Editors --- "Age pension debt: special circumstances waiver; adequacy of notice" [2005] SocSecRpr 15; (2005) 7 Social Security Reporter, Article 15

• HEBBARD and SECRETARY TO THE DFaCS
• Background
• The issues
• Discussion
• Formal decision

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Age pension debt: special circumstances waiver; adequacy of notice

HEBBARD and SECRETARY TO THE DFaCS

(2005/285)

Age pension debt: special circumstances waiver; adequacy of notices

HEBBARD and SECRETARY TO THE DFaCS

(No. 2005/285)

Decided:4 April 2005 by J. Campbell.

Background

Mr and Mrs Hebbard applied for age pension in February 2004. At the claim interview, they discussed the existence of a separate dwelling on the same title as their principal home with an annual rental income of $6760, split evenly between them.

Mrs Hebbard also disclosed at the interview a half share in a nearby property owned jointly with her daughter. Mrs Hebbard’s 50% share of rent from that property was $5070 per year gross.

Mr Hebbard’s claim form did not specifically disclose the separate dwelling. Rather, it stated among other things, that he did not have any interest in real estate other than his home. He also completed an income and assets form in which he indicated that he did not have boarders or lodgers living with him and had no income from any investments not previously mentioned or from any other source.

Mrs Hebbard’s claim form did disclose an interest in property other than her family home. Her forms detailed the existence of AMP shares and other investments as disclosed on her husband’s form, as well as rent of $195 per week from the property jointly owned with her daughter.

On 10 February 1999 Mr and Mrs Hebbard received letters notifying that their claim had been accepted and that their total income for pension calculations was $7251.98. This amount was variably referred to as ‘combined year income’, ‘yearly income’ and was said to be the combination of $3871.98 deemed investments and $3380 real estate. The letters required Mr and Mrs Hebbard to notify Centrelink if this amount was incorrect.

In May 2003 Mr and Mrs Hebbard provided details of the income from the separate dwelling. Following a data matching review for Mrs Hebbard with the ATO in November 2003 and another for Mr Hebbard in January 2004, identical debts were raised in respect of the income from the separate dwelling for the period 4 February 1999 to 17 June2003.

The SSAT held that the debts were solely attributable to administrative error and waived the debts in full. The Secretary appealed to the AAT on the grounds that although the initial recording of income had been incorrect, the respondents were obliged to notify the Secretary of the discrepancy between the rental income stated in various letters sent to them between 10 February 1999 and 27 November 2000.

Mr and Mrs Hebbard argued that they discussed both properties fully with the interviewing officer at the time of claim, they had understood ‘combined annual income’ to mean only combined income relating to the individual and that the figure of $3380 related to Mr Hebbard’s share of income from the separate dwelling. Further, the reason Mr Hebbard responded ‘no’ to the question of other real estate was that it was on the same title as his house.

The issues

The issues to be decided were whether Mr and Mrs Hebbard were each overpaid $5,614.84 for the period 4February 1999 to 17 June 2003 and if so, whether that amount should be recovered. In particular, the AAT considered whether the debts could be waived on the basis that they arose solely due to administrative error pursuant tos.1237A(1) of the Social Security Act 1991(the Act) or due to special circumstances under s.1237AAD of the Act.

Discussion

The Secretary advised the AAT that it was normal practice to exclude one third of the gross rent to allow for expenses incurred in maintaining the rental property. The result of this was that income from the property jointly owned with Mrs Hebbard’s daughter was assessed as only $3380.Coincidentally, this was the same amount that Mr and Mrs Hebbard each received from their separate dwelling.

The AAT decided that it was inappropriate to waive the debt on the grounds of sole administrative error, finding that there had been a number of misunderstandings on the part of both parties. Although Mr and Mrs Hebbard had less than adequate understanding of the term combined annual income, it was found that these misunderstandings did not fully explain Mrs Hebbard’s failure to notice the discrepancy in the amount of rental income stated in notices sent to her.

The AAT found that there were special circumstances in the case. Mr and Mrs Hebbard were elderly and both suffered from moderate to severe hearing impairments. Centrelink had failed to record their income properly at the time of claim. The respondents had misunderstood the meaning of ‘combined annual income’. The phrase was not clearly defined in any of the numerous section 68 notices sent and was variably referred to as ‘total income’, ‘combined year income’ and ‘combined annual income’. The components that made up the income amounts were not specified beyond being assets or investments. It had never been explained to Mr and Mrs Hebbard that the gross rental amount was adjusted by one third. It appeared that a Centrelink officer had made a similar mistake during a data match review for the year ending June 2001 when it was concluded that Mr Hebbard’s rental income declared to the ATO must have been the figure referred to in the notices sent to him.

The AAT observed that:

....I am concerned that Centrelink officers are not giving sufficient attention to explaining all aspects of age pension applications to claimants, particularly in circumstances where the claimants are aged, of impaired hearing and being exposed to concepts and assessments of which they have little experience... (Reasons, para. 47)

...I note the failure of the Secretary to inform Mr and Mrs Hebbard that one third of gross rent is excluded in arriving at the rental figure nominated. In the lack of such knowledge, the ‘combined annual income’, or however termed, would be a mystery figure to the uninformed person as such would not bear any relationship to what an individual may have submitted.......In such circumstances and without such knowledge, the section 68 notice which places obligation upon a claimant would in my view place the claimant in an unfair and unjust position. While it could be argued that a claimant could ring and enquire, it is equally as likely that a claimant will construct his own interpretation as to what the figure represents, as did occur in these two matters by and both by Mr and Mrs Hebbard and the SSAT.(Reasons, para. 48)

The AAT found that much of the misunderstandings had arisen due to the inadequate or incomplete information provided by the Secretary and had allowed the misunderstandings to continue. It concluded that this series of circumstances was unusual and uncommon, with strict enforcement being unjust, unfair and unreasonable.

Formal decision

The AAT set aside the decisions under review and held that $4,000 of each debt be waived in the special circumstances of the case.

[A.M.]