Editors --- "Overpayment: recovery from family tax benefit top up" [2008] SocSecRpr 17; (2008) 10(1) Social Security Reporter, Article 17

• LLEWELLYN and SECRETARY TO THE DFaCSIA
• Background
• The issues
• The law
• Formal decision

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Overpayment: recovery from family tax benefit top up

LLEWELLYN and SECRETARY TO THE DFaCSIA

(2007/1997)

Decided: 30th November 2007 by L. Hastwell

Background

Centrelink raised a family tax benefit (FTB) debt against Llewellyn of $2025.25 for the 2004/2005 financial year. Llewellyn was repaying this debt by instalments.

The next year, a reconciliation of her 2005/2006entitlements provided for a top-up amount of $1858.30 which was made up of$1427.60 Part A supplement and $124.10 Part B arrears. She was advised over the phone by Centrelink that part of the payment would be used to repay the debt, but that $900 would be paid to her bank account. She then ‘earmarked’ the $900 for specific expenses.

Centrelink decided to offset the entire top-up amount against the debt.

On request, the decision was reviewed and affirmed by an ARO and the SSAT.

The issues

The Tribunal identified three key issues:

· Can top-up amounts be used to offset an FTB debt from a previous year?

· If so, should it be applied wholly or in part?

· Is a reconciliation amount calculated at the end of the FTB year ‘arrears’?

The law

The relevant law is found ins.82(1)(b) of the A New Tax System (Family Assistance)(Administration) Act 1999 which states:

‘82 Methods of recovery

(1) A debt owed by a person, other than an approved child care service, is recoverable by the Commonwealth by one or more of the following means:

(a) deductions from instalments of family tax benefit to which the person is entitled;

(b) setting off arrears of family assistance to which the person is entitled against the debt;

The submissions

Llewellyn argued that the top-up amount was made up of two separate amounts – a supplement and an arrears payment.

In her view only the arrears could be offset against a previous FTB debt. She also noted that Departmental policy prior to 1 July 2006 had been to offset only for current year debts and not previous year debts and that the policy change made after 1 July 2006 was not clear on the Centrelink web site.

The Department argued that the Tribunal should interpret the legislation by taking into account the Family Assistance Guide which states:

‘7.2.3 Debt Recovery From Arrears of FA

Top-up payments

This section provides information about offsetting arrears of FA to repay a debt (1.1.D.60). It includes offsetting arrears of:

· child care benefit,

· FTB, MAT or MIA owed to the debtor, and

· FTB, MAT or MIA owed to another consenting person.

From 1 July 2006, any available FTB top-up or lump sum payments paid through Centrelink will be used to offset any outstanding FTB debts from current and/or previous years.

A time limit, Family Assistance (Administration) Act section 86(1) applies to recovery under these provisions.

Top-up is the balance of entitlement due to a recipient, mainly recipients who receive FTB by fortnightly instalments or CCB as reduced child care fees. Top-up payments include supplements to which a recipient is eligible.

Available FTB top-ups will be used to offset all FA debts and any residual amounts sent to the ATO, which will then offset outstanding tax debts with the remaining amount.

Can reconciliation supplementary payments be arrears?

The AAT analysed the payment process, the dictionary meaning of ‘arrears’ and the Explanatory Memorandum when supplement payments were introduced.

Evidence was also given by a FTB practitioner within the Department who explained that the supplement was designed ‘...as a tolerance because of the difficulty people experience in estimating their income in a year. It is designed to reduce the debt that some families were incurring by providing an arrears payment against which a debt can be offset. The supplements were not payable until the end of the financial year and once a reconciliation process had been carried out.’ (Reasons, para. 19)

The AAT also referred tos.15AA of the Acts Interpretation Act 1901 which requires an assessment of the underlying purpose of legislation when interpreting legislation.

The Tribunal concluded that the supplement was ‘...a payment in arrears which is made after the reconciliation process has taken place’ (Reasons, para. 41).Therefore the entire top-up came within the meaning of arrears and was lawfully recovered.

The Tribunal noted that Llewellyn was not in financial hardship and pointed out that it was unfortunate that she was given incorrect information.

Formal decision

The AAT affirmed the decision under review.

[P.A.S.]