Jones and Secretary to the Department of Family and Community Ser vices [2003] AATA 62 (22 January 2003)

Last Updated: 28 January 2003

DECISION AND REASONS FOR DECISION [2003] AATA 62

ADMINISTRATIVE APPEALS TRIBUNAL Nº V2002/582

GENERAL ADMINISTRATIVE DIVISION

Re: ANNE JONES

Applicant

And: SECRETARY TO THE

DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Respondent

DECISION

Tribunal: M.J. Carstairs, Member

Date: 22 January 2003

Place: Melbourne

Decision: The Tribunal affirms the decision under review.

(sgd) M.J. Carstairs

Member

SOCIAL SECURITY - family tax benefit - overpayment - debt to Commonwealth - provision of revised estimates of income - effect on entitlement - whether administrative error

A New Tax System (Family Assistance (Administration) Act 1999 ss16, 21, 31A, 71, 97,

101, 102

REASONS FOR DECISION

22 January 2003 M. J. Carstairs, Member

1. This is an application by Anne Jones (the applicant) for review of a decision of the Social Security Appeals Tribunal (the SSAT) dated 23 May 2002. The SSAT affirmed a decision of a Centrelink delegate of the Secretary to the Department of Family and Community Services (the respondent), to raise and recover a debt of $1280.20, being an overpayment of family tax benefit for the period 1 July 2000 to 30 June 2001.

2. At the hearing of this matter on 9 September 2002 the applicant represented herself and Mr D. Perdon, a Centrelink advocate, represented the respondent.

3. The Tribunal received into evidence the documents lodged under s37 of the Administrative Appeals Tribunal Act 1975 (T1-T27), together with one exhibit (Exhibit A1) tendered by the applicant, and one exhibit (Exhibit R1) tendered by the respondent.

BACKGROUND

4. In 2000/2001, the applicant received family tax benefit by instalments in respect of her four dependant children, Luke aged 15, Timothy aged 13, Dominic aged 9 and Kate aged 4. Family tax benefit replaced family allowance from 30 June 1999. Her payments were calculated on the basis of combined estimated income as follows: $43,010.00 (from 1 July 2000); $45,200.00 (from 6 December 2000) and $51,000.00 (from 13 February 2001). The actual combined taxable income of the applicant and her husband for the year was $52,414.00, made up of $47,899.00 as her husband's taxable income and hers of $4515.00.

5. On 17 January 2002, Centrelink decided that, for the year 2000/2001, the applicant had been overpaid in the amount of $2280.20. An amount of $1000.00 was waived under a special provision for tolerance of $1000.00 where debts arose in the first year of operation of the new provisions for family tax benefit, and the debt was fixed at $1280.20. On 3 April 2002, a Centrelink authorised review officer affirmed the decision that the debt should be recovered. Following the decision of the SSAT, the applicant applied to the Tribunal on 13 June 2002 for review of the decision.

EVIDENCE

6. In her statement of case (Exhibit A1), the applicant stated that the overpayment was the result of an administrative error by Centrelink, in that the application of her instalment entitlement determination for family tax benefit, based on her revised income assessment given to Centrelink in February 2001, was incorrect. She told the Tribunal that the system used by Centrelink is flawed because when an estimate of income is updated the new figure is not then applied to the whole year, that is retrospectively as well as prospectively. She said that, in February 2001 when she revised her estimate to a combined income of $51,000.00, her family tax benefit was calculated on this amount for the remainder of the year, and not the year as a whole.

7. The applicant stated that, in reality, no matter how accurate the estimate of income, if the estimate is revised to a higher amount an overpayment will occur because of the method used by Centrelink to apply the new instalment entitlement. She stated that she updated her estimates of income in a timely manner and had acted in good faith to ensure that her payments were correct.

8. In an attachment to her Statement of Case (Exhibit A1), the applicant provided details of the family's fortnightly income and expenditure, which showed net income as $1315.29 and outgoings of $1668.79. She supplied comparative figures for the family outgoings if they were reliant solely on income support payments, rather than income from employment.

CONSIDERATION OF THE ISSUES

9. A New Tax System (Family Assistance) (Administration) Act 1999 (the Act) deals with the payment of family tax benefit. The Act provides for family tax benefit to be worked out taking into account the person's and their partner's adjusted taxable income. A person may either claim family tax benefit on an ongoing basis, as in the applicant's case, or wait until the end of a financial year for it to be paid as a lump sum. From time to time the applicant provided new estimates of income to Centrelink (para 4). It was upon these revised estimates that her entitlement to ongoing payments was worked out.

10. Section 31A of the Act provides:

31A(1) If:

(a) a determination is in force on a particular day under which a claimant is entitled to be paid family tax benefit by instalment; and

(b) that determination includes a determination of the claimant's rate of family tax benefit worked out on the basis of an estimate of the claimant's adjusted taxable income in a particular income year; and

(c) the claimant, at any time before or during that income year, provides the Secretary with a revised estimate of that amount that is attributable to the occurrence of an event other than an event to which paragraph 31(1B)(c) or (d) applies; and

(d) the Secretary considers the revised estimate to be reasonable; and

(e) if the claimant's rate of family tax benefit were calculated using the revised estimate--a new rate of family tax benefit would be required;

the Secretary must vary the determination so that the claimant's rate of family tax benefit is determined on the basis of that revised estimate.

31A(2) A variation of a determination under subsection (1) has effect:

(a) if it results in an increase in the claimant's rate of family tax benefit:

(i) unless subparagraph (ii) applies--from the day on which the revised estimate was provided to the Secretary; or

(ii) if the first day of the income year to which the revised estimate relates occurs after the day identified in subparagraph (i)--from that first day; and

(b) if it results in a decrease (including a decrease to nil) in the claimant's rate of family tax benefit:

(i) unless subparagraph (ii) or (iii) applies -- from the day on which the revised estimate was provided to the Secretary; or

(ii) if the first day of the income year to which the revised estimate relates occurs after the day identified in subparagraph (i) and subparagraph (iii) does not apply -- from that first day; or

(iii) if the day after the end of the last instalment period before the variation takes place occurs after the days identified in subparagraphs (i) and (ii) -- from the day first-mentioned in this subparagraph.

11. Section 71 of the Act provides:

71 If:

(a) an amount (the received amount) has been paid to a person by way of assistance; and

(b) the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;

the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.

12. The provision for non-recovery of certain family assistance debts is made in Part IV of the Act. Sections 101 and 102 provide:

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.

102(1) The Secretary may, on behalf of the Commonwealth, decide to waive the Commonwealth's right to recover debts, or parts of debts, arising under or as a result of this Act that are included in a class of debts specified by the Minister by determination in writing.

102(1A) A determination by the Minister under subsection (1):

(a) may specify conditions to be met before the Secretary exercises the power to waive debts, or parts of debts, in the specified class; and

(b) may specify limits on the amounts to be waived in relation to debts in the specified class.

The Secretary must exercise the power to waive in accordance with any conditions or limits specified in the Minister's determination.

102(2) A decision 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).

102(3) A determination under subsection (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

13. A debt may be waived on the basis of administrative error only if ...the person would suffer severe financial hardship if it were not waived (s97 of the Act).

14. In regard to s31A of the Act, the applicant submitted to the Tribunal that this section was incorrectly applied in her case. She also submitted that the individual income estimates provided over a year should not be used alone, because they are only part of the rate calculation process. She stated that, had her payments been reduced after she gave the last estimate in February 2001 to take into account the amounts she had received in excess prior to the last estimate, she would not have had an overpayment. She stated further that the Act required that the determination reflect the revised income estimate, while logic dictated that s31A should be applied taking into account payments already made to a person in the relevant year. The applicant submitted that she had a legitimate expectation that her payment would be correctly calculated for the whole period, while the method actually used was inconsistent with the object and purpose of the Act and produced an absurd and unjust outcome. On this basis, the applicant sought to have waived only that part of the debt arising from the application of the incorrect method after her final estimate was given..

15. The applicant submitted that the overpayment resulting from the incorrect application of s31A of the Act was one solely attributable to administrative error. She further submitted that she received the payments of family tax benefit in good faith; and that she would suffer severe financial hardship if required to repay the debt. In regard to financial hardship, the applicant submitted that the family made financial decisions based on an expectation that the instalments of family tax benefit were correct and they were not advised until nearly a year later that they were incorrect. She submitted that, with a mortgage of $70,000.00, and debts owing for school fees in excess of $5000.00, they are struggling and that recovery of the debt would place the family in severe financial hardship.

16. In regard to special circumstances, the applicant submitted that the implementation of the Act had been accompanied by teething problems and overpayments should not knowingly have been made to families who received the family tax benefit in good faith without knowledge that they were being overpaid. She cited a letter from the Centrelink Advocacy and Administrative Law Team dated 29 July 2002:

...

I am instructed that at least partly in response to the concerns of persons such as yourself, that since April 2002 Centrelink has given persons lodging increased income estimates the choice of whether their FTB is to be reduced on the new estimate from the next payday or whether the new estimate should be applied retrospectively over the expired part of the financial year (literature enclosed).

17. The respondent submitted to the Tribunal that the applicant had provided estimates at different times, the last being on 13 February 2001 when she estimated $51,000.00. Mr Perdon submitted that, after the end of the tax year 2000/2001, the Australian Taxation Office advised that the total income was $52,414.00. As this exceeded the estimated amounts, s71 dictated that the difference between the amount received by the applicant and the correct amount was a debt due to the Commonwealth by the applicant.

18. Mr Perdon submitted that the practice of using a new estimate from the date that Centrelink is notified was consistent with s21 and s31A of the Act and it could not be said to constitute administrative error. He also submitted that, even if two alternate methods could be adopted in applying the provision, the use of one methodology rather than another would not constitute administrative error. He contended that it is not possible to ascertain whether a person will be overpaid or underpaid until the end of a financial year. He submitted that, even if there had been an administrative error, it could not be said that the debt was attributable solely to the administrative error as required by s.97 of the Act.

19. Mr Perdon submitted that severe financial hardship could not be shown in this case, as the level of the family income exceeded $50,000.00 in 2000/2001 and 2001/2002. He contended that this amount greatly exceeded the maximum social security payments that would be paid to this family if they were not in employment, which would be $17,300.00 for a married couple. He said that the Act provides for recovery of debts even where the debtor has no other income other than social security payments. Mr Perdon submitted that there were no special circumstances.

20. The Tribunal reached its decision taking into account the oral and documentary material and submissions of the parties.

21. In regard to the first issue to be decided - whether there is a family tax benefit debt - it was not disputed that an overpayment had occurred. The applicant acknowledged that the Act allows for adjustments to a family tax benefit rate when different estimates are given, but she sought relief because, in her submission, Centrelink administrative practice in regard to estimates did not comply with the provisions of the Act.

22. Sections 16 and 21 of the Act provide for payment of family tax benefit by instalments, this being by a determination that remains in force until another determination is made. Amongst other circumstances, another determination may be made under s31A where a person provides a new estimate of income. In applying the new estimate given by the applicant in February 2001, the respondent complied with the provisions of the Act in applying section 31A. That section operates where a person gives a new estimate of income. Under the legislation, until the estimate is given, the previous determination remains in force because of the effect of s21. Section 31A(2) provides for the date of effect of a new determination. Where the result of the new determination is a rate reduction of family tax benefit (the case here), the date of effect will be either the date of the notification of the new estimate, or potentially one of two later dates (s31A(2)(b)(ii) and (iii)). On this basis, the Tribunal is satisfied that, when the applicant gave the new estimate in February 2001, the respondent applied the provisions of the Act correctly to the information provided that income was anticipated to be $52,000.00.

23. The income received in 2000/2001, ascertained at the end of the tax year, was higher than the amounts estimated. Section 71 provides for this situation. The overpayment is a debt under the Act because of the effect of s71(2), which requires that the difference between a received amount and a correct amount be raised as a debt. The Tribunal, therefore, finds that there is a debt in the amount of the difference.

24. The applicant submitted that the provisions for waiver on the basis of administrative error (s97) should be exercised in her case, as s31A of the Act could have been applied in a way that accorded more closely with the object and purposes of the Act. However, the Tribunal accepts the submission of the respondent that, where two administrative practices might be adopted in applying a legislative provision, the adoption of one rather than another will not constitute administrative error. As stated, the Tribunal has decided that the respondent correctly applied the provisions of s31A when the applicant submitted her last estimate of income. That finding rules out administrative error.

25. However, the Tribunal was also satisfied that s97 could not apply as the applicant has not established severe financial hardship. The family is struggling. The Tribunal accepts that, in reality, their financial situation is not significantly different, despite their salaries, from that of people who receive social security. However, the term severe financial hardship must be seen in the context of the legislation. With income of $50,000.00 being well in excess of income support payments under the Act, severe financial hardship is not shown.

26. With respect to waiver of all or part of the debts under s101 of the Act, the respondent must satisfy s101(b) and (c). In relation to s101(b) concerning special circumstances, Court and Tribunal decisions establish 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. The Tribunal considered that the circumstances here were not sufficiently special taken alone or together to warrant the debt being waived in whole or in part.

27. The Tribunal accepts that financial hardship is evident. Other circumstances include that now provision is made (since April 2002) for persons lodging new estimates, who might otherwise incur a debt, to have the choice of having the estimate apply retrospectively. However, the later provision for this is not a justification for an exercise of the discretion as to special circumstances where the debt has already been incurred. The applicant has had the benefit of the $1000.00 debt tolerance in the first year of debt recovery under the new provisions for family tax benefit, so the documents stated, ...To assist families adjust to the new system (T17). While it is unfortunate that the applicant did not have the option to have a new estimate apply retrospectively in 2001, the change appears to be one intended to prevent overpayments arising, not to avoid recovery of them. It is not itself a special circumstance.

28. For these reasons, the Tribunal decides that the sum of $1280.20 in family tax benefit paid to the applicant during the period 1 July 2000 to 30 June 2001 is a debt recoverable by the Commonwealth.

DECISION

29. The Tribunal affirms the decision under review.

I certify that the twenty-nine [29] preceding paragraphs are a true copy of the reasons for the decision of:

M.J. Carstairs, Member

(sgd) Catherine Thomas

Clerk

Date of hearing: 9 September 2002

Date of decision: 22 January 2003

Advocate for applicant: Self-represented

Advocate for respondent: Mr D. Perdon, Centrelink