Nemer; Department of Family and Community Services [2000] AATA 599 (7 July 2000)

Last Updated: 31 July 2000

DECISION AND REASONS FOR DECISION [2000] AATA 559

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S1999/177

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Applicant

And MIRNA NEMER

Respondent

DECISION

Tribunal Member D.J. Trowse

Date 7 July 2000

Place Adelaide

Decision The Tribunal sets aside the decision under review and in substitution therefor decides that payment of the family allowance was properly cancelled and that a debt in the amount of $987 was properly raised and is recoverable.

...............(Signed)................

Member D.J. Trowse

CATCHWORDS

SOCIAL SECURITY - family allowance - income threshold exceeded - existence of car fringe benefits and valuation thereof - effect of employee contribution towards cost of benefits - overpayment - special circumstances.

Social Security Act 1991 ss10A, 838, 1069-H3, 1069-H25, 1157C, 1157D, 1157K, 1157L, 1157M, 1224, 1237AAD.

REASONS FOR DECISION

7 July 2000 MEMBER D.J. TROWSE

1. This is an application by the Department of Family & Community Services ("the applicant") for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 30 March 1999 which set aside the decision of an authorised review officer of 11 January 1999 which had affirmed a delegate's decision of 29 October 1988. The SSAT decision was that, for the purposes of determining Mrs. Nemer's ("the respondent") entitlement to family allowance, benefits provided to her and her spouse by their employer be valued at nil and, on that basis, no overpayment of benefit had occurred. Central to this dispute is the question whether employee contributions towards the cost of car fringe benefits provided by an employer have the effect of reducing the value of that benefit in calculating a person's entitlement to receive family allowance.

2. The Tribunal had before it the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975, copies of income tax returns, together with statements of agreed facts, issues and contentions. As between the parties, it had been agreed that the Tribunal reach its decision without the formality of a hearing.

3. Section 838 of the Social Security Act 1991 ("the Act") sets out the requirements to be met for an individual to qualify for a family allowance. One of the stipulated conditions for entitlement is that a person's income for the relevant period does not exceed that person's income ceiling which, in this reference, is agreed to be a figure of $72,537. Sub-section (4) defines a person's income for a particular family allowance period as being the sum of:

(a) the person's taxable income for that period; and

(b) the person's adjusted fringe benefits value for that period; and

(c) the person's target foreign income for that period; and

(d) the person's net rental property loss for that period.

The provisions of ss1069-H3 of the Act clarify that, if a person is a member of a couple, his income will include the income of his partner.

4. A person's adjusted fringe benefits value is described in ss1069-H25 as being the person's fringe benefits value less the value free area of $1,000.

5. According to s10A of the Act, an assessable fringe benefit means a fringe benefit that is, inter alia, a car benefit, but does not include a car benefit that is exempt

6. The term 'car benefits' is outlined in ss1157C(1) as follows -

'A person (the 'employee') receives a car benefit if:

(a) a car held by another person (the 'provider'):

(i) is applied to a private use by the employee or an associate of the employee; or

(ii) is taken under subsection (2), (3) or (4) to be available for the private use of the employee or an associate of the employee; and

(b) either:

(i) the provider is the employer, or an associate of the employer, of the employee; or

(ii) the car is applied or available in that way under an arrangement between:

(A) the provider or another person; and

(B) the employer or an associate of the employer.'

The kind of availability referred to in (1)(a)(ii) is taken to exist where the car held by the employer or an associate of the employer is garaged or kept at or near a place of residence of the employee or an associate of the employee - see subsection 1157C(2).

7. Exempt car benefits are considered in subsection 1157D of the Act. Generally, car benefits will be exempt - where the car provided is either a taxi, panel van, utility truck or any other road vehicle designed to carry a load of less than 1 tonne - and also where the private use is restricted to work-related travel of the employee and other minor, infrequent and irregular private use by the employee or an associate of the employee.

8. The determination of the value of car fringe benefits is to be made in accordance with the method statement contained in s1157L of the Act. With the aid of a car fringe benefits value table which forms part of the section, one is able to read off the value of the benefit by having regard to the age and engine capacity of the car. It is of interest to observe that subsection 1157M(1) provides for an alternative method of valuation and that the legislation has application if the Minister so determines. The Tribunal is advised that no such determinations have been made by the Minister.

9. The undisputed facts of this matter are as follows -

* At the relevant time the respondent and her spouse were employed by a trading company which was under their control.

* The employer company provided to each of the respondent and her spouse a car which was used on company business, travel to and from home and some other private running.

* During the 1997/1998 financial year, there was in place an arrangement whereby the respondent and her spouse were collectively responsible for the payment to their employer of an amount of $6,539 by way of reimbursement for private use of the cars and which, according to information supplied by the company's accountant, was achieved by deducting that amount from "their share" of dividends declared by the company.

* The respondent, who had previously been in receipt of family allowance which had been cancelled because the combined taxable income for her and her partner exceeded the relevant threshold, sought reinstatement of the allowance and, in that regard, completed and sent to Centrelink on 29 May 1998 a form entitled 'Changes to your Income and Assets'.

* The information disclosed by the respondent in completing the form included-

- total combined estimated taxable income for 1997/98 financial year to be $69,992;

- investment income including trust distributions - Nil;

- sole source of taxable income was wages from employer company;

- neither the respondent nor her spouse received any employer provided benefits.

* On the basis of the information disclosed, it was decided to pay family allowance to the respondent in respect of her three dependent children and that entitlement was to commence from 23 April 1998.

* On 7 October 1998, the respondent completed a form entitled 'Review of Your Family Allowance and Childcare Assistance' and, in so doing, indicated - actual taxable income figures for the 1997/98 year of $34,996 for herself and $36,946 for her spouse - and the fact that their employer had provided them with car benefits throughout the relevant year and, also, the age and engine capacity of the two cars.

* Armed with this information, the applicant determined that the income of the respondent for the 1997/98 year was $77,254 i.e. a combined taxable income figure of $71,942 plus car fringe benefits of $5,312 which had been calculated by using the table contained in s1157L.

* After noting that the resultant income amount exceeded the permitted threshold figure of $72,537, the delegate decided on 29 October 1998 that the respondent was not entitled to family allowance and that payment of same should be cancelled.

* Furthermore, on 4 November 1998, a debt in the amount of $987 for the period 23 April 1998 to 22 October 1998 was raised pursuant to subsection 1223(3) of the Act.

* In a letter dated 18 November 1998, the respondent requested a review of the assessment of the income of her and her partner and it is clear from that correspondence that her grievance related to the inclusion of a so-called benefit which had been reimbursed by herself and her partner.

* The decisions of 29 October 1998 and 4 November 1998 were affirmed first by a delegate on 25 November 1998 and then, subject to a minor amendment, by an authorised review officer on 11 January 1999.

* The variation made by the authorised review officer concerned the decision to raise the debt of $987 and, on that issue, s1224 was nominated in lieu of subsection 1223(3) of the Act.

* On appeal to the SSAT, that Tribunal set aside the earlier decision and sent the matter back to the Chief Executive Officer of Centrelink for reconsideration in accordance with its decision that the value of the employer provided benefit received by Mrs. Nemer and her partner be assessed at nil.

10. Information more recently received by the Tribunal reveals that the 1998 taxable income amounts for Mr and Mrs Nemer were $36,946 and $35,539 respectively which consisted of - salary, interest, distribution from family trust and losses from primary production activities for Mr Nemer - and salary and distribution from family trust for Mrs Nemer. A comparison of these sources from those disclosed in the form 'Change to your Income and Assets' demonstrates the probability that Mrs. Nemer and/or her advisors were less than diligent in the completion of the form.

11. Also, it is apparent that the Department has erred in its use of the value table contained in s1157 of the Act and that, more correctly, the combined value of the car fringe benefit is $7,563. This results in the adjusted fringe benefits value being increased to $6,563.

12. The suggested method of reimbursement calls for some comment and, on this issue, the Tribunal turns to the letter written by the company accountant to Mr and Mrs Nemer and which contains the following statements -

"An amount of $6,539 will be deducted from your share of dividends declared by the company to re-imburse the company for any incidental private use of your motor vehicle made by you as a proprietor of the business. Please note you will have to include the gross dividend in your taxable income."

Documents lodged with the Tribunal make it obvious that the dividends declared by the company were payable to a family trust and not to Mr and Mrs Nemer. The Tribunal is left to ponder how the reimbursement of $6,539 was recorded in the books of the employer company.

13. In applying the provisions of subsections 1157C(1) and (2) to the factual situation of this matter, the Tribunal finds that cars held by the employer of Mr and Mrs Nemer were applied by them to a private use and also that such cars were available for their private use. On that basis, the Tribunal is satisfied that the respondent and her partner were in receipt of car benefits. Furthermore, the Tribunal finds that the private use extended beyond work-related travel of the respondent and her partner and other minor, infrequent and irregular private use by them. For this reason, the Tribunal concludes that the car benefits are not exempt car benefits.

14. On the subject of valuing car benefits, subsections 1157K(1) and (2) of the Act prescribe that such value is to be worked out in accordance with section 1157L unless in terms of s1157M there is in force a ministerial determination. There is no determination and thus the only method available is the one stated in s1157L. The Tribunal is of the view that strict adherence to the provisions of the section is required and that no exceptions or adjustments are permitted. Certainly, there is nothing in the section to support the contention that employee contributions should some how be offset against a predetermined value. Additionally, the Tribunal has applied the table to the two cars in question and is satisfied that the value of the car fringe benefits total $7,563. As this result exceeds value free area of $1,000, the respondent's adjusted fringe benefit becomes $6,563.

15. The respondent's income for the relevant family allowance period is the sum of the following components -

Respondent's taxable income $35,539

Partner's taxable income 36,946

Respondent's adjusted fringe

benefits value 6,563

Total $79,048

Because this total exceeds the threshold figure of $72,537, the Tribunal holds that Mrs. Nemer was not entitled to receive family allowance during the relevant period.

16. Moreover, the Tribunal is of the view that the amount of $987 was paid to the respondent because she made a false statement and that, in terms of subsection 1224(1), the amount so paid is a debt due by her to the Commonwealth. The Tribunal notes that in this context a "false statement" does not mean that the Tribunal considers there to be any deliberate intent on her behalf.

17. While the possibility of the waiver of the debt was not raised on behalf of the respondent, it seems that the only avenue available was to establish the existence of special circumstances as mentioned in s1237AAD. Bearing in mind the facts of this reference, the Tribunal rejects the notion that there existed special circumstances that make it desirable to waive the debt.

18. For the reasons given and pursuant to s43 of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision under review and in substitution therefor decides that payment of the family allowance was properly cancelled and that a debt in the amount of $987 was properly raised and is recoverable.

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Member D.J. Trowse

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

Richard Coates (Associate)

Date of Decision 7 July 2000

Counsel for the Applicant -

Solicitor for the Applicant Ms L Odgers - Centrelink

Counsel for the Respondent -

Respondent's Representative Mr T Creasy