Michalak and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Anor [2009] AATA 299 (30 April 2009)

Last Updated: 30 April 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 299

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2008/6134 &

GENERAL ADMINISTRATIVE DIVISION		) No 2008/6135
	Re		RICHARD MICHALAK AND PEI-HONG MICHALAK

Applicants

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS AND SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT & WORKPLACE RELATIONS

Respondents

DECISION

Tribunal

Mr R G Kenny, Member

Date 30 April 2009

Place Brisbane

Decision

The Tribunal affirms the decisions under review.

.................[Sgd].............................
Member

CATCHWORDS

SOCIAL SECURITY – benefits and entitlements – parenting payment – incorrect estimates of income provided to Centrelink – parenting payments based on that incorrect information – overpayment of parenting payment – debt due to Commonwealth – no basis to write off or waive the debt – decision affirmed

SOCIAL SECURITY – benefits and entitlements – disability support pension – payments based on wife’s income – incorrect estimates of income provided to Centrelink – disability support pension based on that incorrect information – overpayment of disability support pension – debt due to Commonwealth – no basis to write off or waive the debt – decision affirmed

Social Security Act 1991 (Cth), ss 94, 117, 500, 503, 1064, 1068B, 1223(1), 1236, 1237A, 1237AAD

Director-General of Social Services v Hangan [1982] FCA 262; (1982) 70 FLR 212

Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541

REASONS FOR DECISION

30 April 2009

Mr R G Kenny, Member

BACKGROUND

1. Pei-Hong Michalak and her husband, Richard Michalak, were in receipt of parenting payment and disability support pension, respectively, from 2006 to 2008. These are forms of income support which are payable in accordance with the terms of the Social Security Act 1991 (“the Act”). On 30 September 2008, a Centrelink officer determined that Mrs Michalak had been overpaid parenting payment and, on 1 October 2008, a Centrelink officer determined that Mr Michalak had been overpaid disability support pension. In each case, it was determined that a debt was owed to the Commonwealth. The decisions were affirmed by an authorised review officer with Centrelink on 6 November 2008. The amount of the original alleged overpayment was varied to $4,081.54 for Mrs Michalak in the period from 25 April 2006 until 6 May 2008 (“the parenting payment overpayment period”) and, for Mr Michalak, the overpayment of $4,060.58 was affirmed in the period from 5 July 2006 until 17 June 2008 (“the disability support pension overpayment period”).
2. Those decisions were affirmed by the Social Security Appeals Tribunal (“the SSAT”) on 15 December 2008. The matter now comes before the Tribunal. At the hearing, Mrs Michalak appeared and represented both herself and her husband.

ISSUES AND LEGISLATION

3. The qualifications for and the rate of parenting payment are determined in accordance with ss 500, 503 and 1068B of the Act. The qualifications for and the rate of disability support pension are determined in accordance with ss 94, 117 and 1064 of the Act. It is common ground that, at all material times, Mrs and Mr Michalak were qualified for the parenting payment and disability support pension, respectively, and that, at all material times, the rate of those payments was dependent on the income of Mrs Michalak. Mr Michalak was not in employment during the overpayment periods.
4. Mrs Michalak conceded that her income during the parenting payment overpayment period, the level of parenting payment to which she was entitled during the parenting payment overpayment period and the overpayment to her and consequential debt to the Commonwealth of $4,081.54 had been correctly calculated. Mrs Michalak also conceded that her income during the disability support pension overpayment period and the level of disability support pension to which Mr Michalak was entitled had been correctly calculated. At the commencement of the hearing, Mrs Michalak agreed that the overpayment of disability support pension and consequential debt to the Commonwealth by Mr Michalak had also been correctly calculated. However, at the end of proceedings, she contended that the mathematical calculations in relation to Mr Michalak’s overpayment were not accurate.
5. I am satisfied that the concessions of Mrs Michalak in relation to her own overpayment and that of Mr Michalak have been properly made. In her case, the issue for determination is whether the debt or any part of it is able to be written off or waived. In Mr Michalak’s case, if the debt has been correctly calculated, the decision in relation to that debt will depend upon the decision relating to Mrs Michalak’s income. Again, both write off and waiver need to be considered.
6. The provisions relevant to write off and waiver are ss 1236, 1237A and 1237AAD of the Act.

EVIDENCE

Mrs Michalak

7. Mrs Michalak gave the following evidence. She completed tertiary teaching qualifications in 2005. Thereafter, she was employed as a supply teacher by Education Queensland from 6 March 2006 until 1 December 2006 and from 5 March 2007 until 6 May 2008. She was also employed by Educang, at North Lakes College, for brief periods in 2006 of one day and of three hours for which she earned $241 and $166, respectively. She was then engaged at North Lakes College on a contractual basis from 30 January 2007. Initially, that contract was for 2½ days per week until 30 September 2007 at the fortnightly rate of $1,332.42. However, from the start, she was offered 3½ days per week at the fortnightly rate of $1,554. Because the College subsequently reduced her contact time to 2½ hours per week, Mrs Michalak resigned on 26 March 2007 with her final pay period ending on 4 April 2007. She then continued her second period of teaching with Education Queensland.
8. Mrs Michalak always gave details of all of her earnings to Centrelink. Her fortnightly pay periods ended on Thursdays and she received her payment slips some days after that. Sometimes, this was as much as a week later. This made it very difficult to provide accurate fortnightly income information to Centrelink because the end of each Centrelink reporting period was on Tuesdays. As a result, she was required to estimate many of her fortnightly payments when advising Centrelink. She made regular complaints to Centrelink about that. To assist her in keeping her records, Centrelink provided Mrs Michalak with a booklet of Earnings Worksheets, each page of which was designed to correspond with a Centrelink reporting period. Sometimes, she completed these with estimates of her income during the fortnightly reporting period but there were times when she nominated the amount she actually earned. Mrs Michalak was always advised by Centrelink officers she spoke with that what she was doing was appropriate and that she should continue in that way.
9. Mrs Michalak was aware that her parenting payments and Mr Michalak’s disability support pension should vary in amount depending on her income. She also accepted that she had been notified of this in letters from Centrelink, including those dated 9 March 2006 and 29 January 2007. There were times of high income when her parenting payment was reduced to zero and times of low income when she received the maximum amount of parenting payment. Mrs Michalak was referred to Centrelink records of her parenting payments and of her employer earnings. Amongst these were parenting payments of $379.80 for 7 and 21 December 2006, 4 and 18 January 2007 and 1 February 2007; of $85.41 for 19 February 2007; of zero for 1 and 15 March 2007; of $4.38 for 29 March 2007; and of $382.80 for payments from 12 April 2007 to 19 July 2007. Also included was a record of notified payslip information from Educang for the fortnights ending 7 and 21 February 2007 and 7 March 2007. These showed income of $1,554.49 in each period.
10. Mrs Michalak was referred to Centrelink entries for the period when she resigned from Educang on 26 March 2007. The relevant Centrelink payment period was the fortnight ending 12 April 2007. Although she resigned on 26 March 2007, she was paid in accordance with her contract until 4 April 2007. Her employer’s payment for the fortnight ending 4 April 2007 was $1,807.64 even though her standard payment was $1,554. The extra amount was related to additional termination benefits.
11. Mrs Michalak believed that Centrelink would conduct reconciliations of her income and parenting payments by accessing income details from the Australian Taxation Office and that this would result in notification anomalies being rectified.
12. Mrs Michalak and her two children are generally healthy although she has some minor personal health concerns. Mr Michalak suffers from depression which is the basis for payment of the disability support pension. The family has no debts apart from the home mortgage and income is sufficient to meet the family’s needs.

Other evidence

13. Mrs Michalak’s Earnings Worksheets booklet was in evidence. It provides “Useful tips” including the following:

“Don’t tell Centrelink the amount shown on your payslip. Use the worksheets to calculate the amount you earned in the Centrelink Reporting Period”.

14. Also evident in Centrelink records are file notes for fortnights when the estimate of income provided by Mrs Michalak was greater than income actually earned. An example is for the fortnight ending 26 February 2008 where the declared amount was $1,960 and where employer records show that income was $1,463.49. However, there were many fortnightly periods when the estimate of income was less than that actually earned. For example, on 15 August 2006, declared fortnightly income is $1,500.50 whereas Centrelink’s calculations reveal actual income of $1,730.40. In the fortnight to 17 July 2007, a Centrelink file note shows that her estimate was $477.14 and payment records reveal that the sum earned was $708.80. Again, a further example is the period when she resigned from Educang (see para 10 above). Centrelink records reveal that Mrs Michalak declared no income during that period and, in evidence, Mrs Michalak said that she would not have had her payslip at that time and would not have received it until after the Centrelink reporting period had finished. On 4 December 2007, Mrs Michalak’s estimated income was $1,579 whereas actual earnings were calculated as being $1,950.25.
15. In evidence were copies of many letters sent to Mrs Michalak confirming the need for her to comply with reporting obligations. An example is the letter dated 9 March 2006. There, it is clearly stated that Mrs Michalak was to provide her income for Centrelink reporting periods and, if necessary, to estimate what these earnings were for that fortnight. The letter also referred to the need to check actual earnings against the estimate provided and to advise Centrelink, within 14 days, if the estimate differed from income actually earned. A warning was also given that failure to so advise may result in an overpayment and a debt which would need to be repaid.
16. A letter in those terms was also sent to Mrs Michalak on 29 January 2007. There, Centrelink advised that her parenting payment was based on earnings of $332.86 per fortnight. That was the amount advised by Mrs Michalak as her fortnightly income on the same day. On that basis, the maximum parenting payment was paid to Mrs Michalak in the fortnight ending 30 January 2007. However, a pay advice from Educang showed actual income for the fortnight ending 7 February 2007 was $1,554.49.
17. Also in evidence was a copy of a letter, dated 19 June 2007, sent to Mr Michalak. This detailed the benefits he received in the period from 17 March to 19 June 2007. No reference is made to Mrs Michalak’s earnings in that period. However, Education Queensland advised that her income in that period included payments of $269.87, $561.34, $3,087.37 and $2,526.03.

SUBMISSIONS

Mrs Michalak

18. Mrs Michalak recognised that the Centrelink notification requirements forced her to make estimates of her income and she submitted that this was difficult to do with accuracy. This was because her hours of work varied from time to time and because her pay slips were received days after the end of the relevant reporting period. She submitted that she had done all that she could to satisfy the Centrelink requirements and had not done anything to falsely represent her income to Centrelink. She submitted that Centrelink was at fault for not checking her income against Australian Taxation Office records and that, if this had been done, the overpayment may have been noted earlier and the debt reduced. In that sense, she submitted that the debt arose solely because of error on the part of the Commonwealth.
19. Mrs Michalak expressed concern at the calculations associated with Mr Michalak’s overpayment and debt. However, she said that she was not in a position where she was able to point out where any errors in making those calculations were made.

Mr McQuinlan

20. Mr McQuinlan, for the respondent, was aware of the difficulty that Centrelink reporting times posed for some recipients of income support payments. However, he submitted that Centrelink had done much to ensure that Mrs Michalak was aware of her reporting obligations. In part, this was achieved, he submitted, by providing Mrs Michalak with a booklet of Earnings Worksheets and also by setting out clear statements of the relevant procedures in letters sent to her. He submitted that up to 25 such letters had been sent to Mrs Michalak.
21. Mr McQuinlan accepted that no deliberate attempt had been made by Mrs Michalak to mislead Centrelink about her income and he noted that, at times, income was overestimated and that, at other times, it was underestimated. He submitted that Mrs Michalak was well aware that the level of her parenting payments depended on her income and noted that there were occasions where this was not reflected in the parenting payments received by her. He submitted that Mrs Michalak would have been aware that incorrect payments were sometimes made to her by Centrelink. He also submitted that this meant that the additional parenting payment amounts had not been received by her in good faith as that term has been applied under the Act.
22. Mr McQuinlan submitted that the debts had been correctly calculated for both Mrs and Mr Michalak and that they arose because of errors made by Mrs Michalak in lodging her income information to Centrelink. In that sense, he submitted, the overpayments were not brought about solely due to Commonwealth error and could not be waived because of administrative error. Mr McQuinlan also submitted that there were no circumstances which were special in this case to justify the exercise of discretion to waive the debts on that basis. Mr McQuinlan noted that repayment of the debts was being achieved by a $50 reduction in Mrs Michalak’s and in Mr Michalak’s fortnightly Centrelink payments and that, accordingly, it was not appropriate to write off either of the debts.

CONSIDERATION

23. I am sympathetic to the situation in which Mrs Michalak found herself in attempting to give accurate estimates of her income. This was because, frequently, she did not receive confirmation from her employers of her actual earnings until after the Centrelink reporting period had passed. Further, there was no necessary correlation between payment periods and Centrelink reporting periods. Despite that, I am satisfied that Centrelink adopted means to keep Mrs Michalak informed of her reporting obligations and the need for her to keep checking the estimates she had given against actual earnings when these were known. This was done through letters sent to her and also by providing her with a booklet of Earnings Worksheets. In the result, estimation errors were made by Mrs Michalak and this led to incorrect amounts of parenting payments being credited to her.
24. I have noted Mrs Michalak’s concession that her overpayment of parenting payment and consequential debt of $4,081.54 was correctly calculated. I am satisfied that her concession was properly made. I have also noted her belated submission that the calculation of the overpayment of Mr Michalak’s disability support pension was inaccurate. No submissions were made concerning the nature of any inaccuracies or of the methods adopted by Centrelink in making those calculations. The Centrelink materials in evidence set out the material relating to those calculations and I am satisfied that those calculations are accurate and that the overpayment of Mr Michalak’s disability support pension in the amount of $4,060.58 is a debt due by him to the Commonwealth[1].

Write off of debts

25. Provision for a debt to be written off is made under s 1236 of the Act. This is where the debt is irrecoverable at law; or the debtor has no capacity to repay the debt; or the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or it is not cost effective for the Commonwealth to take action to recover the debt. The only component of that provision of potential relevance in this matter is that relating to lack of capacity to repay the debt. Mrs and Mr Michalak are now repaying the debt to the respondent through deductions from their respective current income support payments and I am satisfied that there is no lack of capacity for the debt to be repaid on that continuing basis. In that situation, the debt should not be written off.

Waiver of debts

26. A debt may be waived, under s 1237A of the Act, which reads:

“1237A Administrative error
(1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
...
(1A)  Subsection (1) only applies if:
(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later”.

27. The first element to be satisfied under s 1237A(1) of the Act is that the debt must be attributable solely to an administrative error made by the Commonwealth. This will not be satisfied if there has been some contribution to causing the debt by the recipient[2]. I am satisfied that Mrs Michalak contributed to the overpayment through her failure to provide correct estimates of her income in Centrelink reporting periods. I have referred to the difficulties associated with complying with that obligation. Nevertheless, I am satisfied that Mrs Michalak was aware that the level of her parenting payments was dependent on the information she provided. Some of that information she gave was incorrect and this led to the incorrect payments of parenting payment to her. Because Mrs Michalak contributed to the overpayment and consequential debt, waiver under s 1237A of the Act is not available. The calculation of Mr Michalak’s disability support pension was made on the basis of Mrs Michalak’s income. Centrelink was not always advised of Mrs Michalak’s earnings. Also, the errors of Mrs Michalak in providing estimates of her income were reflected in Mr Michalak’s disability support pension payments and, again, they are not due solely to Commonwealth error and can not be waived under s 1237A of the Act.
28. I have noted Mrs Michalak’s submission in relation to the Australian Taxation Office. While I accept that Centrelink has the capacity to check an individual’s income, this is not an obligation on Centrelink’s part and does not over-ride the requirement of Mrs Michalak to provide correct income records to Centrelink.
29. A debt may also be waived under s 1237AAD of the Act which reads:

“s1237AAD    Waiver in special circumstances
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 false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 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”.

 

30. The Act provides no guidance as to the meaning of the term “special circumstances”. In Groth v Secretary, Department of Social Security[3], Kiefel J observed 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”.

31. No submissions were made by Mrs Michalak for waiver on this basis. Her evidence was that she and her children are in good health, generally. Mr Michalak suffers from depression but this is the condition for which he receives the disability support pension. Mrs Michalak’s evidence was that the family is able to meet their financial obligations on their current income. I am satisfied that the situation of Mrs Michalak and that of Mr Michalak do not fall below the standard applicable to the usual or ordinary case of a social security recipient. In that situation, the debts may not be waived under s 1237AAD of the Act.

DECISION

32. The decisions under review are affirmed.
    

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member

Signed: ...............[Sgd]..............................................................

Mátyás Kochárdy, Research Associate

Date of Hearing 14 April 2009

Date of Decision 30 April 2009

The Applicant was self-represented

Solicitor for the Respondent Mr R McQuinlan, Departmental Advocate

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[1] See s 1223(1) of the Act.
[2] Director-General of Social Services v Hangan [1982] FCA 262; (1982) 70 FLR 212 at 215, 225 and 235.
[3] [1995] FCA 1708; (1995) 40 ALD 541 at 545.