Jones and Secretary, Department of Family and Community Services [2003] AATA 1018 (10 October 2003)

Last Updated: 10 October 2003

DECISION AND REASONS FOR DECISION [2003] AATA 1018

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2003/238

GENERAL ADMINISTRATIVE DIVISION	)
	Re	JAI-ANN JONES

Applicant

And

SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal

Mr R G Kenny, Member

Date 10 October 2003

Place Brisbane

Decision

The Tribunal affirms the decision under review.

....................(Sgd).....................

R G Kenny

Member

CATCHWORDS

SOCIAL SECURITY - family assistance - overpayment of Family Tax Benefit - overpayment of Child Care Benefit - whether a debt due to the Commonwealth - whether non-recovery provisions are applicable

Family Assistance Act 1999 s 58, Schedules 1, 2, 3

Family Assistance (Administration) Act 1999 ss 71, 71C, 95, 96, 97 and 101

Beadle v Director-General of Social Security (1985) 60 ALR 225

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

Re Beadle and Director-General of Social Security (1984) 1 AAR 362

REASONS FOR DECISION

10 October 2003

Mr R G Kenny, Member

BACKGROUND

1. During the financial year 2001/2002, Mrs Jai-Ann Jones (the applicant) received payments of Family Tax Benefit and Child Care Benefit in accordance with the terms of the Family Assistance Act 1999 (FA Act). On 28 October 2002, a delegate of the Secretary, Department of Family and Community Services (the respondent) determined that she had been overpaid an amount of $5,825.40 by way of Family Tax Benefit and the amount of $4,329.70 by way of Child Care Benefit and that these were debts due by her to the Commonwealth. That decision was affirmed by an Authorised Review Officer on 22 November 2002 and, in turn, by the Social Security Appeals Tribunal (the SSAT) on 3 February 2003.

2. On 17 March 2003, the applicant sought review of the decision by the Administrative Appeals Tribunal (the Tribunal).

HEARING AND EVIDENCE

3. The applicant attended the hearing and was represented by her husband, Glen Jones. The respondent was represented by Mr James Howard.

4. During the hearing the following material was taken into evidence:

§ Exhibit 1 - a statement prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents - T1 - T24); and

§ Exhibit 2 - a statement of facts and circumstances, dated 30 September 2003, completed by Glen Jones.

ISSUES AND LEGISLATION

5. The applicant conceded in this case that an incorrect estimate of income had been provided to the respondent and that this had resulted in an overpayment of Family Tax Benefit and Child Care Benefit. The issue for the Tribunal is whether the overpayments that have been raised constitute debts to which the non-recovery provisions contained in the Family Assistance (Administration) Act 1999 (the FAA Act), relating to write-off or waiver, should be applied. Those provisions read:

"95.(1) Subject to subsection (2), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

95.(2) The Secretary may decide to write off a debt under subsection (1) if, and only 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.

95.(3) For the purposes of paragraph (2)(a), a debt is taken to be irrecoverable at law if, and only if:

(a) the debt cannot be recovered by means of:

(i) deductions under section 84; or

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

(ia) setting off under section 84A arrears of family assistance; or

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

(iia) setting off under section 87A against advances; or

(iii) legal proceedings under section 88; or

(iv) garnishee notice under section 89;

because the relevant time limit for recovery action under that section has elapsed; or

(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or

(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or

(d) the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.

95.(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 arrears of family assistance; or

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

(d) setting off under section 87A against advances;

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

95.(5) A decision made under subsection (1) takes effect:

(a) if no day is specified in the decision--on the day on which the decision is made; or

(b) if a day is specified in the decision--on the day so specified (whether that day is before, after or on the day on which the decision is made).

95.(6) Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.

96.(1) On behalf of the Commonwealth, the Secretary may waive the Commonwealth's right to recover the whole or a part of a debt from a debtor only in the circumstances described in section 97, 98, 99, 100, 101 or 102.

96.(2) A waiver takes effect:

(a) on the day specified in the waiver (whether that day is before, after or on the day on which the decision to waive is made); or

(b) if the waiver does not specify when it takes effect--on the day on which the decision to waive is made.

97.(1) The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

97.(2) The Secretary must waive the administrative error proportion of a debt if:

(a) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and

(b) the person would suffer severe financial hardship if it were not waived.

97.(3) The Secretary must waive the administrative error proportion of a debt if:

(a) the payment or payments were made in respect of the debtor's eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and

(b) the debt is raised after the end of:

(i) the debtor's next income year after the one in which the eligibility period or event occurs; or

(ii) the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;

whichever ends last; and

(c) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.

97.(4) For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.

...

101. 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 the family assistance law; 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."

APPLICANT'S CASE

6. Mr Jones submitted that the applicant had contacted Centrelink at the beginning of the financial year 2000/2001 and provided an estimate of income for the two of them at $31,500 with net rental property loss in relation to investment properties at Palm Beach and Walcha in the amount of $24,500. He submitted that this would have provided an income of $56,000 upon which the calculations of Family Tax Benefit and Child Care Benefit should have been made. He submitted that some error had occurred in the way in which this data had been processed by Centrelink so that, instead of adding those two figures in order to get the level of adjusted taxable income, the net rental property loss appeared to have been subtracted from the income level to give a figure of $7,000 as income to which there was then added the net rental property loss of $24,500 to give a total of $31,500 by way of adjusted taxable income. Mr Jones submitted that letters sent to the applicant during the financial year advised her that the payment calculations were based upon a level of income in the amount of $31,500 which had been calculated in that erroneous manner but that, because it was the same figure, by coincidence, as that which she had given as the income figure, no concern was felt and the need to contact Centrelink had not been apparent.

7. For that reason, Mr Jones submitted, there was administrative error on the part of Centrelink for allowing the debt to arise.

8. Mr Jones was also critical of the way in which Centrelink calculated the level of the applicant's income. He noted the difference in the way in which this was done when compared with that adopted by the Australian Taxation Office. He referred to the applicant's taxation return (annexed to Exhibit 2) which showed that, in the relevant year, she had earned an amount of $484 from shares and had a net rental property loss in the amount of $8,231 leaving her with a total income loss of $7,747. He submitted that this amount would be taken into account by the Australian Taxation Office as a loss.. He submitted that, for consistency, the net rental property loss should have been added to the negative income figure of $7,747 to give an adjusted income level to the applicant of only $484. He submitted that, if this had been done, the level of overpayments would have been reduced.

9. Mr Jones referred to the present circumstances of himself and the applicant. He said that they had transferred from Darwin to Toowoomba and had not been able to sell their Darwin house before leaving and, therefore, were forced to rent it for a period. It was the rental arrangements in respect of that property which added to the net rental property loss taken into account by Centrelink. He said that the property had since been sold and that the proceeds had been used to purchase a block of land in Toowoomba upon which he and the applicant were currently building a house.

10. Mr Jones said that he and the applicant also owned a property in Walcha which was a family property and which was still subject to a mortgage repayment in the amount of $110 per week and for which there were additional outgoings totalling some $40 to $50 per week. He said that it was currently rented at $110 per week. He also referred to a property at Palm Beach which he and the applicant own as an investment property. The weekly mortgage repayments on this were $625, additional outgoings were in the order of $80 per week and the rent received was $340 per week.

11. Mr Jones said that the overall circumstances were that, currently, their weekly outgoings exceeded their weekly incomes by approximately $115. He said that this included current repayments to Centrelink in relation to the debts in the amount of $40 per week. He said that, in the event that he was required to continue to pay these, he and the applicant would be able to do so, and would make adjustments elsewhere in order for this to be done. However, he submitted that the figures that he gave were conservative and had not taken into account expenses for items such as clothing. He said that the applicant was now working for three days a week and had prospects of employment beyond that when she was able to do so consistent with child care arrangements.

RESPONDENT'S CASE

12. Mr Howard conceded the applicant's argument that incorrect calculations had been made by Centrelink in the way in which taxable income and net rental property losses were brought together to calculate the adjusted taxable income. In that sense, he conceded that there was administrative error on the part of the Commonwealth. Despite that, he submitted that the actual income, including net rental property loss, for the 2001/2002 financial year for both the applicant and Mr Jones was $67,165.57 and that, even if the estimated income figures had been utilised, calculations would have been based on only $56,000 so that a debt would have been raised in any event.

13. Mr Howard submitted that the debt calculations had been correctly made in reliance upon the adjusted taxable income of the applicant and Mr Jones and that the amounts of $5,825.40 and $4,329.70 were overpayments of Family Tax Benefit and Child Care Benefit, respectively, which, in accordance with the provisions of the FAA Act, were debts due to the Commonwealth.

14. In relation to writing off the debts or either of them, he submitted that the only ground for write-off was that the debtor had no capacity to repay the debt. However, he submitted that, pursuant to sub-section 95(4) of the FAA Act, if a debt is able to be recovered by deductions from a person's social security payments, then the person is deemed to have the capacity to repay the amount unless it would result in severe financial hardship. He submitted that severe financial hardship had not been demonstrated in this case and that write-off was not applicable.

15. In relation to waiver, Mr Howard submitted that the only relevant provisions were sections 97 and 101 of the FAA Act. In relation to the former, he submitted that, even though there had been administrative error to some extent by the Commonwealth, that, alone, was not sufficient to justify waiver of the debt because the provisions specifically required that waiver was not available unless the applicant was in severe financial hardship. Again, he submitted that this requirement was not met.

16. In relation to section 101 which deals with special circumstances, he submitted that the only relevant ground argued had been financial hardship and that the provision requires more than that in order to be satisfied. He submitted that the applicant's circumstances were not so unusual, uncommon or exceptional as to justify waiver under that provision.

CONSIDERATION

17. Income details provided by the Australian Taxation Office to the respondent show that the applicant's taxable income for 2001/2002 was $0 and that net rental property loss was $8,231. In relation to Mr Jones, income was $34,821 and net rental property loss was $24,113. This meant that the combined income was $34,821 and combined net rental property losses were $32,344.

18. The income level upon which calculations of both Family Tax Benefit and Child Care Benefit are made is the current year adjusted taxable income which is set out in Schedule 3 of the FA Act and it requires the combined taxable income and the net rental property losses to be aggregated. This means that the income relevant to the calculation of the applicant's payments was $67,165.

19. I have noted the contention of Mr Jones that the net rental property loss of the applicant should have been added to the negative amount which the Australian Taxation Office would consider to be her taxable income. However, as I understand the methodology he adopted, he has utilised a figure of $8,231 on two occasions. As I understand his calculations, the amount of $7,747 arose through the aggregation of $484 earned in share dividends with the property losses of $8,231 yielding a negative income of $7,747. He then sought again to add the property losses to that amount in order to calculate the level of income. I am satisfied that this is not the method recognised in section 58 and the schedules to the FA Act. Indeed, the zero figure of taxable income relied upon by the respondent is not reflected in the taxation return of the applicant which makes reference, as noted above, to share income in the amount of $484. If the net rental property loss was added to that amount, it would, in fact, yield an adjusted taxable income level of $8,715. This matter was not raised by Mr Howard and I am satisfied that the calculation should be based upon the income figure which represents a net property loss alone of $8,231 in the applicant's case.

20. It was not disputed by the applicant that she was paid $8,668.75 by way of Family Tax Benefit and $11,156.84 by way of Child Care Benefit during the 2001/2002 financial year. I am satisfied that, on the basis of the adjusted income level of the applicant and her husband, their entitlement was $2,843.35 and $6,827.14, respectively, and that, therefore, she was overpaid the amounts of $5,825.40 by way of Family Tax Benefit and $4,329.70 by way of Child Care Benefits.

21. In accordance with sub-section 71(2) of the FA Act and section 71C of the FA Act, amounts of Family Tax Benefit and Child Care Benefit, respectively, which were greater than the amount that should have been paid are debts due to the Commonwealth by the applicant. I am satisfied that those amounts are $5,825.40 and $4,329.70, respectively.

22. A debt may be written off under section 95 of the FAA Act and the provision is set out above. The applicant is currently making repayments from her present Family Tax Benefit payments in the amount of $80 per fortnight and the evidence before the Tribunal was that there was capacity for these payments to continue. In that situation, in accordance with sub-section 95(4) of the FAA Act the applicant is taken to have the capacity to repay the debt unless recovery by deductions against Family Tax Benefits would cause severe financial hardship. The evidence is that the applicant and her husband need to budget carefully but that, in large part, the need to do this is forced upon them by choices that they have taken in respect of investment options. In particular, they own properties at Walcha and at Palm Beach which are negatively geared for taxation purposes. I am satisfied that it is these additional financial constraints that they have voluntarily adopted which place them in the position that they now find themselves. Each of them is in employment and I am satisfied that there will be no severe financial hardship in the event that repayments were to be continued through deductions from Family Tax Benefit. This means that I am satisfied that the write-off provision is not applicable.

23. The only potentially relevant waiver provisions are those set out in section 97 and 101 of the FAA Act. The first of those enables waiver of a debt where there is administrative error and, also, where the person would suffer severe financial hardship if it were not waived. Whilst it is conceded and I am satisfied that there has been administrative error in this case, I am also satisfied that severe financial hardship would not arise if the debt were not waived and, therefore, the requirements of section 97 of the FAA Act are not met.

24. In relation to section 101 of the FAA Act, no guidance is given as to the meaning of the term "special circumstances" but the concept has been the subject of consideration in a range of legislative provisions relating to social security law. In Beadle v Director-General of Social Security (1985) 60 ALR 225, the Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term as it is applied in the context of the Social Security Act 1991.. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood "not to require judicial gloss" (at 228). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security (1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances must be "unusual, uncommon or exceptional" and must have a "particular quality of unusualness that permits them to be described as special".

25. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle, observed (at 545) that special circumstances:

"...would require something to distinguish... [the]... case from others, to take it out of the usual or ordinary case. ... It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."

26. The only matters raised in this case were financial in character and I have determined that financial hardship will not arise if the debt is not waived. Significantly, the provision specifically provides that there be circumstances other than financial hardship alone which make it desirable to waive. I am satisfied that there are no such special circumstances in this case and that the terms of section 101 of the FAA Act are not met.

DECISION

27. The Tribunal affirms the decision under review.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member

Signed: Sarah Oliver

Associate

Date of Hearing 30 September 2003 (at Toowoomba)

Date of Decision 10 October 2003

For the Applicant Mr G Jones

For the Respondent Mr J Howard, Departmental Advocate