"VZF" and Department of Education, Training and Youth Affairs [1999] AATA 102 (25 February 1999)

Last Updated: 1 March 1999

DECISION AND REASONS FOR DECISION [1999] AATA 102

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V1998/993

GENERAL ADMINISTRATIVE DIVISION )

Re VZF

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, TRAINING AND YOUTH AFFAIRS

Respondent

DECISION

Tribunal Mrs H. E. Hallowes, Senior Member

Date 25 February 1999

Place Melbourne

Decision The Tribunal affirms the decision under review.

Liberty to apply is reserved should there be a dispute with respect to the recalculation of the applicant's debt to the Commonwealth.

.......(Sgd) H. E. Hallowes.........

Senior Member

CATCHWORDS

AUSTUDY - overpayment - redundancy - termination payment - professional advice about investment - whether debt should be written off or waived - whether special circumstances

Administrative Appeals Tribunal Act 1975 ss. 35, 37

Student and Youth Assistance Act 1973 ss. 38, 39, 39A, 40, 43, 43A, 43F

Austudy Regulations rr. 61, 62, 66, 82, 83

Director-General of Social Services v Hales (1983) 47 ALR 281

Beadle v Director-General of Social Security (1985) 7 ALD 670

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

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

Re Department of Employment, Education, Training and Youth Affairs and O'Rourke (1996) 45 ALD 707

Re Horvath and Secretary, Department of Employment, Education, Training and Youth Affairs [1997] AATA 12457

REASONS FOR DECISION

25 February 1999 Mrs H. E. Hallowes, Senior Member

1. The applicant seeks review of a decision made by the Social Security Appeals Tribunal ("the SSAT") on 22 July 1998. The SSAT reviewed a decision of a delegate of the respondent made on 23 March 1998 to "raise and recover debts of AUSTUDY in 1996 totalling $3,204.92 and in 1997 totalling $3,197.12" (T2). It was noted by the SSAT that the decision was affirmed by a review officer on 6 April 1998. The SSAT decided to set aside the decision and the matter was remitted to the respondent for reconsideration in accordance with directions that regulation 66 of the Austudy Regulations be applied to the applicant's AUSTUDY entitlement for the 1996 calendar year and that the whole of the debt calculated be written off, no recovery to be sought until March 2000. Regulation 66 provides:

"66. Living allowance is not payable to a student whose entitlement for the year (including any additional allowance under regulation 64 for the student's spouse) is less than an annual rate of $1,000, unless the student is properly receiving financial supplement under Part 4A of the Act."

2. The applicant's reasons for seeking review of the decision of the SSAT are:

"1. The decision is objectively the incorrect one.

2. There was a failure to take account of a relevant consideration.

3. The SSAT have acted unreasonably.

4. It would be more appropriate to waive any debt rather than write it off."

3. The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") ("the documents") together with further material lodged by both parties at the hearing, including relevant AUSTUDY Guides to Student Finances. The applicant represented himself at the hearing. The Secretary was represented by Mr R. Frazzetto of counsel. Due to the sensitive nature of some of the medical issues the applicant wished to raise, an Order was made by the Tribunal pursuant to subsection 35(2) of the AAT Act prohibiting the publication and disclosure of the applicant's name and evidence he gave with respect to medication he purchases as a result of a medical condition. The applicant told the Tribunal that, in applying for review of the decision of the SSAT, he was aware that the Tribunal may exercise all the powers conferred by the relevant enactment and that, in making a decision under section 43 of the AAT Act, he may be placed in a worse position than the decision of the SSAT placed him in, in that it was open to the Tribunal to decide that the debt should not be waived or written off.

4. When the applicant applied for AUSTUDY in 1996 and 1997 and the determination was made that he had been overpaid AUSTUDY, Part 6 of the Student and Youth Assistance Act 1973 ("the Act"), sections 38 and following, provided for the recovery of overpayments. From 1 July 1998 those provisions were repealed and new provisions substituted by section 11 of the Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act No. 45 of 1998, Part 8 of the Act which dealt with write-off and waiver being repealed. Part 6 of Schedule 11 of the amending Act provides, so far as relevant:

"38 In this Part:

debt means an amount of any of the following kinds (whether the amount has arisen before or after the commencement of this Part):

(a) ...

(b) a student assistance overpayment;

(c) ...

39 If a person:

(a) has been paid an amount of a kind referred to in paragraph (a) or (b) of the definition of debt in section 38; or

(b) ...

the amount is a debt owed by the person to the Commonwealth.

39A (1) The Secretary may, on behalf of the Commonwealth, decide to allow a person to pay an amount of debt by one or more instalments.

...

40(1)

(1) This section applies if a person has been paid (whether before or after the commencement of this subsection) an amount (the recoverable amount) that is a special educational assistance scheme overpayment or a student assistance overpayment.

...

43 (1) The Secretary may, on behalf of the Commonwealth, write off a debt.

...

Note: If the Secretary writes off a debt, this means an administrative decision has been made that, in the present circumstances, there is no point in trying to recover the debt. In law, however, this debt still exists and may later be pursued.

43A (1) The Secretary may, on behalf of the Commonwealth, waive the Commonwealth's right to recover the whole or a part of a debt only in the circumstances described in section 43B, 43C, 43D, 43E or 43F.

(2) A waiver takes effect:

(a) if a day is stated in the waiver as the day on which the waiver takes effect--on the day so stated (whether that day is before, on or after the day on which the decision to waive is made); or

(b) if a day is not so stated in the waiver--on the day on which the decision to waive is made.

Note: If the Secretary waives the Commonwealth's right to recover all or part of a debt, the waiver is a permanent bar to recovery of that debt or that part of the debt--that debt or that part of the debt effectively ceases to exist.

43B ...

...

43F 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 a false representation; or

(ii) failing or omitting to comply with a provision of this 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.

Note: Section 43 allows the Secretary to write off a debt on behalf of the Commonwealth."

5. The applicant was a part-time student during 1995 and he noted the following advice to independent students in the Guide to Student Finance AUSTUDY 1995 ("the 1995 Guide"):

"* If you're studying for the full academic year.

Normally your AUSTUDY won't be affected if your taxable income in a financial year is less than $6,000. If you are returning to study after more than a semester break in full-time study, you are only eligible to get AUSTUDY from the start of your course and your income will only be taken into account from that date. The amount you can earn without affecting your AUSTUDY will be a proportion of $6,000.

For each calendar year of study, to calculate your entitlement, AUSTUDY looks at your income in two stages. For each stage they look at income received in the then current financial year. This means that for the period 1 January to 30 June 1995 they will only look at your income during the time you qualify for AUSTUDY. For the period 1 July to 31 December 1995 the 1995-96 financial year income will be used. However, only income that you get during the time you qualify for AUSTUDY is taken into account. Income you get before or after the time you qualify is disregarded.

In 1995 AUSTUDY will ask you for details of how much income you received in each of the two six month periods. If you commence study in second semester and plan to continue studying in 1996, you will also need to tell AUSTUDY how much you expect to receive from 1 January to 30 June 1996."

The applicant noted that the advice to students made no reference to Approved Deposit Funds ("ADF"), rollover funds or superannuation. The 1995 Guide does go on to refer to "taxable income" affecting AUSTUDY.

6. When completing his application for AUSTUDY 1996 on 18 December 1995 (T3), the applicant advised in response to question 36, that he expected to receive income of $3,500 for the first six months of 1996 and $3,500 for the second six months of 1996. He estimated the current market value of his and his partners' assets as $121,200 together with business/farm assets of $1,500. Parts of the applicant's and his wife's income tax returns for the financial year ending 30 June 1995 were provided to the Secretary. On 19 December 1995 the applicant signed an application form for current income assessment or special assessment. He advised that there had been a decrease in his income since December 1995 as he had ceased work. It was noted on the form that any "Taxable portion of lump sum payments must be included in your taxable income estimate". Section 4 of the form, which the applicant completed, asked for his total estimated expected income to be received or paid between 1 July 1995 and 30 June 1996. He was asked to include as taxable income:

"* any lump sum payment received (e.g. long service leave, severance pay, superannuation, etc);

* ...

* ...

* ...."

The form advised students to read the explanatory notes before completing the form. The applicant advised that he had been self-employed since August 1995 but that he would be resigning and not earning further income of a substantial nature. He intended to earn $3,500 for the period 1 January 1996 and the same for the second half of the year. He drew attention to page 30 of the 1996 AUSTUDY Guide to Student Finance.

7. Regulation 61 provides for the maximum living allowance and regulation 62 provides how to work out a student's living allowance, Part 4 of the regulations providing a student's income test. Under Part 4, regulation 82(1) provides:

"82.(1) A student eligible for living allowance can get the maximum allowance in the entitlement period only if his or her relevant income is not more than the amount calculated under the following formula:

$6,000 x entitlement period

number of days in the year

(1A) A student's relevant income is his or her income calculated under the following formula:

T x EP

RIP

Where:

T is the total income earned by the student in the relevant income period;

RIP is the relevant income period;

EP is the entitlement period.

(2) The maximum amount of allowance a student can get is reduced by $1 for each $2 that the student's income exceeds the amount calculated under the formula.

(3) In this regulation:

'entitlement period' means:

(a) for the period 1 January to 30 June in a year of study; or

(b) for the period 1 July to 31 December in a year of study;

the number of days during the period for which the student would, apart from this regulation, be entitled to AUSTUDY;

'relevant income period' means, for the period, in a year of study:

(a) from 1 January to 30 June - the number of days the student is entitled to AUSUTDY in the financial year ending in the year of study; or

(b) from 1 July to 31 December - the number of days the student is entitled to AUSTUDY in the financial year starting in the year of study."

Regulation 83 provides, so far as relevant:

"83.(1) A student's income is:

(a) taxable income within the meaning of subsection 6(1) of the Income Tax Assessment Act 1936; and

(b) ...

..."

8. On page 29 and following of the 1996 Guide, which the applicant told the Tribunal he could not recall reading at the relevant time, advice is given how a claimant should calculate income. The Guide states that AUSTUDY normally looks at what a claimant's taxable income will be for the period the claimant qualifies for AUSTUDY in 1996 and advises that a claimant will be asked for an estimate. Lump sum payments on termination of employment must be included when calculating income and "any draw downs from Superannuation funds", amongst other things. The Guide advises that normally AUSTUDY will not be affected if taxable income in a financial year is less than $6,000.

9. On 24 December 1996 the applicant lodged a claim for AUSTUDY for 1997 (T7). It was noted that he had given previous estimates of his income of $3,500 for the period 1 January to 30 June 1996 and a further estimate of $3,500 for the period 1 July to 31 December 1996. He was now asked to give his actual income other than AUSTUDY and he provided a figure of $2,470 until 30 June 1996 and $500 for the second half of the year.

10. It was not until 5 February 1998 that the applicant was advised by Centrelink that, following checks under the Data Matching Program (Assistance in Tax) Act 1990, his taxable income for the 1996/97 financial year was disclosed as $26,246 which included student assistance payments. On 6 March 1998 the applicant was advised that his entitlement to AUSTUDY during 1997 had been reassessed and an amount of $3,197.12 had been overpaid to him. On 12 March 1998 he was advised that his 1996 application for AUSTUDY had been reassessed and that he had incurred an overpayment of $3,463.01.

11. The documents include a letter from the applicant to the respondent, dated 23 March 1998, attaching a letter from the Secretary of the applicant's employer, Precise Development Services Pty Ltd ("the company"), of the same date, advising that he was an employee of the company and that his gross salary was $600 per month. It was also disclosed that for the financial year ending 30 June 1996 the applicant had a taxable income of $125,738. This sum reflects the payment to him on termination of his employment in the year before. On 27 March 1998 the applicant's overpayment was recalculated by the respondent as $3,204.92 for the period 1 July to 31 December 1996.

12. By letter dated 18 March 1998 the applicant had advised the respondent of more particulars with respect to his circumstances which he expanded on when giving evidence to the Tribunal. He stated that he had been made redundant by local government in 1995 and that he sought professional advice from a financial adviser of the National Australia Bank and also from a firm of solicitors as it was his intention to undertake studies to qualify him to meet the entrance requirements of the Supreme Court of Victoria for admission to practice as a barrister and solicitor. He had made it known to those from whom he sought advice that any action he took acting on their advice, must be beyond reproach. The Tribunal does not doubt the applicant's sincerity in giving his evidence and finds that he always acted with integrity and that statements made by him when he claimed AUSTUDY were not knowingly false. He received advice that money drawn out of an ADF was a return of capital and not income. He went on to note in his letter:

"In addition to this and in support of my belief that such drawdowns were not income I have looked through the Austudy booklets produced for 1995, 1996, 1997 and 1998. Assuming that it is reasonable to rely on these publications I believe that not considering drawdowns on an ADF as income is reasonable.

Page 27 of the Austudy Guide 1995 makes no mention of drawdowns from ADF. Page 30 refers to ADF funds as assets.

Page 29 of the Austudy Guide 1996 refers to draw downs from Superannuation fund but no reference to ADF - again ADF money is referred to as an asset on Page 33.

Page 27 of the Austudy Guide 1997 now includes withdrawals from a roll over fund as income. Page 31 also classifies money in ADF as an asset. In addition to this, the 1997 Austudy Continuing Form (3) at page 3 refers to amounts withdrawn from Superannuation funds but makes no mention of ADF withdrawals.

Page 35 of the Austudy Guide 1998 specifically states roll over funds whereas the Continuing Form Notes only refer to superannuation and similar investments on Page 3.

All of the above shows a good deal of inconsistency in what is income and in my case it is even further confusing having ADF specifically mentioned as an asset."

The applicant reflected that if he had placed all the money he received after he was made redundant in 1995 into a general bank account, any withdrawals he made from the bank account would not have fallen within the meaning of income in the Income Tax Assessment Act 1936.

13. At the hearing the applicant told the Tribunal that he did not have a problem with the thrust of the Secretary's case and there was no dispute between them with respect to his income during the relevant period and the Secretary's interpretation of the regulations. In December 1995 the applicant had advised the Secretary he had been self-employed since August 1995. From his evidence to the SSAT and the Tribunal, it appears that he could predict his earnings (see paragraph 11 above) because he had, acting on advice, established a family trust in 1995 to employ him as a planning and building consultant. At the hearing the Tribunal asked the applicant to provide it with the income tax returns of the company for the financial years ending 30 June 1996 and 1997 and it provided time within which both parties could comment on the income tax returns of the company. Although those returns disclose that the applicant had been paid wages of $33,316 for the year ending 30 June 1996 the Tribunal accepts the applicant's evidence that the majority of those wages were paid to him by the company during the second half of 1995 and that for the period from 1 January to 30 June 1996 he was paid by the company as set out in the letter from the company's Secretary. During the financial year ending 30 June 1997 the company paid him no wages. The Tribunal accepts that the figures disclosed in the returns are generally in accordance with the applicant's oral evidence.

14. In paragraph 20 of its reasons for decision the SSAT noted the following:

"20 In determining the amount of the debt, the Tribunal noted Mr King's statement that there had been various figures of the total debt given to him by the Department. The Tribunal noted that the Department had, in determining the amounts of the debt referable to 1 July 1996 to 30 December 1996, appeared to have incorrectly applied regulation 66 of the AUSTUDY regulations. This regulation provides that, were [sic] an entitlement for the year would be 'less than an annual rate of $1,000' then no living allowance is payable to a student. The Department had calculated Mr King's entitlement for January to June 1996 as $3,397.51. They then calculated his entitlement for July to December 1996 as $820.37. On the basis that this later figure was less than $1,000 the Department determined that there was no eligibility from July to December 1996. The Tribunal determined that this was an incorrect application of regulation 66. The Tribunal determined that the appropriate application of this regulation required consideration to be given to Mr King's eligibility for the whole of 1996, for which he had a clear entitlement of in excess of $1,000, and for any resulting debt calculations to be made on this basis. As the Department's own calculations indicate that he had an entitlement for July to December 1996 of $820.37, the AUSTUDY debt owed by him needs to be adjusted accordingly."

With respect the Tribunal adopts what was said by the SSAT and finds, as acknowledged by the applicant, that he has a student assistance overpayment which is a debt to the Commonwealth for the period 1 July 1996 to 30 June 1997 which should be recalculated.

15. The applicant put to the Tribunal that there are special circumstances which make it desirable for his debt to be waived. The applicant told the Tribunal that it was a shock to him when he lost the security of his employment as a planning officer in local government, particularly as he and his wife had decided to start a family. The applicant suffers from a medical condition which he described as being under "poor to moderate control". It has been his experience that stress affects him. He acted on the advice of those he considered expert in the field when deciding what to do with his termination payment. He conceded during the hearing that he had not contacted AUSTUDY or Australian Taxation officers for advice. He conceded that he failed to correctly answer questions asked of him with respect to his income but he said that he had no knowledge at the relevant time that he was other than honest when completing his application forms. The Tribunal accepts that this was so. Mr Frazzetto pressed him on this point suggesting that he should have been aware that his drawdowns from his ADF were taxable income. The applicant told the Tribunal that the whole episode has caused him stress and it has been costly in respect of both time and money to pursue what he considers should be the correct decision under the relevant provisions.

16. The applicant said that he used some of his financial resources to pursue further education which he pointed out is also the purpose of the AUSTUDY Scheme. He has used the rest of his termination payment to purchase a motor vehicle from his former employer and to build a home which unfortunately is structurally unsound. This has led to a dispute with the builder which is not yet resolved. The health of his family during the relevant period has also not assisted his peace of mind. He acknowledged the ownership of 700 Telstra shares.

17. The parties referred the Tribunal to a number of its own decisions and decisions of the Federal Court including the decision of the Federal Court in Director-General of Social Services v Hales (1983) 47 ALR 281 where Sheppard J said at page 322 and 323 that it is a paramount consideration in considering whether overpayments should be recovered that public monies to which a claimant was not entitled have been received. In Beadle v Director-General of Social Security (1985) 7 ALD 670 the Full Federal Court held that what constitutes "special circumstances" depends upon the circumstances of each particular case. That matter had been appealed from a decision of the Full Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 where the Tribunal at page 4 used the oft repeated phrase, when considering special circumstances, whether the circumstances may be described as "unusual, uncommon or exceptional". The applicant also asked the Tribunal to note that in Re Beadle the Tribunal also said at page 4 "Being misled by an officer of the Department or by some other responsible person as to availability of such an allowance might also constitute special circumstances." The applicant noted that in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at page 545, Keifel J, after referring to Beadle's case said that it would require something to distinguish Mr Groth's case from others to take it out of the usual or ordinary case. The applicant noted in Re Department of Employment, Education, Training and Youth Affairs and O'Rourke (1996) 45 ALD 707 at page 710, that Deputy President Barnett said "By getting wrong advice, he was deprived of options to avoid this overpayment which would have otherwise been open to him ..." and that "...by following the wrong advice, he acted to his quite severe detriment because all that has happened since has been detrimental to him." The applicant told the Tribunal that the Guides for each year had been unclear to him with respect to the meaning of income and he drew attention to what was said by the Tribunal in Re Horvath and Secretary, Department of Employment, Education, Training and Youth Affairs [1997] AATA 12457 at paragraph 38 of the reasons for decision:

"It is not surprising that the average citizen would not ordinarily know that certain superannuation termination payments would be defined as 'income' under the Regulations. If the AUSTUDY application and eligibility check forms have not been altered since 1993 to alert applicants to this fact, to avoid future disputes over 'student assistance overpayments', appropriate warnings should be devised."

18. Mr Frazzetto put to the Tribunal that the applicant's debt should be immediately recovered and that it should not be written off or waived. The Tribunal accepts his submission that the Tribunal, in considering its discretion, must start with the fact that the applicant has received monies to which he is not entitled. It also accepts that the Guides have been amended from time to time. The Guides are not exhaustive and, at the relevant time, drew attention to the relevance of taxable income to a person's entitlement to AUSTUDY. It is important that advice to claimants in Guides accurately reflects relevant legislation and regulations but the Tribunal accepts that it is no easy matter to accurately convey the meaning of legislation to a diverse group of claimants. The Tribunal does not accept Mr Frazzetto's contention however, that the applicant was "wilfully blind" in his reading of the Guides. He asked the Tribunal to distinguish the decisions in Beadle in that a time limit had been missed in that case whereas the applicant in this application had time to clarify his situation and to make inquiries which he was in a better position to do than Ms Beadle.

19. Having considered all the circumstances put to it, the Tribunal has decided that the applicant's debt should not be waived. In coming to this decision the Tribunal has considered what was said in Beadle's case, being satisfied that those decisions are relevant to the consideration of its discretion. The applicant has received monies to which he is not entitled and his circumstances are not so unusual, uncommon or exceptional that the Tribunal should exercise its discretion to waive recovery of the debt. The Tribunal accepts that the applicant inadvertently provided the respondent with incorrect details with respect to his relevant income as have many other applicants. The Tribunal accepts that he did not knowingly make a false statement or representation to the respondent. The applicant was faced with a difficult decision when he was made redundant by local government at a time in his life when he was committed to being the only bread winner in the family. He chose to pursue further education which hopefully will provide him with a profession which gives him some certainty in his life. However, in the circumstances of employment today, where many people find they do not have long term job security, it is not unusual or uncommon for people to have to make decisions with respect to their future employment which may involve a change in direction. Although the Tribunal sympathises with the applicant with respect to the effect on him of his medical condition and the costs involved, this is also not an exceptional circumstance. Unfortunately for him a number of difficulties have arisen for him since he was made redundant and which have been beyond his control including the health of his children, the difficulties he has experienced in building a house and the fact that he sought professional advice with respect to the investment of his termination payment which led to an investment which has disadvantaged him financially. The Tribunal has reflected on what was said by Deputy President Barnett in O'Rourke's case, however, having considered the applicant's circumstances as a whole, they are not such as to persuade the Tribunal to waive the debt. The applicant was disadvantaged in the advice he received and some misfortune has befallen him but not to the extent of making his circumstances special. It is more appropriate to write off the debt in light of the applicant's present difficult financial circumstances. The Tribunal accepts that the applicant has had to exercise great care with budgeting his finances to enable the family to survive from week to week. On the other hand, he has made a small investment in Telstra shares. The applicant's prospects now look good and his financial position should improve. If this does not turn out to be the case, it is open to the applicant to again seek the exercise of the Secretary's discretion before March 2000 when recovery should commence.

20. It is for these reasons that the decision under review will be affirmed.

I certify that this and the 12 preceding pages are a true copy of the decision and reasons for decision herein of

Mrs H. E. Hallowes, Senior Member

Signed: .....................................................................................

Personal Assistant

Date/s of Hearing 29 January 1999

Date of Decision 25 February 1999

Applicant Self-represented

Counsel for the Respondent Mr R. Frazzetto

Solicitor for the Respondent Australian Government Solicitor