Editors --- "Waiver: administrative error and good faith" [2007] SocSecRpr 30; (2007) 9(3) Social Security Reporter, Article 4

• SECRETARY TO THE DEWR and TAYLOR
• Background
• The issue
• The evidence
• Department’s evidence
• The Department’s submissions
• Taylor’s submissions
• Consideration of the evidence and findings
• Formal decision

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Waiver: administrative error and good faith

SECRETARY TO THE DEWR and TAYLOR

(2007/1377)

Decided: 29th May 2007 by R. G. Kenny

Background

On 22 February 2006Centrelink raised a debt against Taylor and decided to recover overpaid parenting payment (PP) for the period 10 July 2002 to 1 March 2005 in the amount of $19,289.31. The overpayments arose as a result of her PP being calculated without regard to her and her husband’s income (‘her combined income’).

An ARO affirmed the decision to raise the debt but waived a component of the debt (the part that was incurred between 16 January 2003 and 9 April 2003) on the basis that it was due solely to administrative error and was received in good faith. The ARO decided not to waive that part of the debt incurred after10 April 2003 because he was not satisfied that Taylor had received those payments in good faith. The SSAT reviewed the decision and, on 20 June 2006,determined that the correct amount of the debt was $19,273.06 and that the debt should be waived from the start of the overpayment period until 9 January 2005. On 27 July 2006, the Secretary to the Department of Employment and Workplace Relations (the Department) sought review of that decision by the AAT. The Department did not dispute the reduction in the debt by the SSAT.

The issue

The issue was whether Taylor’s debt, or some portion of it should be waived in accordance with s.1237A(1) of the Social Security Act 1991 (the Act).

The evidence

Taylor gave evidence that she was always careful to provide correct information about her income to Centrelink. She gave the following evidence about her dealings with Centrelink:

· She provided updated estimates of her combined income on several occasions prior to and during the period of the overpayment. On 25 May 2002, she completed a Parenting Payment Partnered Review form in which she declared her gross income and that of her husband. She was a self-employed contractor undertaking book-keeping work in a medical centre. From 1 July 2002 she also carried out book-keeping duties in a second practice as an employee of the practice. The types of duties that she undertook remained the same at both medical centres. She did not advise Centrelink of this change.

· On 26 August2002 she contacted Centrelink and was advised that calculations of PP were based on her combined income and that it was important that this remained within the estimates that she had provided.

· On 16January 2003, Taylor rang Centrelink about her PP and provided an updated estimate of her combined income for the 2002/2003 year. In April 2003, Taylor received a letter from Centrelink informing her that her PP was being calculated on the basis of earnings of $164.23 per fortnight. As this amount was incorrect she contacted Centrelink on 11 April 2003 to discuss the letter and her PP. The Centrelink officer checked the estimates that were on her record and told Taylor that, as long as the combined income did not exceed $25,000, there would be no overpayment.

· On 10January 2005, Taylor commenced working at the Groves Christian College but did not notify Centrelink of this change of employment.

· Throughout the overpayment period she was unaware that the mode of assessing income for the calculation of family tax benefit (FTB) was different to that which applied to PP. She believed that the information she had provided was used by Centrelink to calculate both payments.

· On 3 March2005, Taylor contacted Centrelink and was advised for the first time of the different methods of recording earnings for the two types of payment. She was advised that the information that she had provided was used to calculate her FTB only and that there were no income records in relation to the PP.

Department’s evidence

The Centrelink call centre operators who spoke to Taylor on 16 January 2003 and 11 April 2003 each gave evidence which did not call into question the substance of Taylor’s account.

Copies of Mr and Taylor’s taxation returns were in evidence which revealed that the income estimates were reasonable.

The Department’s submissions

The Department relied on notices sent to Taylor from 13 June 2001 onwards which required her to advise Centrelink if her combined income exceeded the notified amount and of any change in employment. It submitted that her failure to comply with these obligations had contributed to Centrelink’s reliance on incorrect income amounts. Therefore the debt was not solely attributable to Commonwealth error. The Department conceded that the payments had not been received by Taylor in the absence of good faith.

Taylor’s submissions

Counsel for Taylor submitted:

· Taylor was not in breach of the obligation imposed by the notices because her income levels were already in excess of the amount nominated in the notice of 13 June2001 and this was a matter about which Centrelink had previously been advised. Counsel referred to the decision of the Tribunal in Re Vitalone v Secretary, Department of Social Security [1995] AATA 188; (1995) 38 ALD 169.Taylorhad kept Centrelink informed of the estimates of the income that she and her husband would earn in each of the relevant financial years and Centrelink should have realised that the details about income levels stated on information notices to Taylor were incorrect.

· After9 January 2005 when she changed jobs it was accepted that the debt could not be waived.

Consideration of the evidence and findings

The Tribunal set out the provisions that applied to the calculation of FTB and PP and noted the differences.

The Tribunal was satisfied that:

· Taylor was a truthful witness who was not aware of the different means of calculating FTB and PP prior to March 2005;

· Taylor kept Centrelink informed of the estimates of annual income from 9 May 2001 and throughout the overpayment period;

· Taylor believed that, throughout the overpayment period, Centrelink had the relevant information needed to correctly calculate her PP.

The Tribunal considered whether the debt should be waived pursuant to section 1237A of the Act which, in so far as relevant, reads:

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.

The Tribunal was satisfied that a letter sent to Taylor by Centrelink on 13 June 2001 constituted a written notice which required Taylor to advise Centrelink if her and her husband’s income went over the nominated amount and also if she ‘change[d] jobs’. The Tribunal considered Vitalone where the Tribunal was dealing with notice requirements under s.163 of the Social Security Act 1947 which were not materially different from those under s.68 of the Social Security(Administration) Act1999. In that case the notice required that the recipient advise the Department of Social Security (DSS), if income exceeded a certain threshold but as the DSS had previously been made aware that the recipient’s income exceeded that amount it was held that, in the absence of fault, there was no failure to comply with the notice requirements.

The Tribunal was satisfied that Taylor did not fail to comply with the notice requirement to advise Centrelink if her income ‘goes over $100’ because that event did not occur after receipt of the notice and Centrelink had been advised that her income level was higher than that threshold before the notice was sent. The Tribunal was satisfied that the same strict interpretation adopted in the Vitalone case was applicable to the requirement in relation to advising about employment changes. The notice required Taylor to tell Centrelink if she started work, recommenced work, changed jobs, or started any form of business or self-employment. The Tribunal found that none of these events occurred while she worked for the medical centres. When she failed to advise Centrelink of her new job within 14days of 9 January 2005 this was a breach of her notice obligations. The Tribunal found on the balance of probabilities that had she advised Centrelink of her new employment it would have brought the incorrect payment regimen to Centrelink’s attention.

The Tribunal noted that the finding that Taylor had not breached the obligation imposed by the notices was not relevant to whether she had a debt but rather to the question of whether it should be waived. The Tribunal found that the overpayment of PP until 9 January 2005 arose solely through error on the part of the Commonwealth. The Tribunal noted the concession by the Department that there was no absence of good faith by Taylor and made a finding to this effect.

The Tribunal concluded that the part of the debt that arose in the period from 10 July 2002 until 9 January2005 should be waived in accordance with s.1237A of the Act. The Tribunal was satisfied that there were no special circumstances in Taylor’s case that would justify waiver of the balance of the debt under s.1237AAD of the Act.

Formal decision

The Tribunal affirmed the decision under review.

[C.E.]