Andrea Bak v Commissioner of Taxation
[2008] AATA 630(Decision by: Senior Member Bernard J McCabe)
Andrea Bak
vCommissioner of Taxation
Member:
Senior Member Bernard J McCabe
Subject References:
SOCIAL SECURITY
Student Financial Supplement scheme
Supplement repayment
Whether Commissioner may delay or amend assessment to repay
Meaning 'serious hardship'
No serious hardship to applicant
Meaning 'special reasons'
No special reasons to delay repayment
Decision affirmed
Legislative References:
Social Security Act 1991 (Cth) - s 1061ZZFH; s 1061ZZFJ; s 1061ZZFK
Case References:
Re The Taxpayer and Commissioner of Taxation - [2004] AATA 1073; 2004 ATC 236
Decision date: 18 July 2008
Brisbane (Heard in Darwin)
Decision by:
Senior Member Bernard J McCabe
REASONS FOR DECISION
1. Mr Andrea Bak, the applicant, received assistance under the Student Financial Supplement scheme. Recipients of assistance are expected to repay their loans through the taxation system when their income reaches a certain point. Mr Bak now has a full-time position with the public service in Darwin. His income has reached a point where he would ordinarily be expected to make repayments. He has asked that the financial supplement payment be deferred. The Commissioner of Taxation has declined to agree to the deferment, and Mr Bak has asked the Tribunal to review the Commissioner's decision.
2. This case requires me to consider Mr Bak's circumstances, especially his financial circumstances, to determine if he meets the criteria for deferring the compulsory financial supplement repayment. Those criteria are set out in s 1061ZZFJ of the Social Security Act 1991. Section 1061ZZFJ(2) says the Commissioner of Taxation may delay making an assessment pursuant to s 1061ZZFH if the Commissioner considers:
- (a)
- were the assessment to be made, payment of the assessed amount would cause serious hardship to the person; or
- (b)
- there are other special reasons that make it fair and reasonable to delay the assessment.
3. Section 1061ZZFJ(3) says the Commissioner may defer making the assessment, and consequently defer collecting the money, for such period as he believes is appropriate in the circumstances. If the Commissioner is not persuaded to defer making the assessment, the assessment is made and a notice of assessment is issued pursuant to s 1061ZZFH.
4. The Commissioner also has the power to amend an assessment so that no amount is payable under the assessment: s 1061FFZK. The criteria are essentially the same as those referred to in s 1061ZZFJ(2).
5. I am not persuaded that the assessment for the year ended 30 June 2007 (the financial year in question) should be deferred or amended so that is reduced to zero. I set out my reasons below.
THE BACKGROUND FACTS
6. Mr Bak was born in Sudan. He moved to Australia some years ago. He says he has not seen members of his family in nearly 20 years as a result of the civil war going on in that country. He is an educated man. He worked as a liaison officer with the Queensland police for a period before taking up the offer of a permanent position with the public service in Darwin in 2007.
7. Now that he is earning a healthy income, the time has come for Mr Bak to commence repayment of the financial supplement loan. Mr Bak has sought to defer repayment of the financial supplement loan. The Commissioner says Mr Bak is required to repay $1497.21. That amount has not been repaid.
WOULD PAYMENT OF THE ASSESSED AMOUNT CAUSE " SERIOUS HARDSHIP "?
8. The expression "serious hardship" is not defined, but the meaning of the legislation is clear enough. A person suffers serious hardship as a result of making a payment if he or she is left destitute in the sense that he or she cannot thereafter afford to acquire necessities: see Re The Taxpayer and Commissioner of Taxation [2004] AATA 1073; 2004 ATC 234 at [12]-[14].
9. Mr Bak says he is experiencing financial hardship. He provided some receipts and estimates of his debts and income and other expenditure to the Tribunal at the hearing. The information he provided offered a confusing picture. The picture became all the more confusing when I learned he had provided different information and estimates to the Commissioner early in the process. Mr Bak appeared to be unsure as to how much he owed to various creditors. He was also unclear about the minimum monthly repayments he was required to make on his various loans. At my invitation, Mr Bak rang some of his creditors to seek up-to-date information. Mr Bak said he had other information that might be helpful, but he had not brought that information with him to the hearing.
10. I adjourned the proceedings to allow Mr Bak to obtain more accurate and helpful records. I asked him to provide the information to the respondent in advance of the resumed hearing in an effort to clarify the situation. Documents were provided, although Mr Bak told me at the resumed hearing that there might be others which he did not have the opportunity to obtain. He also said he was now of the view that he needed to see a lawyer. I declined to allow a further adjournment; I formed the view the applicant had been provided with ample opportunities to provide information in support of his case. I was also satisfied that he was able to represent himself, and that I was able to understand the case he was presenting.
11. Mr Bak's finances are a mess. He owes $14,659.75 on his credit cards and he has taken out personal loans on which he still owes $12,570. It is not clear where all of the money has gone. Although some of the debts were incurred paying for a computer he used in connection with this studies, Mr Bak does not appear to own any other assets. He produced letters of demand from various credit providers as evidence that he was experiencing hardship. He also has another tax debt in the amount of $3959.85. He added that he is experiencing dental problems that he cannot afford to fix.
12. I was provided with an estimate of the applicant's other expenses and his income. I will not set them out in detail. In summary, the most recent estimates suggest Mr Bak spends nearly $300 each fortnight more than he earns.
13. The Commissioner says Mr Bak can afford to repay the amount assessed in respect of the 2007 financial year and meet his other obligations by making savings and managing his affairs differently. Mr Bak pointed out during the hearing that he had already started making adjustments; for example, he has cut off his landline and relies on a mobile telephone.
14. Ms Van Hoeyen, on behalf of the Commissioner, went on to argue that if the applicant's financial position really was as bad as Mr Bak asserted and he was unable to make any savings or increase his income, then his position was already irretrievable. Offering a deferment in those circumstances would not serve any purpose, she argued. A deferment would simply allow Mr Bak to slide deeper into debt. That reduced the prospects of recovering anything when the inevitable day of reckoning arrived.
15. While the applicant's finances are a mess, it is not clear to me that his position is hopeless. Mr Bak needs help managing his finances. He does not seem to have a clear grasp of the details of his financial position, and he did not appear to have any sense of the need for devising a strategy for coping with his obligations. He preferred to blame others for his predicament. At the conclusion of the hearing, for example, he told the respondent's representative that she and the Commissioner would be responsible for anything that happened to him if he were required to repay the assessed amount. That is an unhelpful way of looking at the problem.
16. I am satisfied there is a reasonable prospect that Mr Bak could make savings, consolidate his debt and adjust his lifestyle in ways that permitted him to meet all of his obligations without incurring serious hardship - although I doubt he will achieve that goal unless he accepts responsibility for obtaining appropriate advice and assistance. There are various bodies (including charities) that offer advice and assistance to people in Mr Bak's position, and I was not provided with any evidence that suggested he could not obtain dental treatment in Darwin at an affordable rate. I do not think the taxpayer should be asked to wait or defer to other creditors in the circumstances.
ARE THERE OTHER " SPECIAL REASONS " THAT MAKE IT FAIR AND REASONABLE TO DELAY THE ASSESSMENT ?
17. The expression "special reasons" is undefined. It should be taken to include reasons that are unusual or which otherwise suggest the case is worthy of being treated differently to the ordinary run of cases.
18. Mr Bak has at various times referred to:
- •
- his need for a car in light of his transport needs;
- •
- the extraordinary cost incurred in relocating to Darwin;
- •
- his desire to visit his family in Sudan given his lengthy separation; and
- •
- his desire to marry.
19. I do not think any of these matters is unusual. I am not satisfied there are any circumstances that suggest the applicant ought to be treated any differently to other taxpayers who have incurred a liability and who face straitened financial circumstances.
CONCLUSION
20. The decision under review is affirmed. Mr Bak is required to make the repayments. Although it is ultimately a matter for him, I recommend that he seek counselling as to how he should manage his affairs in order to accommodate all of his obligations.
I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe
Signed:..............................[Sgd]................................................
Michael Buckingham, Associate
Dates of Hearing 21 May and 10 July 2008
Date of Decision 18 July 2008
Applicant was self-represented
Advocate for the Respondent Ms R Van Hoeyen, Australian Taxation Office