Low and Anor; Secretary, Department of Education, Employment and Workplace Relations and [2009] AATA 53; (2009) 106 ALD 586 (23 January 2009)

Last Updated: 3 November 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 53

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2007/3767

GENERAL ADMINISTRATIVE DIVISION		) No 2007/3768
	Re		SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Applicant

And

BERNARD LOW First Respondent MARGO LOW Second Respondent

DECISION

Tribunal

Mr A Sweidan, Senior Member

Date 23 January 2009

Place Perth

Decision

The Tribunal sets aside the decision of the Social Security Appeals Tribunal (“SSAT”) dated 4 July 2007 under review (except as set out in (v) below) and remits the matter to the decision maker for reconsideration in accordance with the Tribunal’s findings that: (i) All monies received by the First Respondent from the sale of gold during the relevant period are “income” for purposes of the Social Security Act 1991 (“the Act”) such income being derived from a hobby; (ii) The income referred to in (i) above cannot be reduced by any amounts paid to Reuben and Luke Low (whether as gifts or otherwise) nor can expenses incurred in deriving such income be deducted for purposes of s.1075 of the Act; (iii) The First and Second Respondent have been overpaid social security benefits; and (iv) the amount of such overpayment is to be recalculated and the amounts so determined are debts due to the Commonwealth of Australia which should be recovered in accordance with the relevant provisions of the Act; (v) paragraphs (c) and (d) of the SSAT decision are affirmed.

....(sgd) Mr A Sweidan..............
Senior Member

CATCHWORDS

SOCIAL SECURITY – whether “income” included amounts derived from hobby of gold prospecting – whether amounts “gifted” to children should be deducted – whether expenses deductible – decision under review set aside

LEGISLATION

Social Security Act 1991, ss 8, 1072, 1075, 1236 and 1237

CASES
Secretary, Department of Family and Community Services v Garvey (1989) 19 ALD 348
Watson v Secretary, Department of Family and Community Services [2003] FCA 415; (2003) 74 ALD 77
Secretary, Department of Social Security v Ekis (1998) 85 FCR 382;
Secretary, Department of Family and Community Services v Cantlay [2000] FCA 345.
Re Donges and Secretary, Department of Family and Community Services [2003] AATA 1; (2003) 72 ALD 713
Re Salmon and Secretary, Department of Employment and Workplace Relations [2007] AATA 1386
Re Callaghan and Secretary, Department of Social Security [1996] AATA 413; (1996) 45 ALD 435
Re Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72; (2001) 65 ALD 553
Re Secretary, Department of Education, Employment and Workplace Relations and XSPF [2008] AATA 425
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; (2007) 100 ALD 9
Dranichnikov v Centrelink [2003] FCAFC 133; (2003) 75 ALD 134
Re Green and Secretary, Department of Social Security (1988) 16 ALD 187
Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281
Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114; (2007) 94 ALD 693 ([2007] AATA 1114
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Re Martin Secretary, Department of Social Security (unreported, AAT, 14 November 1990) Director-General Social Security v Hale (1983) 47ALR 281

REASONS FOR DECISION

23 January 2009	Mr A Sweidan, Senior Member
BACKGROUND

1. The applicant seeks a review of a decision of the Social Security Appeals Tribunal (“SSAT”) dated 4 July 2007.
2. The applicant’s Statement of Facts and Contentions sets out the SSAT decision and the relevant facts and history of the matter as follows (subject to paragraph numbering changes):

2.1 During the period 6 October 2001 to 6 August 2004 (“the debt period”), Mr Low was in receipt of Newstart Allowance and Mrs Low was in receipt of Parenting Payment.

2.2 Mr and Mrs Low received income during the debt period from two sources:

2.3 casual employment in their business, Flip & Flop Family Circus (see Profit and Loss Statements for the years ended 30 June 2001 to 30 June 2005 at T21, folios 354-360); and

2.4 the sale of gold from prospecting activities (see T5, folio 99; T6, folio 100 and Attachment A at page 1 (Attachment A being a paginated copy of the material produced by AGR Matthey to the Tribunal under summons)).

3. During the debt period, Mr Low sold gold to AGR Matthey and received:

3.1 $2,635.02 on or around 8 October 2001 (see Attachment A at pages 2 and 28);

3.2 $3,857.65 on or around 10 February 2003 (see T6, folio 100);

3.3 $21,726.98 on or around 14 October 2003 (see T5, folio 99); and

3.4 $16,864.65 on or around 4 August 2004 (see T5, folio 99).

4. Mr Low and Mrs Low contend that they gave monies to their sons Reuben and Luke from the proceeds of the gold sales as follows:

Year	Reuben	Luke
2001	$770	$770
2002/2003	$770	$770
2003/2004	$5,000	$5,000
2004/2005	$4,150	$1,500
Total	$10,690	$8,040

5. Mr and Mrs Low contend that these payments represent amounts owing to Reuben and Luke for gold which Mr Low sold on their behalf. It is said that the amounts were sold by Mr Low on behalf of the children because they were minors and because of the high processing costs (see Statutory Declarations of Reuben Shannon Low and Luke Jemal Low sworn on 19 February 2005 (T11, folios 225-226) and sworn Statutory Declaration of Mr Low dated 22 February 2005 (T8, folios 204-205)).
6. Mr and Mrs Low did not advise Centrelink of the income they received from the sale of the gold. Centrelink became aware of the income from the gold sales during an investigation into gold sales generally, known as Operation Miller (see file note at T14, folio 250).
7. Centrelink determined that, as the income from the sale of the gold had not been taken into account in calculating the rate of social security benefits payable to Mr and Mrs Low, they had been overpaid and owed debts to the Commonwealth.
8. The original decision-maker was satisfied, on the basis of statutory declarations provided by Reuben and Luke, that some of the gold sales related to gold that belonged to the children and which Mr Low had sold on their behalf. The officer therefore excluded from the income of Mr Low the money which related to gold which was said to have belonged to the children (see T12, folio 245 and T14, folio 258).
9. The authorised review officer reconsidered this decision and found that the statutory declarations should not be accepted and relied upon to support a finding that some of the gold had belonged to Reuben and Luke. The officer concluded that the gold belonged to Mr Low and that he had gifted some of the proceeds of the sales to the children (see T15, folios 260-266 and T18, folios 270-295). The officer also concluded that the gold prospecting activities were a business for the purposes of the social security legislation (see T15, folios 260-266 and T18, folios 270-295).
10. Following the authorised review officer's decision, debts were raised as follows:

10.1 Mr Low - $9,907.15; and

10.2 Mrs Low - $2,077.71.

11. Mr and Mrs Low sought review of the authorised review officer's decision.
12. The Social Security Appeals Tribunal (“the SSAT”) reviewed the decision and determined, on 9 July 2007, that:

12.1 the monies received from the sale of the gold were to be included in Mr Low’s ordinary income;

12.2 the income from the gold sales be reduced by:

12.2.1 expenses incurred solely in relation to the gold prospecting; and

12.2.2 the amounts of the gifts made to Mr Low’s sons;

12.3 the monies paid into Flip & Flop Family Circus from the sale of the gold, which was applied to offset loan accounts, be excluded from the income of Flip & Flop Family Circus; and

12.4 the income of Flip & Flop Family Circus be reduced by expenses incurred in carrying on the business (see T2, folios 2-25).

13. On 6 August 2007, the Secretary of the Department of Employment and Workplace Relations (now the Secretary of the Department of Education, Employment and Workplace Relations) ("the Secretary") applied to the Administrative Appeals Tribunal (“the Tribunal”) for a review of the SSAT’s decision (T1, folio 1).

ISSUES FOR DETERMINATION

14. The issues for determination in this matter are:

15.1 whether the monies received by Mr Low from the sale of the gold are "income" for the purposes of the Social Security Act 1991 ("the Act");

15.2 whether the income received by Mr Low from the sale of the gold can be reduced by the amounts allegedly paid to Reuben and Luke;

15.3 whether the gold prospecting activities were a business or a hobby;

15.4 whether losses from one source of income can be offset against profits from another source of income; and

15.5 whether Mr and Mrs Low have been overpaid social security benefits, and, if so, whether the amounts of the overpayments are debts due to the Commonwealth which should be recovered.

EVIDENCE BEFORE THE TRIBUNAL

15. The Tribunal heard evidence from Mr and Mrs Low and their sons Reuben and Luke as well as Mr Low’s mother Mrs Aileen Low. A number of documents including the “T” documents were tendered in evidence. It is appropriate to first deal with issues of credibility of the witnesses and the question of the weight that should be given to certain documentary evidence produced by Mr and Mrs Low.

ORAL EVIDENCE BEFORE THE TRIBUNAL

16. The Tribunal finds that little weight should be given to much of the evidence presented by and on behalf of Mr and Mrs Low for the reasons interalia that the witnesses were often evasive when answering questions, the evidence was in some respects implausible and the witnesses were often inconsistent with each other.
17. For example:

17.1 Mr Low was evasive when asked direct questions by the Tribunal as to his completion of the Declaration of Ownership forms he signed when he sold the gold to AGR Matthey. His claim that he sold some of the gold on behalf of Reuben and Luke is inconsistent with the independent and contemporaneous records in the form of the Declarations of Ownership, in which he stated that the gold was “my own personal gold”.

17.2 Mr Low's evidence on the first day of the hearing was that Mrs Low was the family book-keeper/record-keeper/financial co-ordinator. However, when Mrs Low gave evidence at the resumed hearing, her evidence was that she had had little to do with the gold prospecting and that her husband was responsible for the record-keeping and finances in relation to the gold prospecting activities. Mrs Low's evidence was inconsistent with her husband's. It appeared to the Tribunal that she was attempting to evade questioning in relation to the gold prospecting activities and to distance herself from this issue.

17.3 Mrs Low’s evidence, in general, lacked credibility. Her evidence in relation to the $20,000 gift allegedly received by Mr and Mrs Low in November 2003 shows that she would be prepared to make false and/or misleading statements in order to maximise her social security benefits. Mrs Low agreed during her evidence that she had initially told Centrelink that the money was from an inheritance and then changed it to being a loan, as she did not want the money to affect her entitlement to social security benefits.

17.4 Both Luke and Reuben gave inconsistent evidence on uncontroversial matters such as their address histories and the people they were living with at the relevant times.

17.5 Luke's evidence in relation to the purchase of a motorcycle was also inconsistent with the entries in Mrs Aileen Low's exercise book as to the distribution of the proceeds of the gold sales.

17.6 Luke's evidence that he had not discussed the content of his statutory declaration with his father or his brother prior to the execution of same is not acceptable. Given the striking similarities between the statutory declarations signed by Reuben and Luke, which were signed on the same day, the Tribunal does not accept that the statutory declarations were not prepared following consultation, either between the brothers or between each brother and their parents.

17.7 Further, as neither brother kept their own record of the gold sales or finds, it is clear that Luke would not have been able to prepare his statutory declaration without accessing his parent's diaries and/or discussing the matter with (at least) his father.

17.8 Luke's evidence that he received all of the proceeds from the sale of the gold via his grandmother's account is inconsistent with the evidence of Mr and Mrs Low. Luke did not divert from this evidence, despite leading questions from Mr Low in an effort to have him do so.

17.9 The claim that the proceeds of the two larger gold sales were paid into Mrs Aileen Low's account because it was more convenient for Reuben and Luke to access was unconvincing. The evidence before the Tribunal was that Reuben and Luke were independent at a very young age. Both had their own bank accounts. As neither Reuben or Luke lived with or near their grandmother, it is illogical to suggest that it was easier for Reuben and Luke to access the money from their grandmother's account than it would have been for them to access the money from their own accounts. Additionally it is implausible that their grandmother was looking after the money on their behalf so that they would not spend it recklessly, given that Mr and Mrs Low agreed that Mrs Aileen Low did not require a reason before releasing any funds.

17.10 It is also inherently unlikely that Reuben and Luke would decide on three separate occasions to sell exactly the same amount of gold, particularly given the discrepancy between 'field' weights and processed weight of gold.

DOCUMENTARY EVIDENCE

DIARIES

18. Centrelink first started investigating the overpayments to Mr and Mrs Low in late 2004/early 2005. Throughout the review process the Lows were asked to provide evidence to support their argument that Mr Low had sold gold on behalf of his children. However, it was not until the hearing before this Tribunal that Mr and Mrs Low produced the diary extracts and the exercise book allegedly kept by Mrs Aileen Low during the relevant period.
19. Mr and Mrs Low were not able to give any reasonable explanation for the delay in producing these documents. In the circumstances, the Tribunal finds that little weight should be given to these documents.

MRS AILEEN LOW'S EXERCISE BOOK

20. Mrs Aileen Low's exercise book purports to record the management and distribution by her of the proceeds of the gold sales in October 2003 and August 2004. However in the Tribunal’s view it is of little help in the determination of the issues.
21. The Tribunal notes that in cross-examination, Mrs Aileen Low was taken to Exhibit A2, being the extracts from her bank account statements (Attachment D to the Secretary's Statement of Facts and Contentions). Mrs Low was asked about the discrepancies between the entries in her exercise book and the extracts from her bank account. For example, the exercise book records the payment of $5,000 to "Jenny - Bal of Car Loan" on 17 October 2003. There is no corresponding withdrawal shown in Mrs Aileen Low's bank account extracts. The only transaction between 17 October 2003 and 28 October 2003 is the deposit of $80.00. Mrs Aileen Low could not explain this discrepancy.

TRIBUNAL’S FINDINGS

ISSUE 1: WHETHER THE MONIES RECEIVED BY MR LOW FROM THE SALE OF GOLD ARE "INCOME" FOR THE PURPOSES OF THE ACT

22. Given the broadness of the definition of “income” in section 8 of the Act, the monies received by Mr Low from the sale of the gold clearly fall within the definition of income, regardless of whether the gold prospecting activity was a hobby or a business, provided the monies were received for his own use and benefit.
23. The Tribunal is satisfied that the monies received from the gold sales were received for his own use and benefit and were income derived by Mr Low' from the carrying on of a hobby of gold prospecting, in regard to which the Tribunal notes the following:

23.1 In relation to the gold sales in February 2003, October 2003 and August 2004, Mr Low signed Declarations of Ownership in relation to the gold sold to AGR Matthey (see Exhibit A3 (Attachment A to the Secretary's Statement of Facts and Contentions at pages 7, 14 and 21)). In each Declaration, Mr Low declares that "the following transaction/s listed below is/are my own personal gold...". Further, on each Declaration, the words "or is the property of" are struck through. The Declarations clearly provided Mr Low with the opportunity to declare that the gold was being sold on behalf of another person if that was in fact the case. On each occasion he did not make such a declaration.

23.2 In his oral evidence before the Tribunal, Mr Low agreed that the Declarations were important legal documents and he admitted that when he signed each Declaration of Ownership he considered himself to be the owner of the gold at that time.

23.3 The proceeds of the gold sales were paid by AGR Matthey in accordance with directions given by Mr Low.

23.4 In his Statutory Declaration of 16 March 2005 and in his oral evidence, Mr Low stated that various monies from the sale of the gold in October 2003 and August 2004, which were paid into his mother's bank account, were withdrawn as needed and used for things such as dental work, clearing of firebreaks, connecting electricity to his house, on educational fees and expenses in relation to the children, and to purchase a computer and printer. Further, in relation to the gold sales in October 2001 and February 2003, the evidence is that the monies were entered into the accounts of the family business, Flip & Flop Family Circus. On the evidence before it, the Tribunal is satisfied that the monies from the gold sales were applied for Mr Low, is and by extension, his family's, own use and benefit.

ISSUE 2: CAN THE INCOME RECEIVED FROM THE SALE OF THE GOLD BE REDUCED BY THE AMOUNTS ALLEGEDLY PAID TO REUBEN AND LUKE?

24. Mr and Mrs Low contended in effect that the monies paid to Reuben and Luke from the proceeds of the sale of the gold were received by Mr Low on trust for the children. They say that the monies arise from the sale of the gold belonging to their sons, which Mr Low sold on their behalf because they were minors and because of the high processing costs associated with the sale of gold.
25. While it is clear from the evidence that Reuben and Luke participated in the gold prospecting activities, the Tribunal does not accept the monies given to Reuben and Luke represented any legal or equitable entitlement they might have had to a portion of the proceeds of the gold sales. The Tribunal rejects the contentions of Mr and Mrs Low in this regard interalia for the following reasons:

25.1 Mr and Mrs Low assert that they calculated the amount of gold belonging to Reuben and Luke on the basis of the diary entries produced to the Tribunal. However, as the evidence before the Tribunal progressed, it became clear that the diary records (a) had been kept because there was a family competition to see who would find the most gold and (b) recorded the 'field' weight of the gold finds and not the processed weight. No documentation has been produced (nor was said to exist) to demonstrate how Mr Low allegedly calculated how much money would be payable to Reuben and Luke from the processed gold sales.

25.2 Further, the assertion that Reuben and Luke took all of the gold they found at the end of a prospecting trip back to Perth is inconsistent with the entry in Exhibit R4 (the 2003 diary) that "Luke has taken 37 grams". According to the tally in the diary, Luke had found substantially more than 37 grams of field weight gold that prospecting trip. The explanation given was that Luke was planning to sell the 37 grams to a work colleague. However, if the gold was Luke's to do with as he saw fit, and he took all of his gold back to Perth with him at the end of each trip as claimed by him, he would not need to give any explanation or accounting as to the gold that was taken. Rather the entry indicates that Luke had to account to his father for the gold taken.

25.3 The evidence of Reuben, Luke and Mrs Aileen Low shows that Reuben and Luke were mature young adults at the time of the gold sales, who (due to their schooling requirements) had been living independently for some period of time. They had their own bank accounts and were receiving social security benefits or income from an apprenticeship at the relevant times. If the money given to them by Mr Low truly represented their share of the gold sales as claimed it is logical to expect that they would have received the money directly, as it would have been their own money which they were able to use as they saw fit. The payment of the monies into their grandmother's account indicates that the money was not available for their own use, but rather was subject to the control of their parents and grandmother and was to be applied to meet educational expenses, medical needs or other appropriate expenses. In the Tribunal’s view the payments to Reuben and Luke are more appropriately characterised as monies provided by their parents to assist them in meeting their living and educational expenses and they had no legal entitlement to it other than the general duty of parents to maintain their children.

25.4 Finally, the Tribunal notes that the evidence shows that the gold prospecting activities were a family activity, all the costs of which were borne by Mr & Mrs Low.

GIFTS

26. The SSAT concluded that the monies allegedly paid to Reuben and Luke were gifts made to them by Mr and Mrs Low. It further concluded that the amounts of the gifts were to be excluded from Mr Low's assessable income.
27. Regardless of whether the monies paid to Reuben and Luke were gifts or whether they were paid as part of the general duty of support owed by parents to their children, the Tribunal is satisfied that the entire proceeds of the sale of the gold was assessable income received by Mr Low for the purposes of the Act. There is no basis under the Act for the amounts of any gifts to be excluded from Mr Low's income for the purposes of the Act and the SSAT's decision in this regard is incorrect in the view of this Tribunal.

ISSUE 3: WERE THE GOLD PROSPECTING ACTIVITIES A BUSINESS OR A HOBBY?

28. The issue of whether the gold prospecting activity was a business or a hobby is relevant to the question of whether outgoings and losses associated with the activity can be offset against the income generated by the prospecting.
29. The exception to the general rule that “ordinary income” means gross income from all sources without deduction, is provided for in section 1075 of the Act. Section 1075 allows for a person’s ordinary income from carrying on a business to be reduced by certain losses and outgoings incurred in carrying on that business. The threshold question before section 1075 will apply is, were Mr and Mrs Low “carrying on a business” in relation to the gold prospecting activities?
30. In the present case, in relation to the gold prospecting activities, Mr and Mrs Low have repeatedly expressed the opinion that, during the relevant period, their gold prospecting activities were a hobby. Mr and Mrs Low’s evidence was that after the relevant period, they considered the hobby to have evolved into a business as their expertise in finding gold had improved, resulting in them finding more lucrative patches of gold and increasing their prospecting activities.
31. Whilst there may be some elements of organisation and structure to the gold prospecting activities which point towards a finding that Mr Low was “carrying on a business”, there are more indicators that the activities were only a hobby. These include, the ad hoc nature of the gold prospecting activities, the involvement of the children, the lack of proper financial records in the form of profit and loss statements etc and the non declaration of the income from the gold prospecting activities in income tax returns.
32. The Tribunal finds that during the relevant period the gold prospecting activities were a hobby and not a business for the purposes of the Act. As such, expenses incurred in deriving the income cannot be offset against the income from the gold prospecting activities.
33. In relation to the circus business, Flip & Flop Family Circus, the Tribunal notes that the Secretary agrees that this is a business to which section 1075 of the Act would apply.

ISSUE 4: CAN LOSSES FROM ONE INCOME SOURCE BE OFFSET AGAINST PROFITS FROM ANOTHER?

34. The general rule is that a person’s total gross income, from all sources, must be used when calculating the rate of social security benefits payable to them (section 1072). There is an exemption to this general rule in subsection 1075(1), which relevantly provided (during the debt period):

Subject to subsection (2), if a person carries on a business, the person’s ordinary income from the business is to be reduced by:

(a) losses and outgoings that relate to the business and are allowable deductions for the purposes of section 51 of the Income Tax Assessment Act 1936 or section 8-1 of the Income Tax Assessment Act 1997, as appropriate; ... [Emphasis added]

35. On the issue of whether losses from one source of income can be offset against income from another source, the Federal Court in Secretary, Department of Family and Community Services v Garvey (1989) 19 ALD 348 said:

...[W]e are of the view that the definition of “income” in the Act does not permit the “negative yield” of one source of income to be off-set against the yield from other sources. In truth, a “negative yield” is no more than a demonstration of the lack of a source of income. The loss sustained by the failure of that source to provide an excess of income over the expenditure incurred in that activity has no relevance to any other source of income. [Emphasis added]

36. Garvey decided that under the relevant statutory provisions each source of income was to be "quarantined" in the sense that if a person sustains a loss in attempting to generate income from one source, his or her income from that source was to be regarded as zero, rather than the loss being set off against income from other sources.
37. Further, in Watson v Secretary, Department of Family and Community Services [2003] FCA 415; (2003) 74 ALD 77, Finn J observed (at [18]):

...It is well accepted that, as a result of the amendment that introduced the precursors of ss 1072 and 1075 into the SS Act in 1991, ordinary income for social security purposes means gross income save in certain specified cases. One such case is where income is derived from a business in which case certain expenses incurred relating to that business can be deducted from the ordinary income of the business. Those expenses, though, cannot be deducted from income from any other source: see generally, Secretary, Department of Social Security v Ekis (1998) 85 FCR 382; see also Social Security (Rewrite) Amendment Bill 1991, Explanatory Memorandum, p 181; Secretary, Department of Family and Community Services v Cantlay [2000] FCA 345. [Emphasis added]

38. In Re Donges and Secretary, Department of Family and Community Services [2003] AATA 1; (2003) 72 ALD 713, the Tribunal held that a loss from one source of income could be offset against another source of income provided the sources of income are in fact just limbs of the same business enterprise.
39. Recently, in Re Salmon and Secretary, Department of Employment and Workplace Relations [2007] AATA 1386, the Tribunal found that section 1075 did not prevent the offsetting of losses in one business against the income of another business. The Tribunal commented (at [16]):

...[I]t makes no sense to arbitrarily prevent the respondent from allowing what may be substantial expenses from one business activity to be offset against income from another business. To do so would present a distorted view of an applicant’s income. If the legislature had intended that result, it would have done so in clearer terms. ‘

40. The Tribunal's decision in Salmon was the subject of an appeal to the Federal Court, however the appeal was withdrawn. For the reasons which follow the decision in Salmon should in the Tribunal’s view be distinguished, even if the gold prospecting activity was a business.
41. In Salmon, the Tribunal essentially relied upon amendments to the social security legislation, which enacted the current sections 1072 and 1075, to distinguish the Full Federal Court's decision in Secretary, Department of Family and Community Services v Garvey (1989) 19 ALD 348. In the opinion of the Tribunal the amendments to the Act, which came into effect on 1 July 1996, do not reflect any intention on the part of Parliament to depart from the view taken in Garvey. Excerpts of the Explanatory Memorandum to the Social Security and Veterans Affairs Legislation Amendment Act 1995 are set out in the Secretary's Statement of Facts and Contentions at paragraph 57. The excerpts clearly show that the amendments to the relevant section mirror the policy behind the earlier provisions.
42. It does not seem that the Tribunal in Salmon was referred to the Explanatory Memorandum. The Tribunal is of the view, with respect, that the reasoning in Salmon is flawed and should not be followed by the present Tribunal.
43. In the present case, even if the Tribunal finds that the gold prospecting activities were a business for the purposes of the Act, it is clear that the two activities undertaken by Mr and Mrs Low are unrelated to each other - one is a circus business and the other is a gold prospecting business. It cannot be said that they are limbs of the same business enterprise. Therefore the losses from the circus business could not be offset against the income from the gold prospecting business.
44. As the Tribunal has found that the gold prospecting activities were a hobby and not a business, the reasoning of the Federal Court in Secretary, Department of Family and Community Services v Garvey (1989) 19 ALD 348 and Watson v Secretary, Department of Family and Community Services [2003] FCA 415; (2003) 74 ALD 77 is applicable and the Tribunal finds that losses from one income source i.e. the circus business are of no relevance to any other source of income and cannot be offset against income from any of the other sources of income, i.e. gold prospecting.

ISSUE 5: ARE THERE RECOVERABLE DEBTS DUE TO THE COMMONWEALTH?

45. The Tribunal finds that Mr and Mrs Low have been overpaid social security benefits as the full amount of their assessable income was not taken into account in the calculation of their social security benefits. The overpayments made to Mr and Mrs Low are debts due to the Commonwealth under subsection 1223(1) of the Act. Debts due to the Commonwealth must be recovered unless there is a basis under the Act for the recovery of the debt to be written off or waived.

WRITE-OFF

46. Under section 1236 of the Act, the recovery of a debt may be written off in limited circumstances. None of those circumstances apply in the present case.

ADMINISTRATIVE ERROR

47. Section 1237A of the Act provides for the waiver of the right to recover a debt due to the Commonwealth where a debt arises solely from an administrative error by the Commonwealth. The Tribunal finds that this section does not apply in the present case, as the debts in the present case arose from the failure of Mr and Mrs Low to advise Centrelink of their income from the gold prospecting activities.
48. While Mr and Mrs Low claim that they were advised by a Centrelink officer that they were not required to declare income from a hobby, there are no file notes or records of contact on Centrelink's computer system to corroborate their claim. During cross-examination, Mr Low stated that any inquiry he had made to Centrelink would have been of a very general nature. Mr Low agreed that he would not have told the officer about the level of income he was receiving from the gold prospecting activities. Similar concessions were made by Mrs Low, who stated she tended to make general inquiries to Centrelink to avoid having to wait in a call centre queue.
49. In the Tribunal’s view it is clear that Mr and Mrs Low have confused the requirements of the income tax legislation with the requirements under the social security legislation and are mistaken about any advice they claim they received from Centrelink.
50. The evidence before the Tribunal does not establish that the debts in the present matter arose solely due to administrative error. In the circumstances, section 1237A cannot apply.

SPECIAL CIRCUMSTANCES

51. The only provision of the Act concerning waiver of debts that might apply in the present case therefore is waiver in special circumstances. Before the Tribunal can consider waiver under section 1237AAD, it must be satisfied that the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or false representation or failing or omitting to comply with a provision of the Act or the Social Security (Administration) Act 1999.

KNOWING FAILURE?

52. The meaning of the word "knowingly" as used in section 1237AAD of the Act has been considered by the Tribunal on a number of occasions (see, for example, Re Callaghan and Secretary, Department of Social Security [1996] AATA 413; (1996) 45 ALD 435 and Re Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72; (2001) 65 ALD 553).
53. In Re Secretary, Department of Education, Employment and Workplace Relations and XSPF [2008] AATA 425, the Tribunal concluded that "knowingly" means "knowledge in the mind of its maker of the falsity of the statement or representation at the time that statement or representation was made" (at [26]).
54. The Tribunal finds that the debts in the present case arose wholly or partly from:

54.1 false statements made by Mr Low in the various SU19 Application for Payment of Newstart Allowance forms ("SU19 form/s") completed by him during the debt period (see below); and/or

54.2 failures on the part of Mr and Mrs Low to comply with their obligations under the social security legislation to notify Centrelink of changes in their circumstances (see below).

55. The T documents include copies of the SU19 forms completed by Mr Low during the period 10 January 2003 to 15 October 2004 (T22, folios 432-504). Relevantly, Mr Low:

55.1 completed an SU19 form on 21 February 2003, regarding the period 8 February 2003 to 21 February 2003 (T22, folios 438-439);

55.2 completed an SU19 form on 17 October 2003, regarding the period 4  October 2003 to 17 October 2003 (T22, folios 463-464);

55.3 completed an SU19 form on 31 October 2003, regarding the period 18 October 2003 to 31 October 2003 (T22, folios 465-466); and

55.4 completed an SU19 form on 20 August 2004, regarding the period 24 July 2004 to 20 August 2004 (T22, folios 499-500).

56. Each of these SU19 forms advised Mr Low of his obligation to inform Centrelink if he or his partner received any income in a particular period, including "any other money from any other source". On each of the relevant forms, Mr Low answered "no" to these questions. Each of these answers were incorrect as:

56.1 on or around 10 February 2003, Mr Low received $2,635.02 from gold sales;

56.2 on or around 14 October 2003, Mr Low received $21,726.98 from gold sales;

56.3 on or around 4 August 2004, Mr Low received $16,864.65 from gold sales.

57. Further, letters were sent to Mr and Mrs Low throughout the debt period advising them of their obligations to notify Centrelink of changes in their circumstances and, in particular, changes in their income (see T24, folios 512-713 and T25, folios 714-825).
58. By way of example, a letter was sent to Mrs Low on 19 November 2002 (T25, folios 738-739), which advised her of her obligation to advise Centrelink if she or her partner received (amongst other things) "a lump sum amount of money or one-off payment from any source". The letter further defined "income" to include "a lump sum amount of money or one-off payment from any source". This letter was sent just two months prior to Mr Low receiving the proceeds of the gold sales in February 2003. Similarly worded notices were sent to Mrs Low on 10 March 2003 (T25, folios 743-745) and 6 October 2003 (T25, folios 760-762).
59. On the evidence before the Tribunal it is clear that, at the time Mr Low completed the SU19 form on 21 February 2003, he had actual knowledge:

59.1 from his previous dealings with Centrelink (having been a long-term recipient of social security benefits), that any income he and his wife earned would affect the rate of benefits they would be entitled to receive; and

59.2 that he had received $2,635.02 from gold sales on or around 10 February 2003.

60. Furthermore, at the time Mr Low completed the SU19 forms on 17 October 2003, 21 October 2003 and 20 August 2004, he had actual knowledge:

61.1 from his previous dealings with Centrelink (and in particular the dealings in mid 2003 when his newstart allowance was cancelled due to the level of his income), that any income he and his wife earned would affect the rate of benefits they would be entitled to receive; and

61.2 that he had received $21,726.98 from gold sales on or around 14 October 2003 and $16,864.65 on or around 4 August 2004.

61. Question 8 of the SU19 form relevantly provided:

8. You must tell us if any of the things below happened in the period:

Income

...

▪ You or your partner got any money from any other source.

...

Did any of these things happen to change? Yes ◻ No ◻

62. The Tribunal finds that when Mr Low answered "no" to this question, he had actual knowledge, in his own mind, of the falsity of that statement/representation.
63. Mr Low stated that he believed that money he received from hobbies was not "income" for social security purposes. However the Tribunal notes that the wording of question 8 in the SU19 form is very broad and clear in its terms. Mr Low was obliged to inform Centrelink of "any money" he or his partner received "from any other source". The money received from the sale of the gold, whether or not the prospecting activities were undertaken as a hobby or a business, clearly falls within the ambit of this question on the SU19 form.
64. Further, there is contemporaneous evidence that Mr Low understood the broadness of question 8 on the SU19 form in 2003. That is, on 14 November 2003, he declared on an SU19 form that he had received a "1-off gift from family member of $20,000" (T22, folio 468). This shows that Mr Low understood that he had to declare to Centrelink any money he received.
65. The evidence of Mrs Low also shows that she was aware of having to declare any money received to Centrelink. She told the Tribunal that she had rung Centrelink prior to Mr Low lodging the SU19 form to enquire how a one – off gift would affect his payment and was allegedly told that if he wrote those exact words on his form, then his rate of payment would not be affected. She admitted to the Tribunal that she was prepared to declare the $20,000 as either a gift, loan or inheritance, or in such a manner as to maximise her rate of payment.
66. On all the evidence the Tribunal finds that the debts in this case arose from the knowing failure by Mr and Mrs Low to comply with their obligations under the social security legislation to notify Centrelink of changes in their circumstances. Throughout the debt period, Mr and Mrs Low received notices from Centrelink advising them of their obligations to inform Centrelink of changes in their circumstances and, relevantly in relation to Mrs Low, whether she or her partner received "a lump sum amount of money or one-off payment from any source".
67. In the Tribunal’s view it is clear that, during the debt period, Mr and Mrs Low:

67.1 had actual knowledge, from their previous dealings with Centrelink, that any income or money they received would affect the rate of benefits they would be entitled to receive;

67.2 had actual knowledge that they were receiving significant amounts of monies from the sale of gold; and

67.3 contrary to their obligations under the legislation, failed to advise Centrelink of the monies they were receiving from the gold sales.

68. Accordingly section 1237AAD cannot apply in the present case, as the debts arose wholly or partly from the debtor or another person knowingly making a false statement/representation or omitting to comply with the provisions of the social security legislation.
69. In any event the circumstances in this case do not warrant the exercise of the discretion to waive all or part of the debts owing by Mr and Mrs Low.

ARE THERE "SPECIAL CIRCUMSTANCES"?

70. While the Act does not define "special circumstances", the meaning of this term has been the subject of judicial comment in a variety of contexts.
71. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; (2007) 100 ALD 9, the Federal Court considered the test for determining whether there are "special circumstances" in a particular case. The Court said (at 18):

...The danger is that the test will be overstated if the word “exceptional” is emphasised. It was not the intention of parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words “unusual” or “uncommon” are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.

72. In Dranichnikov v Centrelink [2003] FCAFC 133; (2003) 75 ALD 134 at 148, the Full Federal Court considered the meaning of the term special circumstances and observed:

Other cases which have considered analogous words such as "special reasons" have tended to conclude, albeit in different contexts, that what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary...

73. In Re Green and Secretary, Department of Social Security (1988) 16 ALD 187, the Tribunal stated that a relevant factor as to whether there were special circumstances was whether, if the discretion to waive was exercised, the decision-maker would be “achieving or frustrating ends or objects which are compatible with the scope and purpose of the ... Act”. In determining whether the right to recover all or part of Mr and Mrs Low's debts should be waived, the Tribunal must have regard to all the relevant circumstances of the case, including the fact that the respondents have received monies to which they were not entitled, the reason for the overpayment and the prospects of recovery of the debt: Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281.
74. In Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114; (2007) 94 ALD 693 ([2007] AATA 1114), the Tribunal emphasised that special circumstances are those that “make it desirable to waive”, which “necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system”.
75. In the present case, the debts have arisen because Mr and Mrs Low received a significant amount of income from gold prospecting activities, which they did not declare to Centrelink. The Tribunal notes that the two larger gold sales ($21,726.98 in October 2003 and $16,864.65 in August 2004) were significantly greater in value than the maximum rate of newstart allowance Mr Low would have been entitled to had he not undertaken any form of employment in each of those years.
76. Further, in relation to an amount of $20,000 which was allegedly gifted to Mrs Low in late 2003, Mrs Low admitted during her oral evidence that she incorrectly advised Centrelink that this money was a loan rather than a gift, as she wanted to maximise her entitlements to social security benefits.
77. The Tribunal is of the view that it is likely that Mr and Mrs Low actively took steps to avoid Centrelink detecting the income from the gold sales by having the two larger payments made into Mr Low's mother's bank account and by incorporating the smaller payments into the accounts of the circus business in such a way that the income was not apparent to Centrelink officers on the face of the documents lodged with Centrelink.
78. The Tribunal finds that Mr and Mrs Low have the capacity to repay the debts, based on their financial circumstances. The respondents assert that the recovery of the debts would cause them extreme financial hardship. The evidence given at the hearing did not establish that the respondents would suffer hardship if the debts were recovered. Further, and in any event:

78.1 the respondents’ submissions as to their financial hardship is inconsistent with the assertion earlier in their submissions that they were ineligible for legal aid;

78.2 in the absence of other special circumstances, financial hardship will not be a sufficient ground to justify waiver of a debt under section 1237AAD of the Act (see subsection 1237AAD(b)); and

78.3 whilst financial hardship may be one of the grounds for finding special circumstances, the financial hardship must go beyond “straitened” circumstances and be truly exceptional, Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 at [19]; Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690; and Re Martin Secretary, Department of Social Security (unreported, AAT, 14 November 1990). It was observed by Sheppard J in Director-General Social Security v Hale (1983) 47ALR 281 at 321:

The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances.

79. Having regard to all the circumstances of the case, the Tribunal finds that there are no special circumstances and no basis for the exercise of the discretion in section 1237AAD of the Act to waive the Commonwealth’s right to recover the debts owed by Mr and Mrs Low.

DECISION

80. The Tribunal notes that the quantum of the debts will need to be recalculated following the Tribunal's decision. The amount of the debts, as recalculated pursuant to the Tribunal's decision, are debts due to the Commonwealth which should be recovered.
81. The Tribunal accordingly sets aside the decision of the SSAT dated 4 July 2007 under review (except as set out in (v) below) and remits the matter to the decision maker for reconsideration in accordance with the Tribunal’s findings that:

(i) All monies received by the First Respondent from the sale of gold during the relevant period are “income” for purposes of the Social Security Act 1991 (“the Act”) such income being derived from a hobby;

(ii) The income referred to in (i) above cannot be reduced by any amounts paid to Reuben and Luke Low (whether as gifts or otherwise) nor can expenses incurred in deriving such income be deducted for purposes of s.1075 of the Act;

(iii) The First and Second Respondent have been overpaid social security benefits; and

(iv) the amount of such overpayment is to be recalculated and the amounts so determined are debts due to the Commonwealth of Australia which should be recovered in accordance with the relevant provisions of the Act;

(v) paragraphs (c) and (d) of the SSAT decision dated 4 July 2007 are affirmed.

I certify that the 81 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan

Signed: ...(sgd) T Freeman............

Associate

Date/s of Hearing 19 September 2008, 26 and 26 November 2008

Date of Final Submissions 19 January 2009

Date of Decision 23 January 2009

Counsel for the Applicant Ms S Oliver

Ms M Conlon

Solicitor for the Applicant Australian Government Solicitor

Respondents Self Represented