Box and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 279 (20 April 2010)

Last Updated: 21 April 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 279

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/4125

GENERAL ADMINISTRATIVE DIVISION		)
	Re		KATE BOX

Applicant

And

SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal

Mr Egon Fice, Member

Date 20 April 2010

Place Melbourne

Decision

The Tribunal: sets aside the decision under review for the period 1 October 2006 to 31 December 2006 and remits the matter to Centrelink to recalculate the debt on the basis that the combined parental income for this period was $75,652; and in all other respects affirms the decision under review.

(sgd) Egon Fice
Member

SOCIAL SECURITY - youth allowance – estimate of combined parental income – income in base tax year exceeding 125% - recalculation of debt – income disclosure by an applicant for social security payments – disclosure obligations – waiver of debt due solely to administrative error

Social Security Act 1991 ss 556, 1067A, 1067G, 1067G – F2 to F6, 1067G – F10 to F11(1)

Social Security (Administration) Act 1999 s 179(2)

REASONS FOR DECISION

20 April 2010

Mr Egon Fice, Member

1. Ms Box applied to Centrelink for youth allowance. Centrelink is the service provider for the Secretary, Department of Education, Employment and Workplace Relations (the Secretary). Centrelink granted her youth allowance and made the first payment to her on 7 March 2006. According to s 556 of the Social Security Act 1991 (the Act), the rate of a person’s youth allowance is worked out in accordance with the Youth Allowance Calculator in s 1067G of the Act. There was no issue about the fact that Ms Box was not an independent recipient of youth allowance, as that expression is defined in s 1067A of the Act. This was her position until the end of December 2007.
2. During 2006 Ms Box was paid the youth allowance at a rate based on her parents’ estimate of their income for the 2005/2006 financial year. By letter dated 2 October 2006, Centrelink advised Ms Box that it had based her current youth allowance payments on an estimate of her parents’ income for the 2006 financial year. Centrelink requested a copy of her parents’ tax assessment notices for the 2006 financial year.
3. On 25 January 2007 Centrelink, following receipt of Ms Box’s parents’ income tax assessments for the 2006 financial year, cancelled her youth allowance because her parents’ income was above that allowable from October 2006. Ms Box asked for that decision to be reconsidered because she had since lodged an estimate for her parents’ income for 2007 and their income estimate was significantly reduced.
4. By letter dated 26 April 2007, Centrelink advised Ms Box that its decision to cancel her youth allowance would be set aside and that she should continue to receive the youth allowance based on her estimate of her parents’ income for 2007. However, Centrelink also determined on 14 May 2007 that Ms Box had been overpaid youth allowance based on the estimate of her parental income provided for the 2006/2007 year and owed a debt to the Commonwealth of $470.39. It meant that she was entitled to a lower rate of youth allowance than that she had previously received between 1 January 2007 and 25 January 2007. However, following the receipt of further information from Ms Box, Centrelink altered that debt to zero on 21 May 2007.
5. Centrelink cancelled Ms Box’s youth allowance again on 28 December 2007 because she failed to provide proof of her parents’ actual income for the 2007 financial year. Ms Box’s parents’ received their tax assessments for the 2007 financial year shortly after 5 February 2008. These were forwarded to Centrelink. Ms Box reclaimed youth allowance on 13 February 2008, which was then paid to her at the independent rate from 8 February 2008.
6. On 3 July 2008 a Centrelink customer service officer, on reviewing Ms Box’s entitlement to youth allowance, noted a discrepancy between Ms Box’s declared income to the Australian Taxation Office (ATO) and the income she had declared to Centrelink. Ms Box had obtained some part-time employment in late 2006 and in early January 2007.
7. After a data matching exercise with information obtained from the ATO, on 10 February 2009 Centrelink decided that Ms Box had again been overpaid youth allowance and raised two debts. The first was for $939.47 for the period from 13 July 2007 to 27 December 2007. This was on the basis that Ms Box had not declared income received from Santas Photo Factory (Santas Photos) between 28 November 2006 to 24 December 2006 and income from Nazareth House from 19 January 2007 to 27 December 2007. The customer service officer noted that Ms Box’s student income bank precluded the raising of a debt prior to 13 July 2007.
8. The second debt Centrelink raised was for the period from 8 February 2008 to 22 January 2009 in the sum of $1,490.90. The customer service officer noted that income from Nazareth House was incorrectly declared during this period. The officer also took into account the previous debt of $246.75. The customer service officer noted that Ms Box’s income was being declared on a fortnightly basis by her mother, rather than by her.
9. By letter dated 13 March 2009 a Centrelink authorised review officer affirmed the customer service officer’s decision to raise the two debts. Ms Box sought review of those decisions by the Social Security Appeals Tribunal (SSAT). On 24 June 2009 the SSAT set aside the decision to raise a debt in the amount of $939.47 (the first debt), remitting the matter to the chief executive officer of Centrelink for reconsideration in accordance with the following directions to recalculate the debt:

(a) the debt is to be recalculated taking into account a combined parental taxable income of $76,787 from 1 October 2006 and a combined parental taxable income estimate of $60,569 from 1 January 2007;
(b) the student income bank balance as at 30 September 2006 is to be used in the calculations from 1 January 2007. This means the balance as at 7 September 2006 plus any additional credits that should have been accrued between 8 September 2006 and 30 September 2006; and
(c) the income from Nazareth House and Santa Photos is to be taken into account as used in the previous multical calculation.

10. The SSAT affirmed the decision to raise and recover the debt of $1,490.90 (the second debt).
11. Centrelink recalculated the first debt for the period from 1 October 2006 to 27 December 2007 in accordance with the SSAT decision. It divided the debt period into two parts, the first between 1 October 2006 and 31 December 2006 and the second between 1 January 2007 and 27 December 2007. That resulted in the raising of a debt for $2,890.53 for the two combined periods.
12. Ms Box seeks a review of the decision of the SSAT which includes the recalculated first debt and the second debt. The issues which I am required to determine are:
    • (a) whether Ms Box incurred a debt due to overpayment of youth allowance between 1 October 2006 and 27 December 2007;
    • (b) if the answer to (a) is in the affirmative, whether that debt has been correctly calculated;
    • (c) whether Ms Box incurred a debt in the sum of $1,490.90 for the period 8 February 2008 to 22 January 2009 as a result of overpayment of youth allowance; and
    • (d) whether the debts raised by Centrelink should be waived.

THE FIRST DEBT – FIRST PERIOD (1 OCTOBER 2006 – 31 DECEMBER 2006)

13. The first debt was recalculated by Centrelink in accordance with directions made by the SSAT that the Secretary take into account Ms Box’s combined parental income of $76,787 from 1 October 2006 and a combined parental taxable income estimate of $60,569 from 1 January 2007. The SSAT also directed that Ms Box’s student income bank balance at 30 September 2006 was to be used in the calculations from 1 January 2007 as was the income Ms Box received from Nazareth House and Santas Photos.
14. Where the SSAT sets aside a decision and sends the matter back to the Secretary for reconsideration in accordance with directions or recommendations, the decision made by the SSAT is taken to be the directions or recommendations of the SSAT (see s 179(2) Social Security (Administration) Act 1999 (the Administration Act)).
15. There was no dispute between the parties that in respect of the first debt, Ms Box was not an independent person for the purposes of s 1067A of the Act. Therefore, as is set out in s 1067G-F2, subject to s 1067G-F3, the parental income test applies to the person. Section 1067G-F3 does not apply to Ms Box.
16. Submodule 1 of Module F of the youth allowance rate calculator provides that a person’s combined parental income for the appropriate tax year must be calculated using Submodule 4. The expression base tax year is defined in s 1067G-F5 as:

The base tax year for a youth allowance payment period is the tax year that ended on 30 June in the calendar year that came immediately before the calendar year in which the period ends.

17. Therefore, in determining Ms Box’s rate of youth allowance between September and December 2006, the relevant base tax year is the year ending on 30 June 2005. In her claim for youth allowance made in March 2006, Ms Box’s parents stated their income for the base tax year to be $23,720 and $26,905 respectively, a combined income of $50,625. However, in a letter dated 28 February 2006, Mrs Box advised Centrelink that from 25 May 2005 until 4 November 2005 she was unemployed. She therefore estimated her income for the 2006 financial year to be $15,400. That, combined with her husband’s income, amounted to a combined parental income of $42,305. Centrelink calculated Ms Box’s rate of youth allowance payment by reference to that adjusted parental income figure.
18. Centrelink records indicate that Ms Box contacted Centrelink on 30 October 2006 and provided the Centrelink officer with a revised estimate of her parents’ combined incomes for the 2006 financial year. This was said to be $41,905. It was to take effect from 22 October 2006.
19. However, the ATO issued notices of assessment to Mr and Mrs Box in December 2006. Mrs Box’s taxable income was $39,650, while Mr Box’s taxable income was $36,002; a total of $75,652. Therefore, the actual parents’ combined income received in the tax year following the base tax year was $75,652. In other words, Ms Box’s combined parental income exceeded their income in the base tax year by 190 per cent.
20. Section 1067G-F6 of the Act provides that if a person’s combined parental income under Submodule 4 for the tax year following the base year exceeds 125 per cent of the person’s combined parental income under the submodule for the base tax year and 125 per cent of the person’s parental income free area under Submodule 5, the appropriate tax year for the purpose of applying the parental income test in Module F in respect of the youth allowance payment period that ends after 30 September in a year, is the tax year following the base tax year.
21. Under Submodule 4, combined parental income is defined (s 1067G-F10) to include the parents’ taxable income for that year. Section 1067G-F11(1) defines the expression taxable income for a tax year as the parents’ assessed taxable income for that year. Clearly, the combined parental income for the tax year ending 2006 was $75,652. Therefore, applying s 1067G-F6, the appropriate tax year for applying Module F dealing with parental income as far as Ms Box is concerned is the 2006 financial year. Furthermore, that figure is to be used in respect of Ms Box’s youth allowance payment period after 30 September 2006. It follows that for the period from 1 October 2006 to 27 December 2006, Ms Box’s correct rate of youth payment allowance must be calculated using the combined parental income figure of $75,652.
22. This is not to say that Centrelink made any error. It properly, in accordance with the Act, worked on the estimated combined parental income given to it by Ms Box’s parents. However, after Ms Box’s parents received their tax assessments for the financial year ending 30 June 2006, they were required to notify Centrelink immediately of their assessed income. That requirement is set out in a letter from Centrelink to Ms Box dated 2 October 2006. It stated that Centrelink required proof of her parents’ income and asked that a copy of the tax assessment notices be provided to Centrelink.
23. After obtaining copies of those notices of assessment in January 2007, Centrelink was required to change its rate of payment from the base tax year to the appropriate tax year, as Ms Box’s combined parental income exceeded 125 per cent of the income estimate for the base tax year. Ms Box’s combined parental income for the 2006 financial year also exceeded her parental income free area under Submodule 5 by 323 per cent. Therefore, Centrelink was bound, by the Act, to recalculate Ms Box’s youth allowance rate using the combined parental income figure of $75,652.
24. Centrelink also took into account for this debt period the amount of income Ms Box earned when employed by Santas Photos between 28 November 2006 and 24 December 2006. Those earnings were verified with her employer.
25. Prior to the hearing of this matter, Centrelink recalculated all of the debts. For the period from 1 October 2006 to 31 December 2006 it calculated that Ms Box had been overpaid $1,566.67. While that calculation has taken into account her earnings from Santas Photos, having regard to her income bank balance during that period of time, it used the figure of $76,787 as the combined parental income. It is unclear to me where that figure has come from. It seems to me that the correct figure should be $75,652. Therefore, in my opinion, the debt for the period from 1 October 2006 to 31 December 2006 should be recalculated using a combined parental income figure of $75,652.

THE FIRST DEBT – SECOND PERIOD (1 JANUARY 2007 TO 27 DECEMBER 2007)

26. On 14 February 2007 Ms Box lodged with Centrelink what is described as a Module JY, which set out a combined parental income of $60,659. This was made up from Mr Box’s taxable income of $36,002, Mrs Box’s taxable income of $8,517 and an adjusted (degrossed) fringe benefits amount of $16,050.
27. During the second debt period, Ms Box also earned income from Nazareth House. She received payments between 19 January 2007 and 23 December 2007. In a letter dated 26 April 2007, Centrelink advised Ms Box that a decision had been made to pay her youth allowance from 26 January 2007. In that letter, Centrelink stated that she must advise Centrelink if she started or stopped receiving income or had any income change. The letter explained to her that she could earn up to $236 per fortnight before her income affected her payments. She was told that if she earned less than $236 per fortnight, the difference between her actual earnings and that figure would accumulate up to a cap of $6,000 in what is called an income bank.
28. Ms Box said in evidence that Nazareth House paid her salary directly into her bank account and that she did not receive payment advices. She did not declare the payments she received from Nazareth House between January and December 2007 to Centrelink. The amounts Ms Box earned during this period were generally in excess of $236 per fortnight and therefore the excess should have been set off against any credits which she had in her income bank. However, because she had not declared that income, her income bank account continued to accumulate credits. At the point where the income bank balance is reduced to zero, Ms Box’s earnings would result in her youth allowance rate being reduced. This of course did not happen because Ms Box had not notified Centrelink of those earnings.
29. On recalculating Ms Box’s debt for the period from 1 January 2007 to 27 December 2007, Centrelink calculated that she had been overpaid $1,323.86. That calculation took into account the fact that on 1 January 2007 Ms Box had a credit balance in her income bank of $3,499.15. That balance was depleted to zero in the pay period ending 29 June 2007. From that time onwards, her income from Nazareth House resulted in reductions being made to her youth allowance rate of payment. I am unable to discern any errors in that calculation.
30. Between January 2007 and December 2007 Ms Box received a number of letters from Centrelink which clearly stated that if she experienced any changes to income or started receiving income when she had previously not been receiving any, she was required to notify Centrelink within 14 days. From the file notes kept by Centrelink, it appears that Ms Box advised Centrelink on 30 October 2007 that she had been in employment for the past 18 months and that she received income that she had not declared. This prompted Centrelink to seek a data match, which resulted in Nazareth House providing Centrelink with details of all payments made to Ms Box between 19 January 2007 and 5 January 2009.
31. In my opinion, this debt was correctly raised based on the amounts Ms Box received from Nazareth House during this period, taking into account her income bank credit at the start of the period.

THE SECOND DEBT – THIRD PERIOD (8 FEBRUARY 2008 – 22 JANUARY 2009)

32. During this period, there was no dispute that Ms Box was entitled to the paid youth allowance at the independent rate.
33. Although Mrs Box notified Centrelink of her daughter’s earnings from Nazareth House in February 2008, Ms Box was nevertheless required to notify her earnings for this period on a fortnightly basis. Although Mrs Box said that she contacted Centrelink with an estimated payment every two weeks, there is no record of her having done so. Mrs Box was critical of Centrelink for not indicating, at an earlier date, that her daughter probably owed a debt due to overpayment as a result of not declaring the exact income she received from Nazareth House. However, be that as it may, Ms Box continued to have an obligation to notify Centrelink of her income on a fortnightly basis so that an accurate calculation could be made of her entitlement to youth allowance payments.
34. It was not until Centrelink decided to seek recovery of the debts for this period in February 2009 that the exact overpayment was calculated. Centrelink sought to recover $1,490.90. I cannot discern any Centrelink error in calculating an overpayment of the youth allowance to Ms Box of $1,490.90.

WAIVER ON GROUNDS OF ADMINISTRATIVE ERROR

35. Section 1223(1) of the Act provides that if a person who obtains the benefit of a social security payment was not entitled for any reason to obtain the benefit, then the amount of the payment is a debt due to the Commonwealth by the person. The debt arises when the person obtains the benefit of the payment. Section 1223(1AB) sets out the circumstances under which a person is taken not to have been entitled to a payment. Among the matters listed in that section is the fact that the payment was not payable. In my opinion, the overpayments calculated by Centrelink in accordance with the reasons set out above were payments to which Ms Box was not entitled. They are therefore a debt due to the Commonwealth by Ms Box unless, as Mrs Box submitted, the debts should be waived because of an administrative error.
36. Section 1237A(1) provides:

1237A Waiver of debt arising from error
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.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
(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.

37. As the debts in question were first raised in August 2008, which was more than six weeks after the first payment that caused the debt, there is no question that s 1237A(1) may apply.
38. In order for the mandatory provisions in s 1237A(1) to apply to Ms Box’s debts, the debts must be attributable solely to an administrative error made by the Commonwealth. The debtor must also receive the payments in good faith. The only issue in this case is whether the debts were due solely to an administrative error.
39. Mrs Box submitted that Centrelink was aware of the combined parental income for 2007 when her daughter’s youth allowance was restored in April 2007. She also submitted that her daughter had a substantial income bank balance. She made no submissions in respect of the first debt between October and December 2006. However, Centrelink merely applied the law in making adjustments to the base tax year after receiving copies of the tax assessments of Mr and Mrs Box. The actual income for the period exceeded 125 per cent of the combined parental income for the base tax year. In that case, no error was made by any person. For the period in question, Ms Box had simply been paid the youth allowance rate based on declared income for the base tax year. When her parents’ actual income was notified to Centrelink, the base tax year was altered in accordance with the Act. That gave rise to the overpayment. There was no administrative error.
40. As for the debt for the period from 1 January 2007 to 27 December 2007, it arose because Ms Box did not notify Centrelink of the income she was receiving from Nazareth House. Although Mrs Box suggested that Nazareth House had been asked to provide Centrelink with those details, and that it failed to do so, that does not alter her daughter’s obligation to notify Centrelink on a fortnightly basis of the amount of income she received.
41. However, no notification appears to have occurred until Mrs Box contacted Centrelink on 30 October 2007. This is despite the fact that Ms Box received a number of letters from Centrelink during this period, stating that she was required to notify Centrelink of her income on a fortnightly basis. Clearly, the debt did not arise out of an error made by the Commonwealth. Therefore, there is no basis for a waiver under s 1237A(1) for the debt for this period.
42. During the last period, between February 2008 and January 2009, Ms Box continued to receive earnings from Nazareth House. She continued to be sent letters informing her that she was required to notify Centrelink within 14 days if any of the information that Centrelink was using to calculate her rate of youth allowance was incorrect. Again, Mrs Box said that because her daughter did not receive payment slips from Nazareth House, she relied on Nazareth House to inform Centrelink of the exact payments.
43. The problem with this submission is that Nazareth House was not required to notify Centrelink of the payments to her daughter. The onus to notify Centrelink was on Ms Box. She failed to satisfy that onus. Other than some estimates which were given to Centrelink, full account of the exact payments made to Ms Box during this period were not obtained until Centrelink asked Nazareth House to provide the precise information. Having received that information, Centrelink calculated the amount which Ms Box had been overpaid and raised a debt. There was no administrative error in relation to this debt.
44. Although the Act contains provisions for writing off debts or waiving debts on the grounds of special circumstances, in my view, neither of those sections of the Act apply to Ms Box. There was no evidence that the debt was irrecoverable at law and Ms Box tendered no evidence of special circumstances.

CONCLUSION

45. In essence, the debts that Ms Box complains about in this case arose from the fact that in the first period, Centrelink was required under the Act to adjust the base tax year upon which Ms Box’s youth allowance payment rate had been calculated following receipt of actual income for the base tax year. That resulted in the first overpayment.
46. In the second period, the overpayment resulted from Ms Box failing to notify Centrelink of her precise income from her employment at Nazareth House. The obligation to notify Centrelink was clearly explained in a number of letters from Centrelink to Ms Box regarding the basis upon which her youth allowance rate had been calculated.
47. As for the third period of overpayment, although Centrelink had been informed that Ms Box was employed by Nazareth House, Ms Box relied on Nazareth House to notify Centrelink of the precise fortnightly payments being made to her. Nazareth House did not do so. The problem for Ms Box is that it is her obligation under the Administration Act to notify Centrelink of changes to her income on a fortnightly basis. She failed to do so.
48. Given my findings regarding the reasons for the overpayment of youth allowance to Ms Box for the three periods set out above, the waiver provisions in s 1237A(1) do not apply. The debts raised by the Commonwealth were not attributable solely to an administrative error made by the Commonwealth. There are no grounds on the evidence before me to write off any debt or to invoke the special circumstances provisions in s 1237AAD of the Act.
49. I therefore find that the decision made by the SSAT in respect of the second debt (the third period) was correct. I affirm that decision.
50. As for the first debt, the SSAT, in its decision made on 30 June 2009, remitted the debt for the first two periods for reconsideration in accordance with directions. Those directions included re-calculating the debt for the first period based on a combined parental taxable income of $76,787. I am unable to determine the basis for the combined parental taxable income figure and, on the evidence before me, it appears that the figure should be $75,652. Accordingly, I set aside the decision of the SSAT in respect of the first period and remit the matter to Centrelink for recalculation on the basis that the combined parental income for the first period was $75,652. The recalculated debt for the second period is correct. I affirm that part of the reconsidered decision.

I certify that the fifty [50] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr Egon Fice, Member

(sgd): Leah Berardi

Clerk

Date of Hearing 23 February 2010

Date of Decision 20 April 2010

Representative of Applicant Mrs L Box

Advocate for the Respondent Ms K Paul, Centrelink Advocacy Branch