Editors --- "Exceptional circumstances relief payment: qualification for payment, debt waiver and write off provisions" [2009] SocSecRpr 38; (2009) 11(4) Social Security Reporter, Article 1

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Exceptional circumstances relief payment: qualification for payment, debt waiver and write off provisions

WOOD and SECRETARY TO THE DFHCSIA

(2009/675)

Decided: 8th September 2009 by M. Isenberg

Background

Wood owned two properties in New South Wales: a 2000 acre property at drought affected Tooraweenah (‘Tallawarra’) and a 40 acre property at Toronto.

Wood was subsequently issued with an Exceptional Circumstances Certificate in respect of Tallawarra on the basis that it was used for ‘beef (dryland)’. As a result he was paid Exceptional Circumstances Relief Payment (ECRP) from February 2007.

About a year later, Wood leased out 1600 acres of Tallawarra for an annual fee of $2500. He also sold his cattle.

In June 2008 Centrelink cancelled Wood’s ECRP because of the rental income and raised an overpayment of the ECRP in respect of the period 8 February 2008 to 13 June 2008. That decision was affirmed by the Authorised Review Officer (ARO). However the ARO varied the reasons for cancellation and raising the debt on the basis that Wood did not satisfy the definition of ‘farmer’ after he sold his cattle and leased out the majority of the property. The ARO also found that riding, training and competing endurance horses was not a farming activity.

On further review the Social Security Appeals Tribunal (SSAT) found that the decision to cancel Wood’s ECRP was correct but waived the debt for the period 26 May 2008 to 13 June 2008 on the basis of sole administrative error and the debt (subsequently recalculated at $3350.54) was to be written off for a period of six months from the date of the decision.

Issues

The issues before the Tribunal were:

Was Wood qualified for ECRP as at 8 February 2008 and until the EC declaration for the area ceased on 30 September 2008? ; and

If not, were there any grounds not to recover part or all of the debt?

The law

Relevantly, s.8A of the Farm Household Support Act 1992 (the Farm Act) provides that a person is qualified for ECRP if the person:

Is a farmer; and

contributes a significant part of his or her labour and capital to the farm enterprise; and

derives a significant part of his or her income from the farm enterprise; and

.......

an exceptional circumstances certificate issued in respect of the person has effect.

Section 3 of the Farm Act provides the following relevant definitions:

‘farmer’ means a person who has a right or interest in the land used for the purposes of a farm enterprise.

‘farm enterprise’ means an enterprise carried on within any of the agricultural, horticultural, pastoral, apicultural or aquacultural industries.

The write off provisions contained in s.236(1A) of the Social Security Act 1991 (the Act) provide that a debt may only be written off in very limited circumstance.

Section 1237A and 1237AAD of the Act are relevant to whether all or part of the debt can be waived.

Was Wood qualified for ECRP?

The Tribunal noted that qualification for ECRP depended on whether Wood was a farmer conducting afarm enterprise as defined, and whether he contributed a significant part of his labour and capital to the farm enterprise and derived a significant part of his income from the farm enterprise during the relevant period.

The Tribunal found that Wood was a farmer and that he was conducting a farm enterprise on the basis that he carried on an agricultural enterprise (horse breeding) on the 400 acres of Tallawarra and was raising horses which were for sale. In arriving at this finding, the Tribunal considered that the Departmental guide to the Social Security Law (the Guide) which restricted the definition of ‘farm enterprise’ to primary producers who have an interest in farming property and excluded horse breeders who breed racehorses, went beyond the simple requirements of the Farm Act.

The Tribunal noted that s.3 of the Farm Act defined a farm enterprise as ‘an enterprise carried on within... the agricultural ... industr[y]’ and that the SSAT had referred to the definition of ‘agricultural’ contained in the Macquarie Dictionary, (2^nd Revised Edition) namely: ‘pertaining to cultivation of fruit, vegetables, and flower, including crop-raising, forestry and stock-raising’. The Tribunal also referred to recent policy advice issued by the Department of Agriculture, Fisheries and Forestry which included the rearing of live-stock in its interpretation of a farm enterprise.

The Tribunal went on to comment that there seemed to be little logic in the distinction drawn in the Guide between a breed of stock horses or those rearing horses for food, skins or other primary production purposes and a horse breeder who trains and races horses. In any event, the Tribunal concluded that Wood’s raising of endurance horses for sale was more akin to the allowable horse breeder than to the horse racer.

The Tribunal also found that Wood had an ‘interest’ in the other 1600 acres of land used for the purposes of a farm enterprise, in that the lessee was raising cattle and growing crops.

However, whilst the Tribunal found that Wood had contributed a significant part of his capital to Tallawarra, it was not satisfied on the evidence that he had contributed a significant part of this labour to the Tallawarra farm enterprise during the period in question. In coming to this finding, the Tribunal commented that the evidence Wood had given in relation to the work which had been undertaken at or for the Tallawarra business had been inconsistent throughout the various stages of review.

For completeness the Tribunal went on to consider the question whether Wood derived a significant part of his income from the farm enterprise. The Tribunal found on the evidence (despite the figures not adding up) that Wood had done so, as the majority of his income in the relevant period was derived from the sale of cattle through the rent of Tallawarra.

Accordingly, the Tribunal concluded that after Wood had leased out the majority of Tallawarra, he no longer contributed a significant part of his labour to the farm enterprise and ceased to qualify for ECRP from 8 February 2008.

Were there any grounds not to recover part or all of the debt?

The Tribunal found that none of the limited provisions for write-off applied to Wood given his ownership of two properties valued together in the vicinity of $1,000,000.

The Tribunal found that the debt in relation to the period 26 May 2008 to 13 June 2008 met the conditions for waiver pursuant to section 1237A of the Act. The Tribunal found sole administrative error on the basis that Centrelink had continued to pay ECPR despite Wood having informed them on 26 May 2008 that he had leased out 1600 acres of Tallawarra, and had moved his residence to Toronto (and had sold his cattle). Given the complexity of the circumstances and Wood’s belief that he continued to be entitled to ECRP, the Tribunal went on to find that he had received the payments in good faith.

The Tribunal did not accept that special circumstances existed to justify waiver of the remainder of the debt. Whilst the Tribunal commented that like many farmers, Wood had a long and difficult time on the land during the drought, it found his financial circumstances were not dire, that he was in good health and there were no other aspects of his circumstances that might be considered special.

Formal decision

The Tribunal affirmed the decision under review. Wood did not qualify for ECRP from 8 February 2008. A debt of $3943.74 for the period 8 February 2008 to 13 June 2008 was owed to the Commonwealth, however the debt in respect of the period 26 May 2008 to 13 June 2008 was waived under s.1237A(1) of the Act.

[G.B.]