Jones and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 77 (12 January 2012)

Last Updated: 10 February 2012

[2012] AATA 77

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2011/2796
Re	Debra Jones
	APPLICANT
And	Secretary, Dept. of Families, Housing, Community Services and Indigenous Affairs
	RESPONDENT

DECISION

Tribunal	M D Allen, Senior Member
Date	12 January 2012
Date of written reasons	10 February 2012
Place	Sydney

The decision under review is set aside and remitted to the respondent for recalculation of Family Tax Benefit for the period 1 July 2009 to 30 June 2010 on the basis that the sum of $45,950 does not form part of that calculation.

..................[sgd]....................
M D Allen, Senior Member

Catchwords

FAMILY TAX BENEFIT – overpayment – special circumstances – the decision under review is set aside and remitted to the respondent for recalculation of the Family Tax Benefit.

Legislation

Administrative Appeals Tribunal Act 1975 s 43(2A)

Tax Laws Amendment (2009 Measures No.1) Act 2009

A New Tax System (Family Assistance) Act 1999 sch 3

Taxation Administration Act 1953 s 16-182

A New Tax System (Family Assistance) (Administration) Act 1999 s 71, 96, 97, 101

Cases

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

Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; 65 ALD 211

Re Ivovic v DirectorGeneral of Social Services (1981) 3 ALN 95

Kertland v Secretary, Department of Family and Community Services FCR 71

Martinez v Secretary, Department of Family and Community Services (2000) FCA 1090

Secretary, Department of Social Security v Smith (1991) 30 FCR 56

Department of Social Security v Ellis (1997) 46 ALD 1

Click here to enter text.

REASONS FOR DECISION

Senior Member Allen


10 February 2012

1. At the conclusion of the hearing in this matter, the terms of the decision intended to be made and the reasons therefore were stated orally. The Respondent, pursuant to section 43(2A) of the Administrative Appeals Tribunal Act 1975, requested that the Tribunal furnish to them a statement in writing of the reasons of the Tribunal for the decision. Those reasons are as follows:
2. By application made the 20th day of July 2010, the applicant sought review of a decision by the Social Security Appeals Tribunal to affirm a prior determination of an authorised review officer, that she had been overpaid Family Tax Benefit in the sum of $6069.15 in the period 1 July 2009 to 30 June 2010. The over payment resulted from the manner in which the applicant estimated her husband's income for Family Tax Benefit purposes. The husband is the sole source of income for the family group. The underestimate of income was caused by amendments to the manner in which entitlement to Family Tax Benefit is calculated, occasioned by the passing of the Tax Laws Amendment (2009 Measures No.1) Act 2009, which amended clause 21 to schedule 3 of A New Tax System (Family Assistance) Act 1999 (FTB Act). The affect of the amending Act was set out in a letter to the applicant from Centrelink, dated 19 May 2009. That letter reads inter alia:

From 1 July 2009 there will be some important changes that may affect your family assistance:

(1) Changes to the definition of "income". There are two new types of income that will be used to calculate your income estimate for family assistance reportable superannuation contributions

And continues, or option:

(2) Use the income estimates we have calculated. These figures do not include an estimate of any reportable superannuation contributions or net investment losses you may make during the 2009/2010 financial year.

3. The term "reportable superannuation contributions" is defined in section 16182 of the Taxation Administration Act 1953, namely:

A reportable employer superannuation contribution for an individual for an income year is an amount that has been, is or will be contributed in respect of the income year:

(a) by an employer of the individual or an associate of the employer for the individual benefits; and
(b) to a superannuation fund or an RSA, to the extent that either or both the following paragraphs apply;
(c) the individual has or has had, or might reasonably be expected to have or have had the capacity to influence the size of the amount;
(d) the individual has or had or might reasonably be expected to have or have had the capacity to influence the way the amount was, is or will be contributed so that his or her assessable income is reduced.

4. Following the above mentioned amendments to the FTB Act, subclause 21 to Schedule 3 of that Act defined adjustable taxable income as:

(1) for the purposes of this Act and subject to subclause 2, an individual's adjusted taxable income for a particular income year is the sum of the following amounts (income components):

(a) the individual's taxable income for that year;
(b) the individual's adjusted fringe benefits total for that year;
(c) the individual's target foreign income for that year;
(d) the individual's total net investment loss within the meaning of the Income Tax Assessment Act 1997 for that year;
(e) the individual's tax free pension or benefit for that year;
(f) the individual's reportable superannuation contributions within the meaning of the Income Tax Assessment Act 1997 for that year, less the amount of the individual's deductible child maintenance expenditure for that year.

5. In the case of the current applicant, the husband contributed an amount of some $45,950 into a superannuation fund. He then withdrew this amount and it was declared as income to the Commissioner of Taxation. The net result of this withdrawal, plus wages paid to the husband from his company, resulted in a taxable income of $87,112. In passing I note, as pointed out by Mr Jones, who represented his wife in these proceedings, that there was in fact an underestimate of annual earnings, separate and apart from the calculation required by adding superannuation benefits and share trading losses to adjusted taxable income for the purposes of Family Tax Benefit calculations. The applicant did not adjust her calculations of income as reported to Centrelink for Family Tax Benefit purposes, to take account of the amendments to the FTB Act. On 16 February 2011 the respondent wrote to the applicant, stating inter alia:

On 10 December 2010 reconciliation occurred as the ATO transmitted your combined actual income of $137,157 taxable income as assessed by the ATO.

6. This statement is misleading. The correct situation was set out in the decision of an authorised review officer dated 19 April 2011, namely:

On 10 December 2010, as part of the reconciliation process, the Family Assistance Office received details of your income for the 2009/2010 financial year from the Australian tax office. Your ATO assessed income included taxable income of $87,112, total net investment loss of dollars $4095, and reportable superannuation contribution of $45,950. Therefore your actual adjusted taxable income for the 2009/'10 financial year was $137,157.

7. Following receipt of the letter of 16 February 2011, the applicant's husband wrote to the Family Assistance Office. That letter succinctly sets out the gravamen of his and the applicant's complaint, namely:

You have advised that our actual income for the 2010 financial year is 137,157. My taxable income as advised on tax assessment dated 16 November 2010 is $87,112. I have no problem with you using that figure. However, you have added to it the amount of income both withdrawn and added to superannuation. To make this clearer we have an amount of $50,000 that comes from superannuation in the form of a pension, and we also lodged some $50,000 back to superannuation. You are taking both these amounts as income, and this is clearly wrong and inflates our income in your eyes by $50,000. This is no different than making a withdrawal from a savings account and depositing it to another, yet you count this as income and penalise us accordingly.

8. This movement of funds is done under a Government recommendation, an authorised plan referred to as transition to retirement. There is no doubt, and I did not take the applicant to dispute this, that the amount of adjusted taxable income for Family Tax Benefit purposes was correctly calculated pursuant to subclause 21 of Schedule 3 to the FTB Act as the amount of Family Tax Benefit has been correctly calculated, and the result of that calculation is that the applicant has been overpaid Family Tax Benefit, then that overpayment is a debt due to the Commonwealth see section 71 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).
9. Ameliorating provisions to the strict application of s 71 of the Administration Act, are set out at ss 96, 97 and 101 of that Act. Writeoff. Section 96 does not apply in this matter, as the debt has been recovered. Administrative error. Section 97, as a reason for waiver, does not apply as there has been no error on the part of the respondent. The only ameliorating provision that might apply to this applicant is s 101, being a waiver as a result of special circumstances. There is also a caveat in the Administration Act that the overpayment should not be as a result of false declarations or omissions, but that does not apply here. The only special circumstances which might possibly apply to the applicant is unfairness, as was pointed out by Keifel J, as she then was, in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, namely:

It would, of course, follow that if one were to conclude that something unfair, unintended or unjust had occurred, then there must be some feature out of the ordinary.

10. Unfairness per se, as a ground for finding special circumstances, was referred to by Mr Mansfield J in Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; 65 ALD 211, a case referred to me very properly by the respondent. His Honour, in the course of his judgment said starting at para 22:

In my view that misapprehension of the legislative policy has influenced the tribunal into excluding from consideration unfairness in the strict application of the legislation as possibly demonstrating that special circumstances exist in the applicant's case. Indeed, in my view section 1184 is designed specifically to enable the respondent, and on review the tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act.

That view was effectively expressed by von Doussa J in Secretary, Department of Social Security v Smith (1991) 30 FCR 56:

By its terms the discretion given by section 156 may be exercised where the Secretary or a body standing in the place of the Secretary on appeal, considers it appropriate to do so in the special circumstances of the case. These are wide words, intended as the tribunal in Re Ivovic v DirectorGeneral of Social Services (1981) 3 ALN in 95 pointed out:
To allow the decisionmaker the fullest opportunity to consider the particular circumstances of each case.

His Honour continued at paragraph 25:

It is clear in my view that the Tribunal instructed itself as a matter of law that unfairness by virtue of the operation of section 1165(1A) and the other provisions to which I have referred cannot constitute special circumstances. In my judgment it was in error in so doing.

11. In Kertland v Secretary, Department of Family and Community Services, Merkel J said, FCR 71 ALD 607:

In Smith, to which I will return later, von Doussa J rejected a contention put on behalf of the Secretary that the circumstances of the case should be confined to matters which are external to the operation of the statutory scheme. His Honour made the point, with which I respectfully agree, that a distinction cannot meaningfully be drawn between matters external to the operation of the scheme, and matters which are the product of the strict application of the scheme.

His Honour expressly referred with approval to the observation of von Doussa J in Smith, to which I have already referred. I respectively agree and adopt their Honours reasons for that conclusion. I think they are also consistent with the observation of Carr J in Ellis ( (1997) 46 ALD 1), and Kiefel J in Groth. Finally, at paragraph 31, his Honour concluded by stating:

Finally, I mention an argument which was advanced on behalf of the respondent through its counsel, namely that the unfairness or injustice by the strict application of the Act cannot qualify as a special circumstances, unless in some way the unfairness or injustice itself arises out of some other special circumstance.
In my view that submission is not supported by authorities. It is a somewhat circuitous proposition. It fails to have regard to the role of section 1184 in the Act, and to its plain words. It is but another way of putting the proposition that injustice or unfairness by the strict application of the Act cannot of itself amount to a special circumstance for the purposes of section 1184. That is a proposition which, as I have noted, has been rejected by a number of decision of the courts as far back as Smith and Beatle. It has also been rejected more recently by justice RV Nicholson in Martinez v Secretary, Department of Family and Community Services (2000) FCA 1090.

12. To my mind the applicant has suffered from unfairness, in that her husband's superannuation, by way of salary sacrifice, a provision which has been encouraged by the government on the basis that a person should be encouraged to contribute to their own retirement, and hence in future be less of a drain on the public purse, has been calculated twice in the assessment of income for Family Tax Benefit purposes. That is to say, it was calculated as part of the husband's taxable income when withdrawn from his superannuation fund a perfectly legitimate arrangement, again encouraged by the government and referred to as "Transition to Retirement", and then added yet again for the purposes of Family Tax Benefit.
13. In other words, the legislation enables doubledipping on the part of the respondent. As stated, I accept special circumstances do exist in the case of this applicant. The decision under review is set aside and remitted to the respondent for recalculation of Family Tax Benefit for the period 1 July 2009 to 30 June 2010 on the basis that the sum of $45,950 does not form part of that calculation.

I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of M D Allen, Senior Member.

Signed: ................................[sgd]..............................................
Casey Comans, Associate

Date of Hearing 12 January 2012
Date of Decision 12 January 2012
Date of Written Reasons 10 February 2012
Solicitor for the Respondent Ms G Heggen