TAXATION - Tribunal's jurisdiction to conduct review - interception of income tax return - family tax benefit debt - offsetting decision - identification of systemic issue - application dismissed as decision is not reviewable

Administrative Review Tribunal Act 2024 (Cth)

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

1. This application is concerned with whether the Tribunal has jurisdiction to review the decision made by the Commissioner of Taxation (Commissioner) to intercept Ms McNair's income tax return and the application of part of those funds to debts arising from the overpayment of family tax benefit.

1. On 22 August 2024 Ms McNair lodged her income tax return for the 2024 financial year.
2. On 6 August 2024 Services Australia - Centrelink (Centrelink) advised Ms McNair that the amounts of $4,553.63 and $107.10 were garnished from her income tax return to repay family tax benefit debts owed to the Commonwealth (Centrelink debts).
3. On 8 August 2024 the Commissioner issued a notice of assessment for the 2024 financial year, advising Ms McNair that there was a credit of $10,771.91 available and advised the amounts of $4,553.63 and $107.10 were garnished from her income tax return to repay the Centrelink debts (offsetting decision). After the repayment of these and other debts, Ms McNair received a refund of $860.28.
4. On 17 October 2024 a Centrelink authorised review officer determined that Centrelink did not have legal authority to undertake a formal review of the offsetting decision as it was a decision made by the Commissioner of Taxation.
5. On 25 November 2024 Ms McNair lodged an application for review with the Administrative Review Tribunal (Tribunal) in respect of the offsetting decision.
6. On 28 April 2025 the Tribunal dismissed the application, determining that the offsetting decision was not a reviewable decision at first review in the Social Services Jurisdictional Area[1] and so dismissed the application for review pursuant to section 97 of the Administrative Review Tribunal Act 2024 (ART Act).
7. On 24 February 2025 Ms McNair lodged an application for review with this Tribunal in the Taxation Jurisdictional Area.
8. On 14 and 28 May 2025 the Tribunal issued directions to the Commissioner, pursuant to section 79 of the ART Act requesting that it provide the following information:
   • The matter of 2024/7300 was concerned with the interception of the applicant's income tax return refund and offsetting this against a 2023 financial year family tax benefit debt raised in accordance with the A New Tax System (Family Assistance) (Administration) Act 1999.

Following application to this Tribunal the Commissioner advised that he had consulted with 'internal stakeholders' and reversed the offsetting of the income tax refund. That is, that income tax refund was refunded to the applicant.

1. The legislative or policy basis upon which the offsetting of the applicant's income tax refund in the matter of 2024/7300 was reversed;

1. The details of the 'internal stakeholders' that were consulted with in reaching this conclusion, including whether there is a formal process whereby members of the public can apply for a reversal of the offsetting of their income tax refund; and

1. Any other information, documents or submissions that will assist the Tribunal to understand the basis on which the offsetting in matter 2024/7300 was reversed.

1. On 2 June 2025[2] the Tribunal was advised that, pursuant to section 87 of the A New Tax System (Family Assistance) (Administration) Act 1999 (FA Act), the Commissioner had exercised his discretion not to apply income tax credits of $4,660.73 that was offset against Ms McNair's Centrelink debts. The Commissioner also advised that it required further time to consult with Services Australia in relation to issues arising under section 87 of the FA Act, including future public advice and guidance about the offsetting process. Further, the Commissioner understood that Ms McNair would be withdrawing her application and so requested that the interlocutory hearing set down for 4 June 2025 be vacated. The request to vacate was refused.
2. At the interlocutory hearing on 4 June 2025 the Tribunal invited submissions in respect of whether the application had identified a systemic issue of which the President of the Tribunal should be informed pursuant to paragraph 197(5)(f) of the ART Act.
3. On 11 June 2025 the Tribunal issued further directions in the following terms:

1. By 31 July 2025 the Commissioner of Taxation (the Commissioner) to file and serve further submissions addressing the following:

1.1. whether notices that advise a person when all or part of their income tax refund was applied by the Commissioner against a debt which is recoverable under section 82 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (FAA Act) contain advice that the Commissioner may waive all or part of the intercepted funds;

1.2. the publicly available information advising that all or part of an income tax refund intercepted by the Australian Taxation Office against a debt which is recoverable under section 82 of the FAA Act may be waived by the Commissioner;

1.3. whether, before exercising the discretion to intercept an income tax refund, the Commissioner considers whether or not there is a payment plan in place between the person and Services Australia, and (if relevant) whether the person is complying with that payment plan;

1.4. the avenues available to a person who is dissatisfied with, and seeks a review of, a decision made by the Commissioner, pursuant to section 87 of the FAA Act, to apply an income tax refund to a debt which is recoverable under section 82 of the FAA Act;

1.5. the powers available to the Commissioner to review a decision made to apply an income tax refund to a debt which is recoverable under section 82 of the FAA Act; and

1.6. whether there are any avenues of appeals from a decision of the Commissioner to not waive, or waive only part, of an intercepted income tax refund.

1. On 25 July 2025 the Commissioner sought permission to provide the Tribunal with additional information and submissions further to the 11 June 2025 directions. The request was granted by the Tribunal.
2. On 31 July 2025 the Tribunal received documents in compliance with the 11 June 2025 directions and additional submissions from the Commissioner.
3. On 6 August 2025 the Tribunal invited Ms McNair to provide a response to Commissioner's submissions by 14 August 2025. Ms McNair elected not to provide a response.
4. On 22 August 2025 Justice Kyrou, President of the Tribunal, wrote to the Commissioner advising that he had formed a preliminary view, pursuant to paragraphs 193(e), (i) and (l) of the ART Act that he should inform the Commissioner of a potential systemic issue.
5. On 2 September 2025 Ms McNair advised that she had received the refund of $4,660.73 and wished to proceed with the application to focus on ensuring that others "are not faced with the same difficulties".
6. A response was received from the Commissioner on 12 September 2025.
7. On 16 September 2025 the President of the Tribunal informed the Commissioner and the Administrative Review Council of a systemic issue in the following terms:

Financial hardship (which may sometimes be severe) is caused to recipients of family assistance benefits under the A New Tax System (Family Assistance) (Administration) Act 1999 by the Commissioner of Taxation (Commissioner) offsetting under section 87 of that Act income tax refunds due to those recipients against debts claimed from the recipients in respect of alleged overpayments of such benefits, in circumstances where:

(a) many of the recipients are vulnerable individuals, some of whom rely upon the expected income tax refund to meet basic life necessities;

(b) the offsetting process is automated, without any consideration being given to the circumstances of the recipient, including whether an approved repayment arrangement or repayment pause is in place between the recipient and Services Australia acting on behalf of the Secretary of the Department of Social Services (Secretary);

(c) the failure to take the recipient's circumstances into account may constitute a jurisdictional error which enlivens the power of the Commissioner to reverse the offset;

(d) the Commissioner's notice of assessment and statement of account which refer to the offset do not advise the recipient of any avenues of review if the recipient is aggrieved by the offset, including the Commissioner's power to reverse the offset referred to in (c); and

(e) both the Secretary and the Commissioner contend that the offsetting of an income tax refund does not give rise to a decision either of the Secretary or the Commissioner, which is reviewable by the Administrative Review Tribunal.

The President proposed that the Administrative Review Council inquire into and report on the systemic issue.

1. A further interlocutory hearing took place on 15 September 2025 via MS Teams audio. Ms McNair was in attendance and the Commissioner was represented by Ms Sekler of Counsel. The Commissioner urged that the application be dismissed on the basis that it is not a reviewable decision and so the Tribunal did not have jurisdiction to hear and determine the application.

1. Section 12 of the ART Act states that a decision is a 'reviewable decision' if an Act or legislative instrument provides for an application to be made to the Tribunal for review of the decision.
2. Section 97 of the ART Act states that the Tribunal must dismiss an application if the decision is not a 'reviewable decision'.
3. Section 111 of the FA Act provides that the Tribunal has power to review a decision provided that a 'decision reviewer' has affirmed, varied or set aside a decision under Subdivision B of Division 1 of the FA Act.
4. Subsection 111(1A) of the FA Act states that application may be made if the decision has been made by:

(a) the Secretary personally; or

(b) another agency head himself or herself in the exercise of a delegated power; or

(c) the Chief Executive Centrelink in the exercise of a delegated power; or

(d) the Chief Executive Medicare in the exercise of a delegated power.

1. Section 3 of the FA Act contains the following relevant definitions:

(a) the Department; or

(b) the Human Services Department

(a) in the case of the Department - the Secretary; or

(b) in the case of the Human Services Department - the Chief Executive Officer of Services Australia.

officer means an officer of an agency and includes:

(aa) if the agency is the Human Services Department

(i) the Chief Executive Centrelink; and

(ii) the Chief Executive Medicare; and

(b) an employee of the agency; and

(c) any other person engaged by the agency, under contract or otherwise, to exercise powers, or perform duties or functions, of the agency.

1. Section 82 of the FA Act provides for methods of recovery of debts by various means. Paragraph 82(1)(g) of the FA Act provides that a debt owed by a person is recoverable by the application of an income tax refund owed to the person.
2. Section 87 of the FA Act gives the Commissioner discretion to apply the whole or part of a person's income tax refund to recover a person's family tax benefit debt:

(1) If, under section 82, a debt owed by a person is recoverable by the Commonwealth by means of application of an income tax refund payable to the person the Commissioner of Taxation may apply the whole or a part of the refund to the debt.

(2) The amount of the refund and the amount of the debt are reduced accordingly.

1. There are no other provisions in the FA Act that specify and express considerations governing when or in what circumstances the Commissioner may exercise his discretion.
2. Subsection 95(2) of the FA Act provides the Secretary of Services Australia with a discretion to write off a section 82 debt if, amongst other reasons, the debtor has no capacity to repay the debt.
3. Subsection 95(4) of the FA Act states that a person does have capacity to repay a debt if it is recoverable by application of an income tax refund unless that recovery would place the person in 'severe financial hardship'.

1. I am satisfied that the Tribunal, sitting in the Taxation Jurisdiction, does not have jurisdiction to review the offsetting decision. This is for the same reasons as I determined that the Tribunal did not have jurisdiction to review the same offsetting decision at first review in the Social Security Jurisdiction, as set down in decision 2024/M192206 dated 28 April 2025.
2. The decision that Ms McNair seeks to have reviewed is the offsetting decision made pursuant to subsection 87(1) of the FA Act. Section 111 of the FA Act permits the Tribunal to conduct a merits review of a decision which were either subject to internal review under Subdivision B of Division 1 or made by certain persons.
3. The offsetting decision is not a decision subject to internal review under Subdivision B of Division 1 of the FA Act nor is the Commissioner a person who made a decision referred to in subsection 111(1A) of the FA Act. Therefore, the offsetting decision is not a 'reviewable decision' as required by section 12 of the ART Act.
4. It follows that the Tribunal does not have jurisdiction to review the offsetting decision. Accordingly, the application is dismissed pursuant to section 97 of the ART Act.
5. In reaching this conclusion I note that Ms McNair's purpose in continuing with this application has been achieved. Her actions have meant that there have been significant changes to the offsetting mechanism and appeal rights arising from such decisions have been clarified and published. Services Australia and the Commissioner acknowledge the issues raised in this application require urgent attention. Liaison between the two has taken place to address the issue. On 25 July 2025 information was published on the Australian Taxation Office website about how a person can apply for a refund following an offset decision in addition to outlining the avenues of appeal against an offset decision in relation to family tax benefit debts. The President has also issued a notice of a systemic issue that the Administrative Review Council will inquire into and report on.

[1] See Administrative Review Tribunal (Allocation of Business to Lists) Direction No.1 of 2024.