Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 161(1B)-161(1C) of the A New Tax System (Family Assistance) (Administration) Act 1999.

SOCIAL SECURITY - pensions, benefits and allowances - family tax benefit - lodgement of tax return - whether special circumstances prevented lodgement - third party failure to compile data for lodgement of tax return - decision under review affirmed

A New Tax System (Family Assistance) Act 1999

A New Tax System (Family Assistance) (Administration) Act 1999

Hooker and Secretary Department Social Services [2015] AATA 732

Secretary, Department of Social Service and Hollis [2015] AATA 941

Berges and Secretary, Department of Social Services [2020] AATA 3507

Henry and Secretary, Department of Social Services [2019] AATA 5453

1. Ms GDQR is aggrieved by a decision made by Centrelink to limit her entitlement to Family Tax Benefit (FBT) for the 2021-22 income year to $266.45. Centrelink limited the payment in this regard because Ms GDQR did not lodge her personal income taxation return for 2021-22 by 30 June 2023. In this way, Ms GDQR has missed out on a payment of $3,832.50.
2. After a Centrelink authorised review officer affirmed the decision on 5 December 2023, finding that there were not special circumstances that prevented Ms GDQR from lodging her return within the prescribed timeframe, Ms GDQR applied to the Administrative Appeals Tribunal (AAT) for review. On 26 April 2024, the AAT affirmed the decision under review.
3. In doing so, the AAT considered the circumstances put forward by Ms GDQR; namely that she had commenced operating a business with family members and was unable to lodge her taxation return until her business partner had reconciled receipts in order for her accountant to distinguish between her and her business partner's income for the year. The AAT also considered Ms GDQR's contention that the consequences for her were disproportionately harsh and she had not known that the consequences would be so severe. However, the AAT considered that Centrelink had correctly applied the legislation and policy to her circumstances, and special circumstances preventing lodgement of the returns did not exist.
4. On 15 May 2024, Ms GDQR applied for second review in the AAT. On 14 October 2024, the AAT was abolished and the Administrative Review Tribunal commenced operations. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review that were not finalised by the Administrative Appeals Tribunal before 14 October 2024 were taken to be applications for review to the Administrative Review Tribunal (hereafter the Tribunal). The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed.

1. Under the A New Tax System (Family Assistance) Act 1999 (the Act), the rate of FTB is calculated after taking into account the income of a person and (if relevant) their partner for an entire financial year. Provisions exist for FTB to be paid by instalments throughout the financial year, typically on the basis of a reasonable estimate by the person as to their anticipated income. An entitlement can also be paid as a lump sum after the end of a financial year.
2. It appears that in Ms GDQR's case, she is to be understood to have been paid by instalment, albeit her instalments were to be 'deferred' until reconciliation occurs once information about her (and her partner's) adjusted taxable income is known. The arrangements through which deferral of the instalments of FTB are deferred in this way are not expressly set out in legislation but are referred to in Departmental policy: Family Assistance Guide 4.3.1.20 FTB payment choices for instalment individuals, and apparently implemented through that policy.
3. Section 16 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the FA Administration Act) requires the Secretary to make a determination that a person is entitled to be paid FTB for each day on which the determination is in force at the daily rate at which the Secretary considers the claimant to be eligible. Through this process, it appears the Secretary considered Ms GDQR to be eligible for $266.45 in FTB in aggregate over that 2021-22 income year, albeit payment of that amount was deferred under the arrangements mentioned above.
4. Sections 105 and 105A of the FA Administration Act authorise and require the Secretary to review and reconcile a determination about entitlement to FTB, if for example an individual satisfied certain reconciliation conditions. It is through this mechanism that a person's annual entitlement to FTB is ultimately checked and adjusted once their (and their partner's if relevant) adjusted taxable income becomes known. Certain supplements are not taken into account until this reconciliation process and serve as a buffer to recipients incurring debts at reconciliation.
5. However, section 28 of the FA Administration Act effectively provides that the Secretary must vary the determination so that it has the effect that the claimant is not, and never was, entitled to FTB for what are termed 'cancellation days'. 'Cancellation days' are days occurring within an income year that began 2 years before the beginning of the income year in which the provisions are being applied, the claimant is otherwise entitled to be paid FTB for those days, but the claimant and their partner or both are required to lodge an income tax return but has not done so.
6. Put more simply, a person and their partner have twelve months after the end of an income year for which they were paid FTB by instalment to lodge their income taxation returns. If they do not the Secretary must determine the person had no entitlement to FTB in that year.
7. Subsection 28(3) of the FA Administration Act makes provision for consequences where a person's income taxation returns are later lodged. Relevantly, if the taxation returns are lodged other than before the end of the income year after the cancellation income year or within such further period as has been allowed, the determination must be the lesser of the recalculated amount of the entitlement (based on the taxation returns) or the amount that the claimant was entitled to before the determination was varied.
8. Put more simply, if an individual and their partner are required to lodge a taxation return but fail to do so by the end of the next financial year, the entire amount of FTB is raised as a debt. If they later lodge a taxation return, the debt will be reversed, but only to the extent of their actual entitlement up to what they had been paid. There will be no top up, and there will be no supplements.
9. In the case of a person who has deferred receipt of FTB by instalment, this provision will bring about the result Ms GDQR has experienced. The very low amount of FTB she was paid for the 2021-22 income year represents the amount of the instalments to be paid based on the existing estimate of her income, but not the very substantial top up she would have otherwise expected once her and her partner's actual adjusted taxable income became known through the lodgement and assessment of her taxation returns. Nor does it include the supplements.
10. The scheme mentioned above refers to 'such further period as has been allowed'. This reference is a reference to Subdivision D of Division 1 of Part 3 of the FA Administration Act: subparagraph 28(3)(c)(ii) of the FA Administration Act. That reference pertains to (relevantly) section 32C(3)(b) of the FA Administration Act.
11. The provision speaks of a relevant reconciliation time being when an assessment is made under the Income Taxation Assessment Act 1936...so long as the income taxation return was lodged before the end of first income year after the relevant income year or such further period (if any) as the Secretary allows, if the Secretary is satisfied that there are special circumstances that prevented the person from lodging the return before the end of the first income year.
12. In order for Ms GDQR's grievance to be addressed, that provision must be exercised to allow further time for the lodgement of her taxation return to 28 July 2023, when her income taxation return was in fact lodged. The legislation expressly limits its favourable exercise to where there are special circumstances that prevented the person from lodging the return before the end of the first income year. That is the issue I must decide in this review.

Are there special circumstances that prevented the income tax return being lodged within time?

1. In written submissions lodged on 13 October 2024, Ms GDQR summarised the circumstances she wished to have considered into four categories:
   • Dependence on third party information: referring to being unable to complete her taxation return until her business partner had finalised her bookkeeping in relation to a jointly operated business;

• First year of rental property ownership: referring to the extensive learning and adjustments required operate the new business, including the operating of new accounting systems and the gathering and submitting of financial information;

• Family health challenges: referring to a serious accident befalling her husband in April 2022, requiring reconstructive eye surgery, mental health sequelae, and the strain this placed on her family; and

• Working and caregiving responsibilities: referring generally to her commitments working, operating the new business and raising young children.

1. In relation to the challenges associated with the new business and the related reliance on third parties to complete their bookkeeping activities in respect of it, Ms GDQR explained that her family and the family of her sister-in-law have jointly purchased an old property in a small town on the Murray River, undertaken extensive renovations. They commenced offering the property for short term rental to large groups in February 2022, after purchasing the property in October or November 2021. Ms GDQR and her extended family manage the property themselves, which involves maintaining a website and monitoring other booking platforms. Other tasks of managing the property include arranging cleaners, supplies, and maintaining the garden. The extended family chip in in keeping the property running.
2. In relation to the particular problem identified by Ms GDQR that she attributes to the late lodgement of her taxation return; namely the delayed completion of bookwork by her business partner, Ms GDQR said that an accountant had set up Xero bookkeeping software for the business which was new to her and new to her sister-in-law. They needed to learn to use the software, and record all purchases in Xero and reconcile it against a bank account. In the first year of operation this task was particularly onerous because they had purchased a lot of supplies, bedding and building materials. They also made mistakes along the way that need to be corrected. Both parties purchased items for the business and need to separately enter the data into the software. Ms GDQR explained that she was able to get her receipts entered on time, but her sister-in-law did not do so.
3. Ms GDQR explained that the family would have dinner together every Sunday and discuss the business. She is confident she reminded her sister-in-law of the need to complete these tasks from time to time. She also identified and produced text message exchanges in which she reminded her sister-in-law of the need to complete the bookwork in May 2023. Ms GDQR explained she tried to apply pressure. Ms GDQR confirmed receipt of a series of reminders sent by Centrelink, and confirmed she had been aware of the time pressure. Ms GDQR said however that she was not aware of what her options were in the circumstances where she felt she simply could not lodge the taxation returns without the required information, and had no time to attempt telephone contact with Centrelink to discuss what options might be available to her in the circumstances. Ms GDQR said that eventually she was able to apply the pressure to get it done, but unfortunately it was not by the 30 June 2023 deadline. Ms GDQR explained she felt torn between two evils, either lodging an incorrect taxation return or missing the deadline. Ms GDQR said she was surprised and disappointed by the severity of the consequences for her in the circumstances.
4. In relation to her perspective as to what the problem was at her sister-in-law's end, Ms GDQR said that her sister-in-law's children were much younger, and she was busy helping her husband run his business. Ms GDQR's perception was that completing the bookwork for the business they operated together did not rank as highly in her sister-in-law's priorities as her sister-in-law's other commitments.
5. As to the family health challenges, Ms GDQR confirmed that in April 2022 her husband sustained a serious eye injury. He was hospitalised at the time and returned for further surgical procedures in January 2023. Ms GDQR explained that her husband had a lot of time off work during the year, and the event was traumatic in nature and impacted her husband's mental health. I accept that such a stressor inevitably had a highly adverse impact on Ms GDQR and her family generally.
6. Ms GDQR however acknowledged, in response to the questions put to her by the Secretary's representative, that her husband was able to lodge his income taxation return on 18 September 2022.
7. Ms GDQR also elaborated in her evidence on her own circumstances. Ms GDQR works full time and raises three children who are also quite young. She also undertakes voluntary roles with her children's school. Ms GDQR explained that most of the times she can keep on top of things but that year she acknowledges that she did not, as she considers she faced unusual stressors during the year.
8. I have considered all of the matters put forward by Ms GDQR. I have considered each matter individually but also in combination.
9. In approaching the review, I have reflected on the words used in the legislation, and in particular the word "prevented". According to the Australian Oxford Dictionary the terms means:

To stop from happening or to do something; to hinder or to make something impossible.

1. In the practical context of governing the exercise of a discretion the term is more appropriately understood in terms of circumstances 'hindering' as opposed to me looking for circumstances that make it impossible; I think that would be too high a bar. I am conscious, however, that the term has its ordinary meaning in the English language, and I do not substitute any words for the meaning that is set out in the legislation, but I do approach the discretion that I have on a practical basis.
2. I also recognise it is well established that the legislation puts forward a two-part threshold; namely that the circumstances must both prevent the lodgement of the taxation return, and the circumstances must be special[1]. In this way, there may be circumstances that are special but do not prevent the lodgement of the taxation return, and likewise there may be circumstances that prevent the lodgement of the taxation return, but are not special.
3. I accept Ms GDQR faced very significant stress associated with her husband's injury, adding to an already very busy life. I also accept that the commencement of a new family business in the previous financial year had made her taxation affairs more complex than they would have otherwise been.
4. However, on reflecting on all the evidence, I do not consider that either her husband's injury, the complexity of her taxation affairs introduced by the new business or Ms GDQR's generally busy lifestyle, operated to prevent or indeed contributed to Ms GDQR not lodging her taxation return within the required timeframe. I reach this conclusion because it is apparent that Ms GDQR's husband's taxation return was lodged within time, and also that Ms GDQR had completed her tasks associated with the bookkeeping for the business, and was ready to lodge her taxation return. Ms GDQR was also agitating and applying pressure for her sister-in-law to complete what was required within the required timeframe. In these circumstances, it appears to me that while Ms GDQR undoubtedly faced stressors during the relevant period, they did not prevent or indeed contribute to the late lodgement of the taxation return because she was otherwise ready to lodge, but for the missing bookkeeping data. I note her accountant in fact lodged the taxation return a short time after the deadline when that data became available.
5. It appears to me that while Ms GDQR faced a range of stressors during the year within which the taxation return ought to have been lodged, it is the non-completion of the essential bookwork by her business partner that was the only factor that prevented the taxation return from being lodged. The balance of the matters raised by Ms GDQR have not prevented the lodgement of the taxation return within the required timeframe, regardless of whether they are special.
6. I accept that the absence of the bookkeeping data from Ms GDQR's business partner did prevent the lodgement of the taxation return. As Ms GDQR says, it would not be appropriate for her to lodge a taxation return knowing it to be inaccurate and incomplete. However, as to whether the failure of a third-party business partner to complete necessary bookkeeping activities as part of a jointly operated business amounts to a special circumstance that prevented the lodgement of the taxation return within time, I have reflected on the authorities referred to by the Secretary.
7. In relation to Ms GDQR's dependence on third-party information for the completion of her taxation return, the Secretary contends that there were no substantial barriers preventing Ms GDQR from lodging her taxation return in circumstances where she ultimately did so 28 days after the expiry of the deadline. Ms GDQR's evidence indicating that she perceived her sister-in-law had different competing priorities as the root cause of her delay in getting the bookwork done supports the Secretary's contention. I am not satisfied that there were any substantial barriers preventing Ms GDQR's business partner from completing the bookkeeping tasks. Indeed, if the test was focussed on whether Ms GDQR's sister-in-law had special circumstances that prevented the lodgement of the taxation return, then it would manifestly not be satisfied.
8. The Secretary points to two authorities said to sustain a submission that reliance on the involvement of third parties and the consequential complexity of the taxation affairs is insufficient to amount to special circumstances[2].
9. In my view, the need and obligation to compile data about the operation of a business forms part of the normal obligations of any taxpayer who chooses to operate such an entity. The timeframe within which that data is to be compiled and form part of a lodged taxation return is reasonable, if not generous. I accept the Secretaries contention that Ms GDQR's reliance on the co-owner's provision of data to complete the taxation return does not meet the threshold required to enliven special circumstances. I consider that where the deadline was in place, was well understood and capable of being met, the intervention of the third party's competing priorities such that the deadline was missed is not a special circumstance, even insofar as it relates to Ms GDQR's capacity to lodge the taxation return. The consequences contemplated by the legislation for not lodging the taxation return within the required timeframe, harsh as they may appear to be, are to flow.
10. I am not satisfied that there are special circumstances that prevented Ms GDQR from lodging her taxation return within the required timeframe. It follows that the calculation methodology provided for in subsection 28(3) of the FA Administration Act, with no such further period for the lodgement of taxation returns allowed is correctly applied, with the consequence that the top-ups are not payable to Ms GDQR.

[1] Hooker and Secretary Department Social Services [2015] AATA 732 cited with approval in Secretary, Department of Social Service and Hollis [2015] AATA 941

[2] Berges and Secretary, Department of Social Services [2020] AATA 3507 and Henry and Secretary, Department of Social Services [2019] AATA 5453