Wicke-Fitzgerald did not gain a net advantage from the loan transaction so far as her assets were concerned.[7]

[5] See for example, T65 folio 102.

[6] See Secretary, Department of Employment and Workplace Relations v Vanderpluym [2007] FCA 876 at [63]; Re Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225.

[7] Unicomb v Secretary, Department of Social Security (1998) 50 ALD 405 at 407

17. There are no reasonable grounds that I can see to consider these circumstances as a ‘special circumstances’ within the meaning of s 1237AAD.

18.     If Mrs Wicke-Fitzgerald was ignorant and was not advised by her accountants of the implications of the shareholder loan in relation to her claim for Parenting Allowance, and I accept that may well be so, it does not constitute a special circumstance that renders it desirable to waive all or part of her debt. Any deficiency in the professional advice she obtained is a matter between her and her accountant; it is not a matter that is appropriately visited upon the taxpayer.

19.     Mrs Wicke-Fitzgerald gave evidence about the financial and health circumstances of herself, Mr Fitzgerald and their children. It can be accepted that Mrs Wicke-Fitzgerald and Mr Fitzgerald are in straitened financial circumstances. They own their own home, nevertheless, and have other assets, albeit not of great value. Their expenses roughly match their income, albeit solely in the form of social security payments. Mr Fitzgerald suffers from a debilitating and deteriorating back condition, and requires care from Mrs Wicke-Fitzgerald. While unfortunate, these circumstances are not ‘special circumstances’ that are apart from so many other unfortunate cases in which social security claimants find themselves.

20. Thus, considering the well settled authorities on this subject to which the respondent has referred, I am reasonably satisfied in all of the circumstances that it is not appropriate to waive any part of Mrs Wicke-Fitzgerald’s debt pursuant to s 1237AAD.

21.     That being so, the decision under review is affirmed.

I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S Webb, Member.

Signed: ...............Signed.................................
  Demelza-Rose Gale           
  Associate

Date of Hearing  1 December 2008

Date of Decision  19 December 2008

Representative for the Applicant:      Unrepresented

Representative for the Respondent:  Mr. A Parker