FEDERAL COURT OF AUSTRALIA

Chaplin v Secretary, Department of Social Services [2025] FCAFC 89

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The respondent pay the applicant’s costs as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THAWLEY AND HESPE JJ:

OVERVIEW

1    The issues in this appeal from a decision of the Administrative Appeals Tribunal arise in relation to an issue of historic importance to some recipients of Youth Allowance paid under the Social Security Act 1991 (Cth) and administered in accordance with the Social Security (Administration) Act 1999 (Cth): Re Secretary, Department of Social Services and FTXB [2024] AATA 3021 at [190] (hereafter “T”). The relevant receipts of Youth Allowance for this appeal occurred in 2014 and 2015. The Act and the Administration Act have since been amended in material respects. Unless the contrary is stated, these reasons speak to the legislative regime:

(a)    in 2014 and 2015, at the time of the relevant receipts of Youth Allowance (relevant period);

(b)    in October 2019, when the Secretary of the then Department of Human Services, or her delegate, made decisions which affected the appellant (Mr Chaplin); and

(c)    in 2023, when Mr Chaplin sought review in the Tribunal.

2    During the relevant period, a person’s entitlement to Youth Allowance (generally ascertained and paid on a fortnightly basis) was determined by various matters including by applying an “income reduction” to reduce the rate of Youth Allowance by reference to the person’s income. The relevant “Method statement” for calculating the income reduction (Step 1 in Point H1) required the Secretary to “[w]ork out the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in points 1067G-H2 to 1067G-H25)”. Point H23 required ordinary income “to be taken into account in the fortnight in which it is first earned, derived or received”. It is the operation of these provisions, and the phrase “first earned, derived or received” in particular, which is central to an understanding of the issues dividing the parties.

3    Mr Chaplin was a recipient of fortnightly Youth Allowance payments from 10 July 2014 to 24 June 2015. Over that period Mr Chaplin consistently under-reported his income and thereby received more in Youth Allowance payments than that to which he was entitled. It was not suggested before the Tribunal that Mr Chaplin under-reported income with the intention of securing payments to which he was not entitled.

4    In April 2019, the Department received information from the Australian Taxation Office (ATO) showing that Mr Chaplin had under-reported his income: T[3].

5    Section 1223(1) and (9) of the Act provided that, if a person receives the benefit of a “social security payment” and was not entitled to obtain that benefit, the amount of the payment (or the relevant part thereof) is a debt due to the Commonwealth, taken to arise when the person obtains the benefit of the payment. Ascertaining the existence of a debt therefore involves ascertaining a person’s entitlement. The next step involves calculating whether the person has received more than that to which the person was entitled.

6    Having been informed that Mr Chaplin had under-reported his income, and having made further inquiries of Mr Chaplin, the Department set about determining how much Mr Chaplin had been overpaid by reassessing Mr Chaplin’s entitlement by reference to his actual income, rather than the lower amounts that he had reported. Having determined the amount that it considered to have been overpaid, the Department issued a demand for repayment.

7    As mentioned, the Department needed to reach a view about (the rate of) Mr Chaplin’s entitlement to Youth Allowance at the relevant time. The material before the Department established the income which Mr Chaplin had in fact received. It also established that Mr Chaplin earned or derived that income before it was received. However, for certain amounts of income received (the income in dispute), the evidence was insufficient to reach a conclusion about whether the income was earned and received in the same Youth Allowance fortnight or was earned in the Youth Allowance fortnight immediately before that income was received. This gives rise to the issues which divide the parties.

8    The final point in the merits review history of the proceedings was the decision of the Administrative Appeals Tribunal. The Tribunal concluded that a debt was owed in the same amount as had been contended by the Secretary during the hearing – $806.16 – albeit its reasoning to that conclusion was different to that employed by the Secretary: at T[186]. The Tribunal set aside the decision under review and substituted a decision that “a debt in the amount of $806.16 is due to the Commonwealth by” Mr Chaplin: at T[190].

9    The Tribunal concluded that Mr Chaplin “first earned, derived or received” his income (including the income in dispute) at the end of the working week on Sundays when (according to the Tribunal) he became “legally entitled” to the relevant wages, rather than on the days the work was performed or the following Thursday, when Mr Chaplin was paid: at T[183].

10    Both parties submitted, and for the reasons given below it is accepted, that the Tribunal erred in this respect.

11    In summary, and with some simplification, the positions of the parties before this Court were as follows:

(a)    Mr Chaplin contended that the income in dispute should be ignored altogether in determining his entitlement, because it is not known whether that income was earned and received in the same Youth Allowance fortnight or was earned in the Youth Allowance fortnight immediately before that income was received. This results in Mr Chaplin being entitled to a higher amount of Youth Allowance and a lower debt, than found by the Tribunal and contended for by the Secretary.

(b)    The Secretary contended that all of Mr Chaplin’s income must be taken into account in ascertaining the income reduction. It is known when most of the income was earned and that income is to be taken into account in the fortnight it was earned. Where the fortnight in which the income was earned cannot be ascertained, the income in dispute should be taken into account in the fortnight of receipt, because the fortnight in which it was earned is either that fortnight or the one immediately before. The Secretary contended that the debt totals $806.16.

12    On 24 September 2024, Mr Chaplin appealed to this Court, in its original jurisdiction, on a question of law pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). This Court has the same powers in relation to the appeal, after repeal of the AAT Act, as it had under s 44 of that Act: Administrative Review Tribunal (Consequential and Transitional Provisions No 1) Act 2024 (Cth), Sch 16 Item 25.

13    Mr Chaplin identified one question of law in the following terms:

On the proper construction of Point H23 in s 1067G of the Social Security Act 1991 (Point H23), where (as the Tribunal found) a person’s “ordinary income” is to be taken into account only in that fortnight in which the income was “first earned, derived or received”:

a.    and where a person earns ordinary income from income-producing activities, is that income “earned” at the time they become legally entitled to that income, as opposed to the time they have a legally enforceable right to receive payment of that income?

b.    does a casual employee paid at an hourly rate pursuant to an unwritten contract of employment “earn” ordinary income upon the completion of each hour of service by the employee?

14    For the reasons which follow:

(a)    The relevant original decision under review included:

(i)    ascertaining (the rate of) Mr Chaplin’s Youth Allowance entitlement under the Act and Administration Act;

(ii)    calculating how much Mr Chaplin had been overpaid by subtracting the amounts of his entitlement from the amounts he had been paid; and

(iii)    deciding whether, as a first step in a process of recovery, the Department should demand repayment.

(b)    These were the questions for each later merits review decision-maker, including the Tribunal, remaking the original decision-maker’s decision on the available material. Given Mr Chaplin had under-reported his income for the whole period he was receiving Youth Allowance payments, each decision-maker had to begin by asking itself whether it was satisfied that Mr Chaplin was entitled to the (whole of the) Youth Allowance payments he had received.

(c)    No decision-maker acting reasonably could have been satisfied that Mr Chaplin was entitled to the whole of the payments he had received based on the information available to the decision-maker, because it was known that Mr Chaplin had under-reported his income for the whole period he had been receiving Youth Allowance payments.

(d)    The extent of Mr Chaplin’s entitlement had to be ascertained taking into account the “income reduction” provided for in Module H. On the preferable construction of the Act, the income in dispute was to be taken into account under Step 1 of Point H1 in the fortnight it was received in calculating Mr Chaplin’s “income reduction”, because the available information did not enable a conclusion to be reached that the income in dispute was earned or derived in a preceding fortnight and therefore, on the available information, Point H23 was not capable of application to the income in dispute.

(e)    Although the Tribunal erred in reasoning to its conclusion about (the rate of) Mr Chaplin’s entitlement to Youth Allowance, the decision it reached was correct in that no other decision was reasonably open on the preferable construction of the Act and the available material.

(f)    The Tribunal did not err in concluding that repayment of the amount overpaid, being the amount paid above his entitlement, should be demanded as a debt due to the Commonwealth under s 1223(1) of the Act.

15    Kennett J has approached the issues by reference to what a court might be expected to do in debt recovery proceedings on the basis that the decision was one to “raise a debt”. We do not consider that the decision under review can be characterised simply or solely as a decision to “raise a debt”. Unlike the approach of Kennett J, we do not consider that the principal issues raised in this appeal are to be resolved by examining what a court might be expected to do in debt recovery proceedings should, at some future time, a decision be made to commence such proceedings.

16    For the reasons given below, the Tribunal erred in law in concluding that all of Mr Chaplin’s income was earned on Sundays when, according to the Tribunal, a legal entitlement to the week’s income first arose. It thereby misdirected itself and reached a conclusion which was not open on the facts. The Tribunal did not expressly approach the decision under review as one involving a decision about (or an ascertaining of) Mr Chaplin’s entitlement, although that was an essential step in deciding whether a debt arose by operation of the statute and whether to demand repayment. In ascertaining Mr Chaplin’s entitlement, the Tribunal had to (but did not) consider whether the income in dispute was to be taken into account in Step 1 of the Method statement in Point H1 when it was received, given it was not known whether it was earned in the Youth Allowance fortnight of receipt or the fortnight before. It follows that the Tribunal erred on questions of law.

17    It is convenient to begin with an understanding of the legislative regime and the facts, before identifying the decision under review and the preferable construction of the Act.

LEGISLATIVE REGIME

18    The Act and the Administration Act are now materially different from how they stood during the relevant period, some ten years ago. The issues in this case no longer arise because, broadly speaking, the Act now contains provisions which, where appropriate, apportion over relevant days income received. This case is concerned with the allocation of income to a particular fortnight in circumstances where the Act did not provide for apportioning income.

Overview of the legislative scheme

19    The Act and the Administration Act formed part of an integrated “social security law” – see: ss 3(3) and 4 of the Administration Act, which have since been repealed. The statutory scheme provided for social security benefits, pensions and allowances. The Act included criteria to qualify for a benefit and contained provisions for determining the rate of eligibility to a benefit. Reductions to the rate of entitlement were often made to reflect a person’s income or means (including assets).

20    Section 7 of the Administration Act conferred the “general administration of the social security law” on the Secretary.

21    Section 8 of the Administration Act set out “principles of administration” that the Secretary was to have regard to in administering the social security law. It included the following, with the parties emphasising ss 8(a)(iii) and (v):

8    Principles of administration

In administering the social security law, the Secretary is to have regard to:

(a)    the desirability of achieving the following results:

(i)    the ready availability to members of the public of advice and information services relating to income support generally and to the social security payments that are available;

(ii)    the ready availability of publications containing clear statements about income support entitlements and procedural requirements;

(iii)    the delivery of services under the law in a fair, courteous, prompt and cost‑efficient manner;

(iv)    the development of a process of monitoring and evaluating delivery of programs with an emphasis on the impact of programs on social security recipients;

(v)    the establishment of procedures to ensure that abuses of the social security system are minimised; and …

The Youth Allowance

22    Chapter 2 of the Act provided for various pensions, benefits and allowances. Within Ch 2, Pt 2.11 provided for Youth Allowance. The Youth Allowance was first introduced into the Act on 1 July 1998 by the Social Security Legislation Amendment (Youth Allowance) Act 1998 (Cth). Part 2.11 comprised several Divisions. Division 1 provided for the qualifications for Youth Allowance. Division 5 provided for the rate at which Youth Allowance was to be payable.

23    It was not in dispute that Mr Chaplin qualified for Youth Allowance at the times at which he received it, by satisfying Div 1 of Pt 2.11. What was in dispute was the rate at which Mr Chaplin was entitled to be paid.

24    Section 556 (in Div 5 of Pt 2.11) provided that the rate of Youth Allowance was worked out in accordance with s 1067G (in Ch 3):

556    How to work out a person’s youth allowance rate

Subject to this section, the rate of a person’s youth allowance is to be worked out in accordance with the Youth Allowance Rate Calculator in section 1067G.

25    Chapter 3 of the Act – titled “General provisions relating to payability and rates” – began with a number of parts that contain “Rate Calculators” for the various benefits established by the Act. The relevant Rate Calculator for Youth Allowance was contained in “Part 3.5—Youth Allowance Rate Calculator”.

26    Part 3.10 was titled “General provisions relating to the ordinary income test”. The “ordinary income test” was an aspect of the Rate Calculator for Youth Allowance and was relevant to other Rate Calculators in Ch 3.

27    Section 1067G(1) (in Pt 3.5) provided that the rate of Youth Allowance was to be calculated in accordance with a Rate Calculator contained in the section:

1067G    Rate of youth allowance

Youth allowance rate calculator

(1)    The rate of youth allowance of a person referred to in section 556 is to be calculated in accordance with the Rate Calculator in this section.

28    The Rate Calculator contained in the section was comprised of various “Modules” – see: s 39(3). Module A was entitled (and provided for) the “Overall rate calculation process”. Point 1067G-A1 of Module A specified that the rate of Youth Allowance was a daily rate, calculated by dividing by 14 a fortnightly rate determined by applying the Rate Calculator (comprising further relevant Modules).

29    Point 1067G-A1 contained a “Method statement” for calculating the fortnightly rate. Step 1 in the Method statement was the identification of a “maximum basic rate using Module B”. This could then be increased by reference to supplements and allowances (Steps 1A, 2, 2A and 3, which use Modules BA, C, D and s 1070A(a)) to determine a “maximum payment rate” (Step 4).

30    The “maximum payment rate” was then decreased by reference to income and means tests to arrive at the “rate of allowance” (Step 14) that was to be paid. The exact mechanics of this are not of particular importance for present purposes. The income test in Step 12 of the Module A Method statement is important.

31    Module A includes:

Youth Allowance Rate Calculator

Module A—Overall rate calculation process

Method of calculating rate

1067G‑A1    The rate of allowance is a daily rate. That rate is worked out by dividing the fortnightly rate calculated according to this Rate Calculator by 14.

32    As mentioned, the step of central importance for present purposes is Step 12, which required application of the income test contained in Module H “to work out a person’s income reduction”.

33    Module H relevantly provided:

Module H—Income test

Effect of ordinary income on maximum payment rate

1067G-H1    This is how to work out the effect of a person’s ordinary income, and the ordinary income of a partner of the person, on the person’s maximum payment rate:

Note 1:    For ordinary income see subsection 8(1).

Note 2:    The application of the income test is affected by provisions concerning:

(a)    the general concept of ordinary income (sections 1072 and 1073);

(b)    business income (sections 1074 and 1075);

(c)    deemed income from financial assets (sections 1076 to 1084A);

(d)    income streams (sections 1095 to 1099DAA);

(e)    disposal of income (sections 1106 to 1112);

34    Step 1 of the Method statement in Point 1067G-H1 required the working out of “the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in points 1067G-H2 to 1067G-H25)” as the starting point for working out “the effect of the person’s ordinary income … on the person’s maximum payment rate” under Point 1067G-H1.

35    It is Point H23 which is central to the issues dividing the parties. It provided:

Ordinary income generally taken into account when first earned, derived or received

1067G-H23    Subject to points 1067G-H23A, 1067[G]-H23B, 1067G-H24 and 1067G-H25 and section 1073, ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received.

36    Points 1067G-H23A, 1067G-H23B, 1067G-H24 and 1067G-H25 do not apply to Mr Chaplin.

37    In summary, Point H1 governed “how to work out the effect of a person’s ordinary income … on the person’s maximum payment rate”. In Point H1, Step 1 of the Method statement required one to start by working out “the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in points 1067G-H2 to 1067G-H25)”. Point H23 identified when (ie the fortnight in which) ordinary income was to be taken into account.

38    Each of Point H1, Step 1 in the Method statement in Point H1 and Point H23 refer to “ordinary income”. Point H23 contains the phrase “earned, derived or received”. There were definitions of those terms in s 8(1) of the Act, which was titled “Income test definitions” (italics in original). The phrase “income test” was used in various places in the Act, including in the heading to Module H. Section 8(1) was expressed to apply to the whole Act unless the contrary intention appeared.

39    The word “income” was defined in s 8(1), in relation to a person, to mean “an income amount earned, derived or received by the person for the person’s own use or benefit”; or “a periodical payment”, subject to the operation of certain exclusions:

income, in relation to a person, means:

(a)    an income amount earned, derived or received by the person for the person’s own use or benefit; or

(b)    a periodical payment by way of gift or allowance; or

(c)    a periodical benefit by way of gift or allowance;

but does not include an amount that is excluded under subsection (4), (5) or (8).

Note 1:    See also sections 1074 and 1075 (business income), sections 1076‑1084 (deemed income from financial assets), sections 1095 to 1099DAA (income from income streams), section 1099F (exempt bond amount does not count as income) and section 1099K (refunded amount does not count as income).

Note 2:    where a person or a person’s partner has disposed of income, the person’s income may be taken to include the amount which has been disposed of—see sections 1106‑1112.

Note 3:    income is equivalent to ordinary income plus maintenance income.

40    The phrase “income amount” was defined as follows:

(a)     valuable consideration; or

(b)     personal earnings; or

(c)     moneys; or

(d)     profits;

(whether of a capital nature or not).

41    The phrase “ordinary income” was defined to mean “income that is not maintenance income or an exempt lump sum”.

42    The present context is “quite different” to the context of the Income Tax Assessment Act 1936 (Cth) and Income Tax Assessment Act 1997 (Cth) – see: Read v Commonwealth [1988] HCA 26; 167 CLR 57 at 69 (Brennan J). This is made clear, for example, by the fact that an “income amount” included an amount which was capital in nature.

43    Section 8(1) provided a definition of “employment income” as follows:

employment income, in relation to a person, means ordinary income of the person that comprises employment income under subsection (1A) and includes ordinary income that is characterised as employment income of the person because of the operation of subsection (1B).

44    Subsection 8(1A) provided that a reference to employment income was a reference to ordinary income that was (or was taken to be) earned, derived or received from remunerative work undertaken as an employee:

(1A)    A reference in this Act to employment income, in relation to a person, is a reference to ordinary income of the person:

(a)    that is earned, derived or received, or that is taken to have been earned, derived or received, by the person from remunerative work undertaken by the person as an employee in an employer/employee relationship; and

(b)    that includes, but is not limited to:

(i)    salary, wages, commissions and employment‑related fringe benefits that are so earned, derived or received or taken to have been so earned, derived or received; and

(ii)    if the person is engaged on a continuing basis in that employer/employee relationship—a leave payment to the person;

but does not include:

(c)    a superannuation payment to the person; or

(d)    a payment of compensation, or a payment to the person under an insurance scheme, in relation to the person’s inability to earn, derive or receive income from that remunerative work; or

(e)    if the person is not engaged on a continuing basis in that employer/employee relationship—a leave payment to the person; or

(f)    a payment to the person by a former employer of the person in relation to the termination of the person’s employment; or

(g)    a comparable foreign payment.

45    Subsection 8(1B) specified the way in which ordinary and employment income was to be characterised if a person was in a couple:

(1B)    For the avoidance of doubt, if:

(a)    a person is treated, for the purposes of working out the person’s ordinary income, as having earned, derived or received any ordinary income that was in fact earned, derived or received, or taken to have been earned, derived or received, by the partner of the person; and

(b)    that ordinary income would be characterised as employment income in the hands of the partner if the partner were not a member of a couple;

then, for the purposes of this Act, that ordinary income is to be similarly characterised in the hands of the person.

46    Subsection 8(2) addressed income “earned, derived or received” by specifying that it referred to income earned, derived or received “by any means” and “from any source (whether within or outside Australia)”:

Earned, derived or received

(2)    A reference in this Act to an income amount earned, derived or received is a reference to:

(a)    an income amount earned, derived or received by any means; and

(b)    an income amount earned, derived or received from any source (whether within or outside Australia).

47    As mentioned earlier, the application of the income test in Module H of the Youth Allowance calculator was affected by “Part 3.10 – General provisions relating to the ordinary income test”. Within Part 3.10, “Division 1 – Ordinary income concept” contained two sections: ss 1072 and 1073. Section 1072 provided:

Part 3.10—General provisions relating to the ordinary income test

Division 1—Ordinary income concept

1072    General meaning of ordinary income

A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.

Note 1:    For ordinary income see subsection 8(1).

Note 2:    For other provisions affecting the amount of a person’s ordinary income see section 1073AA (work bonus), sections 1074 and 1075 (business income), sections 1076 to 1084 (deemed income from financial assets) and sections 1095 to 1099DAA (income from income streams).

48    Section 1073 provided for certain amounts to be taken to be received over a 12-month period and is not relevant to Mr Chaplin.

Overpayment and debt recovery

49    Chapter 5 of the Act is titled “Overpayments and debt recovery”. Section 1222 – the only section in Pt 5.1 – “provides the methods for recovery by the Commonwealth of … debts owed to the Commonwealth under Part 5.2” and a series of other provisions. Part 5.2 was titled “Amounts recoverable under this Act” and included s 1223. Section 1223 provided that a debt arose if a person was paid a benefit to which they were not entitled. The amount of that debt was the amount of the overpayment. Section 1223(1) provided:

1223    Debts arising from lack of qualification, overpayment etc.

(1)    Subject to this section, if:

(a)    a social security payment is made; and

(b)    a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.

50    Some of the circumstances in which a person will not be entitled to the benefit of a payment are identified in s 1223(1AB), which included:

(1AB)    Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:

…

(c)    the payment was not payable;

(d)    the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation;

51    Section 1223(9) made clear that the reference to a “social security payment” included part of a payment:

(9)    In this section, unless the contrary intention appears, a reference to a social security payment includes a reference to a part of a social security payment.

52    It follows that, if a social security payment has been made, and a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit, then the amount of the payment is a debt due to the Commonwealth, taken to arise when the person obtains the benefit.

53    Although administrative processes are undertaken to recognise the existence of a debt and to recover it, the debt arises by operation of the social security law, not by reason of any decision of the Secretary – see: Secretary, Department of Social Security v Alvaro [1994] FCA 320; 50 FCR 213 at 218C–E (von Doussa J, Spender and French JJ agreeing); Director General of Social Services v Hangan [1982] FCA 292; 45 ALR 23 at 26 (Fox J), 31 (Toohey J) and 45 (Fitzgerald J); Director General of Social Services v Hales [1983] FCA 81; 47 ALR 281; 78 FLR 373 at 398 (Lockhart J).

Other relevant aspects of the Administration Act

Making, determining and paying claims

54    Section 11 of the Administration Act specified that social security claims must be made in accordance with certain provisions, including s 16, which provided for the making of claims in forms approved by the Secretary.

55    Other provisions applied to the determination of claims by the Secretary. Section 36 of the Administration Act required the Secretary to determine all claims in accordance with the law by either granting or rejecting the claim. Subsection 37(1) provided that a claim is to be granted if the Secretary is satisfied that a claimant is qualified or expected to be qualified for the relevant entitlement.

56    Section 41 provided that a person’s entitlement begins from the “start date”, which is required under s 42 to be worked out under Sch 2. Ordinarily (as in this particular case), cl 3 of Sch 2 applied such that the start day was the day on which the person made the claim.

57    Section 43 provided that social security was required to be paid in arrears by instalments that related to periods determined by the Secretary of no more than 14 days, which were described statutorily as “instalment periods”. Mr Chaplin’s instalment period was a period of 14 days, consistently with what is understood to be the typical case.

Provision of information by social security recipients

58    Part 3 governs the provision of benefits. Division 6 specified requirements to provide information to the Secretary.

59    Section 66A created an obligation on recipients of social security payments to inform the Secretary of changes in circumstances potentially relevant to their eligibility to receive social security payments.

60    Sections 67 and 68 reposed in the Secretary the power to issue notices to persons receiving or applying to receive a social security payment requiring them to inform the Department of certain circumstances if they occur or appear likely to occur. Those circumstances included any “matter that might affect the payment to the person of the social security payment”. Section 68(2) provides:

(2)    The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:

(a)    inform the Department if:

(i)    a specified event or change of circumstances occurs; or

(ii)    the person becomes aware that a specified event or change of circumstances is likely to occur;

(b)    give the Department one or more statements about a matter that might affect the payment to the person of the social security payment;

(c)    give the Department one or more statements about a matter that might affect the operation, or prospective operation, of Part 3B in relation to the person.

61    These reporting obligations interact with provisions that trigger automatic rate reductions, including ss 99 and 100 of the Administration Act.

Automatic rate reductions

62    Automatic cancellations and variations to social security payments are provided for in Div 8. Relevantly, s 100(1) provides:

(1)     Subject to subsection (2), if:

(a)     a person who is receiving a social security payment is given a notice under subsection 68(2); and

(b)    the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period); and

(c)     the event or change of circumstances occurs; and

(d)     the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and

(e)    because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;

the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.

Information gathering

63    The Administration Act also confers broad powers on the Secretary for the gathering of information relevant to the eligibility of persons to receive social security payments.

64    Sections 192, 195 and 196 empower the Secretary to require persons to give information and produce documents relevant to the entitlement of a person claiming a security payment:

192    General power to obtain information

The Secretary may require a person to give information, or produce a document, to the Department if the Secretary considers that the information or document may be relevant to one or more of the following:

(a)    the question whether a person who has made a claim for a social security payment is or was qualified for a social security payment;

(aa)    the question whether a person is or was qualified for a social security payment for which a claim is not required;

(b)    the question whether a social security payment is payable to a person who is receiving the payment;

(c)    the question whether a social security payment was payable to a person who has received the payment;

(d)    the rate of social security payment that is or was applicable to a person;

…

195    Obtaining information to verify claims etc.

(1)    The Secretary may require a person to give information about a class of persons to the Department for any or all of the following purposes:

(a)    to detect cases in which amounts of social security payment under the social security law have been paid when they should not have been paid;

(b)    to detect cases in which concession cards have been granted to persons to whom they should not have been granted;

…

196    Written notice of requirement

(1)    A requirement under this Division must be made by written notice given to the person of whom the requirement is made.

…

(4)    The notice may require the person to give the information by appearing before a specified officer to answer questions.

Review of decisions

65    Part 4 of the Administration Act provided for the review of decisions made under the social security law. As at 2 October 2019, internal review by the Secretary was provided for in s 126. The Secretary had power to review “a decision of an officer under the social security law, irrespective of whether or not a person had applied for review of the decision and irrespective of whether an application had been made to the Tribunal”: s 126(2).

66    A person affected by a decision of an officer under the social security law could apply to the Secretary for review of the decision: s 129. Section 129(5) provided:

A reference in this section to a decision of an officer under the social security law includes a reference to a determination that the Secretary is taken, by virtue of a provision of the social security law, to have made.

67    Part 4A of the Administration Act provided for review by the Tribunal. There were two levels of review. First review, in Div 2, involved a review by the Tribunal of a decision of an officer under the social security law: s 140 of the Administration Act. Section 140(2) provided:

A reference in this section to a decision of an officer under the social security law includes a reference to a determination that the Secretary is taken, by virtue of a provision of the social security law, to have made.

68    First review also applied to a decision of the Secretary on internal review under, relevantly, s 126: s 142. If, on first review, the Tribunal set aside a decision and substituted for it a decision that a person was entitled to a social security payment, the Tribunal was required to assess the rate at which the social security payment was to be paid or ask the Secretary or Chief Executive of Centrelink: s 177.

69    Second Review, in Div 3, provided for review of the decision of the Tribunal on first review.

FACTUAL BACKGROUND

Mr Chaplin’s Youth Allowance

70    Mr Chaplin was employed casually at a Ritchie’s IGA grocery store: T[2]. He would ordinarily work on Mondays, Wednesdays and Fridays and often on Sunday mornings, but his hours varied and he did not keep records of the hours or days he worked: T[40]. Mr Chaplin was paid weekly each Thursday for the hours worked on Monday to Sunday of the previous week: T[41]. Mr Chaplin’s employer provided him payslips that recorded his gross and net pay; the number of hours he worked; and the rate of pay, which varied for weekend loadings and other allowances: T[41]. The payslips did not record the days of the week on which hours were worked.

71    By letter dated 1 August 2014, Mr Chaplin was notified that the Department had decided that he would be paid Youth Allowance from 10 July 2014, the date of Mr Chaplin’s application: Part C, page 52. The Secretary determined Mr Chaplin’s Youth Allowance be paid by instalments by reference to fortnightly periods – s 43(1)(b) of the Administration Act. These did not align with Mr Chaplin’s pay weeks. The payments were to be made in arrears – see s 43(1)(a) of the Administration Act. The letter informed Mr Chaplin that the amount he would be paid might vary depending on changes in his circumstances, such as changes to his income, and that he was required to notify the Department of those changes. On the second page of the letter, information was provided to Mr Chaplin under headings “What you must tell us” and “What is income”.

72    Also on 1 August 2014, the Department sent Mr Chaplin a “Reporting Statement” which was expressed to be an “information notice given under social security law”: Part C, page 50; s 68(2) of the Administration Act. It included (emphasis in original):

This Reporting Statement is an information notice given under social security law. You have an obligation to provide us with all the information that is relevant to your payment. Giving false or misleading information is a serious offence. Information provided by you may be checked under our data matching programs.

You must report every 2 weeks for each Reporting Period on the dates below. Once your reporting requirements have been met, your payment will be issued for each Reporting Period.

What you must report for each Centrelink Reporting Period

•    If any circumstances have changed (see the list on the back of this page for details)

•    If you were employed:

•    The business where you worked.

•    The amount you earned for work done in the Centrelink Reporting Period that relates to the day you need to report. The amount reported must be the amount earned before tax and other deductions such as salary sacrifice. You must report even if you have not received some or all of the pay yet.

•    To qualify for payments as a student you must undertake a full-time study load or be granted a special workload concession (see the back of this page for the full-time study load requirement).

73    On the next page of the notice, Mr Chaplin was told, amongst other things, that:

(a)    if he did not tell the Department about changes, he could have a debt;

(b)    he was required to tell the Department if his “income from employment changes (the amount earned goes up or down)”; and

(c)    income “has a very broad meaning” and “includes, but is not limited to, earnings from employment”.

74    Reporting Statements in similar terms were sent to Mr Chaplin on 7 August 2014 and 18 February 2015: Part C, pages 57 and 75. Between 1 August 2014 and 24 June 2015, Mr Chaplin received fortnightly Youth Allowance payments totalling $2,804.02: T[1], [39].

75    Although Mr Chaplin had been told to report the total of what he had earned before tax and other deductions, Mr Chaplin consistently and erroneously reported his after-tax net income. It was not suggested before the Tribunal that he did so with any intention to receive something to which he was not entitled.

Secretary receives further information about earnings

76    As mentioned, in April 2019, the Secretary received information from the ATO which showed that Mr Chaplin’s gross income between 10 July 2014 and 24 June 2015 was higher than the income he had reported to the Department: T[3].

77    On 9 April 2019, the Department wrote to Mr Chaplin informing him about the discrepancy between the information he had provided and the information the ATO had provided about his income: Part C, page 86. The Department sought “past income information” from Mr Chaplin, within 28 days.

78    Mr Chaplin attempted to obtain copies of his timesheets but was informed by his employer that it no longer held records showing the dates on which he worked: T[47]. On 11 June 2019 Mr Chaplin provided payroll records to the Department which disclosed his total hours worked, but did not record the dates he worked.

79    On receipt of the information from the ATO and pursuant to her obligation to administer the social security law, the Secretary was required to ascertain whether Mr Chaplin was entitled to the Youth Allowance he had received. There was no question that Mr Chaplin qualified for Youth Allowance in accordance with Pt 2.11 of the Act. The issue was what rate of allowance should have been paid in accordance with the Youth Allowance Rate Calculator in s 1067G in Pt 3.5 of the Act – see: s 556 of the Act.

80    One of the components which had to be determined to accomplish this task was to work out Mr Chaplin’s “income reduction” (Step 12), namely how much his “maximum payment rate” (Step 4) should be reduced on account of his income – see: Steps 4 and 12 of the Method statement in Point 1067G-A1. Relevant to Mr Chaplin’s “income reduction”:

(a)    Step 12 of the Method statement required the Secretary to “[a]pply the income test using Module H below to work out the person’s income reduction”.

(b)    Step 1 of the Method statement in Point H1 required the Secretary to “[w]ork out the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in … [Point H23] …)”.

(c)    Point H23 provided that “ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received”: Point H23.

81    There was no dispute about when Mr Chaplin received income and the amounts so received. However:

(a)    In respect of some income amounts received, the evidence was sufficient to establish the fortnightly instalment period in which that received amount was first earned or derived.

(b)    In respect of other income amounts (referred to earlier as the “income in dispute”), although it was known when it was received, the evidence was insufficient to reach a conclusion about whether it was earned in the Youth Allowance fortnight in which it was received or was earned in the immediately preceding fortnight.

82    By way of further explanation:

(a)    In weeks where all the days on which Mr Chaplin worked fell entirely within a fortnightly Youth Allowance instalment period, the evidence was sufficient to establish that Mr Chaplin first “earned” the relevant income amount during that instalment period. Accordingly, the income was taken into account in the Secretary’s calculations for the Youth Allowance instalment period in which the income was earned.

(b)    In payroll weeks that spanned two fortnightly Youth Allowance instalment periods, the Secretary was of the view that there was insufficient evidence upon which the Secretary could identify the days that Mr Chaplin had worked and therefore the Youth Allowance instalment period in which that income was earned. In respect of these payroll weeks, the evidence was sufficient to establish the dates on which the income was received. The payroll information revealed that Mr Chaplin’s earnings for hours worked during a week were totalled at the end of each Sunday and the employer’s usual practice was to pay the total amount so earned on the following Thursday. Accordingly, the Secretary’s calculations recognised the income for those payroll weeks that spanned two Youth Allowance instalment periods on the date the income was received, except for limited exceptions where information concerning loadings and allowances enabled the Secretary to work out the date on which the work was performed and therefore the income earned or derived.

The written record of decisions

83    The Department sent Mr Chaplin an “Account Payable” dated 1 October 2019, stating that an amount of $911.98 was on 30 October 2019. The document included (Part C, page 80):

Account Payable

We have reassessed your Youth Allowance. You were paid more than you were entitled to and you need to pay the money back.

Why you owe money

The correct amount of your earnings was not taken into account in the payments made to you from 10 Jul 2014 to 24 Jun 2015. This means you have been overpaid. We are, therefore, required to recover this amount.

Details of amount due

Benefit Type                            Amount due

Youth Allowance                        $911.98

To discuss the reason for this debt please call 1800 061 838 (call charges may apply).

…

Yours sincerely

…

Manager

Delegate of the Chief Executive Centrelink

84    The document also stated:

If you do not agree with a decision we have made

•    Contact us so we can check the details and explain the decision.

•    Contact us and ask for a review of the decision. We will change it if it is wrong.

•    Contact the Administrative Appeals Tribunal (AAT) if you do not agree with the review officer’s decision.

•    If you do not agree with the decision of the AAT you may be able to appeal further. For more information about the AAT, please go to aat.gov.au

All of the above are free of charge.

If you do not agree with a decision we have made, contact us as soon as possible.

There is no time limit for a review of a decision about money you owe us. However, you may have to pay back the money while the decision is being reviewed.

85    On 2 October 2019, a delegate sent Mr Chaplin a “notice of decision under social security law” (Original Decision) with the subject line: “We have finished checking your past income”: Part C, page 88.

86    The “notice of decision” was in the following terms:

We have finished checking your past income

Thank you for checking and updating your past income information. We have used the information you told us to assess the amount of payments you received from us in the past.

What this means for you

*The amount you owe us may also include changes to other amounts and allowances you have received. For more information, view your online statement at humanservices.gov.au/confirmincome or call us on 1800 061 838.

This is a notice of decision under social security law. If you want to discuss or you do not agree with the decision, you can call us on 1800 061 838 to have the decision explained or reviewed.

What happens next

We will write to you again about the amount you owe and explain how to pay it. There are payment plans and options available to help you.

Yours sincerely

National Manager

Compliance Risk

87    On the next page, the notice of decision included information under a heading “If you do not agree with a decision we have made”.

Internal review

88    On 28 October 2019, Mr Chaplin sought internal review.

89    By a letter dated 28 April 2020, an authorised review officer (ARO) of the Department affirmed the Delegate’s decision (ARO Decision): Part C, page 14. The ARO Decision recorded that the ARO had “reviewed the decision made on 1 October 2019 to ask you to repay a Youth Allowance debt of $911.98 for the period 10 July 2014 to 24 June 2015 (debt number J5528063)”.

90    The letter also included (emphasis added):

Issues

The main issues in this review are whether:

•    You have a Youth Allowance debt and if so, if the amount of $911.98 is correct.

•    Recovery of all or any part of the debt should be waived.

…

Findings of Fact

After careful consideration of the evidence, I have made these key findings:

•    Your Youth Allowance was approved on 1 August 2019, effective from 10 July 2014.

•    On 4 August 2014, 7 August 2014, 14 August 2014, 15 December 2014, 29 January 2015, 18 February 2015 and 19 March 2015, the agency sent you letters which said that you were required to notify the agency within 14 days or by your reporting date if you started work or your income changed. Several of these letters specified that gross income was to be reported.

•    In the period 10 July 2014 to 24 June 2015, you were working for Ritchies Stores.

•    You did not give the agency full details of your income from this work.

•    On 8 April 2019, the agency received information from the ATO about your income which was different to the information you had previously provided.

•    The agency contacted you on 9 April 2019 and 9 May 2019 and asked you to update your details.

•    You provided payslips from Ritchie’s stores on 11 June 2019.

•    The agency updated your record and recalculated your entitlement.

•    In the period 10 July 2014 to 24 June 2015, you received Youth Allowance totalling $2,804. You were entitled to receive $1,892.02.

•    On 1 October 2019, the agency decided you had a debt of $911.98 and sent you a debt notice.

•    You contacted the agency on 28 October 2019 and asked the agency to review this decision.

•    On 24 April 2020, the agency referred your review request to me as an Authorised Review Officer to conduct the review.

Reasons for Decision

The amount of income a person earns each fortnight can reduce the amount of Youth Allowance payable for that fortnight.

While you were working for Ritchies Stores, you were reporting earnings and your payments were reduced according to amounts you reported. However, according to the information now available to the agency, you earned more than you reported and your payments should have been reduced to a lower amount than was paid to you.

For example, in the reporting period ending 15 October 2014, you reported total earnings of $1,104.50 to the agency. However, your payslips showed that your actual gross earnings were $1,406.46.

From 10 July 2014 to 24 June 2015, you received Youth Allowance totalling $2,804. Based on your actual circumstances, you were entitled to receive $1,892.02. This means you have a debt of $911.98.

I have checked the calculations carefully and I am satisfied the calculations are correct.

I have considered the rules that allow the recovery of a debt to be waived, that is, not recovered.

…

You have a debt because you did not provide the agency with accurate advice about your gross earnings. As the debt was not caused solely by the agency’s error the debt cannot be waived for this reason.

…

This means you have a debt of $911.98 that must be repaid.

…

Social Services and Child Support Division of the Tribunal (AAT1)

91    Some years later, on 19 May 2023, Mr Chaplin applied to the Social Services and Child Support Division of the Tribunal (AAT1) for review of the ARO Decision.

92    On 8 January 2024, AAT1 set aside the relevant decision and remitted the matter for reconsideration. The reasons for decision record the following as part of the background (emphasis added):

3.    On 1 October 2019 Centrelink raised a youth allowance debt against Mr Chaplin of $911.98 from 10 July 2014 to 24 June 2015 based on the pay advices.

4.    The debt has been calculated using a simple mathematical methodology usually referred to as “apportionment”. Using this methodology, earnings are apportioned across instalment fortnights where those fortnights do not align with a person’s work weeks/fortnights …

5.    The approach adopted is that Mr Chaplin’s earnings were uniformly derived in the first and third work weeks. On this approach Mr Chaplin earned $473.55 x 4/7 ($270.60) from 7 to 10 August 2014 and $364.72 x 3/7 ($156.31) from 18 to 20 August 2014 in addition to his earnings of $586.54 from 11 to 17 August 2014.

6.    On 28 April 2020 an authorised review officer affirmed Centrelink’s decision. Mr Chaplin sought review of the debt decision by the Administrative Appeals Tribunal (AAT) on 19 May 2023.

93    AAT1 was of the view that it would be unlawful to apply earned income to the fortnight of receipt: at [33].

The Tribunal

94    The Secretary applied for a second review of AAT1’s decision in the General Division of the Tribunal on 7 February 2024.

95    In the course of that review, the Secretary issued a notice to Mr Chaplin’s employer which resulted in the production of payroll records, consistent with what Mr Chaplin had produced in 2019. On 28 February 2024, a delegate sent a notice pursuant to s 196 of the Administration Act to Ritchie’s Stores requesting documents that showed, for the period between 1 July 2014 and 30 June 2015, the dates Mr Chaplin’s salary was paid; the dates and hours he worked in each pay period; and the rate at which he was paid: Part C, page 94. Ritchies responded with payslip details but stated, “[u]nfortunately we do not have any records of the actual dates worked in each pay period only the total hours worked in each pay period”: Part C, page 95.

96    On 28 August 2024, the Tribunal decided under s 43(1) of the AAT Act to set aside the decision under review and to substitute a new decision that “a debt in the amount of $806.16 is due to the Commonwealth by” Mr Chaplin: at T[190].

97    The Tribunal rejected the competing constructions of Point H23 which had been advanced by the parties: at T[176] and [179] to [182]. The Tribunal did not reach a concluded view about the meaning of the word “derived” – see: at T[142] to [148]. The Tribunal concluded that:

    a person “earns” income for the purposes of Point H23 when that person becomes entitled or legally entitled to the income: at T[132], [133] and [136];

    it was to be inferred that Mr Chaplin had a legal entitlement to wages on Sundays in respect of the hours worked during the preceding week: at T[158(b)], [183]; and

    therefore, Mr Chaplin earned the wages on Sunday (and not on the days on which work was performed): at T[183].

98    The Tribunal concluded that Mr Chaplin “first earned, derived or received” the income on Sundays, when it considered that he became “legally entitled” to the relevant wages, rather than on the days when hours were worked, or the Thursday when Mr Chaplin was paid.

99    The Tribunal concluded that a debt was owed in the same amount as had been contended by the Secretary during the hearing – $806.16 – albeit with different reasoning from the Secretary: at T[185].

THE APPEAL

100    As noted earlier, Mr Chaplin identified one question of law, in the following terms:

On the proper construction of Point H23 in s 1067G of the Social Security Act 1991 (Point H23), where (as the Tribunal found) a person’s “ordinary income” is to be taken into account only in that fortnight in which the income was “first earned, derived or received”:

a.     and where a person earns ordinary income from income-producing activities, is that income “earned” at the time they become legally entitled to that income, as opposed to the time they have a legally enforceable right to receive payment of that income?

b.     does a casual employee paid at an hourly rate pursuant to an unwritten contract of employment “earn” ordinary income upon the completion of each hour of service by the employee?

101    The Secretary, who supported the Tribunal’s decision but not its reasoning, filed a notice of contention. In substance, the Secretary’s position was that, if it was not possible on the available material to reach a conclusion about when income was earned or derived, then the income was properly taken into account in performing the task required by the legislative scheme (specifically, Point H1 and Point H23) when the income was received: ROS[36].

102    The parties were agreed that – if the Secretary had material which satisfactorily established the fortnight in which income was “earned”, the fortnight it was “derived” and the fortnight it was “received” – then in undertaking the task in Step 1 of Point H1 (and Point H23), the income must be allocated to the fortnight in which the first of those things occurred. The position before the Tribunal can be summarised in the following way:

(a)    There was sufficient evidence to conclude when the income amounts were received. This was on the Thursday after the pay week (Monday to Sunday) had ended.

(b)    It was known that the income amounts were earned during the pay week immediately before the amounts were received.

(c)    Where the pay week fell entirely within a Youth Allowance fortnight, it was known that the income was earned and derived (and received) in that fortnight.

(d)    Where the pay week straddled more than one Youth Allowance fortnight, it was not known whether the amounts of income were earned in the same Youth Allowance fortnight as that in which the income was received, or were earned in the Youth Allowance fortnight immediately before the income was received.

103    The issue may be illustrated by reference to pay week three and Youth Allowance fortnight two as an example (and leaving aside the limited exceptions where loadings and payrates contained in the payroll records permitted identification of the actual days worked). Pay week three was a “cross-over week” in that it was a week spanning across the end of Youth Allowance fortnight one and the beginning of Youth Allowance fortnight two. Youth Allowance fortnight two began on the Thursday in pay week three (Monday to Sunday). The evidence established that the earnings for pay week three were received on the Thursday in pay week four in the middle of Youth Allowance fortnight two. Of the amount received on that Thursday, it was not known whether it was all earned in the four days which fell within the first week of Youth Allowance fortnight two (beginning on the Thursday in pay week three) or all earned in the three days which immediately preceded those four days (in Youth Allowance fortnight one), or partly in both. The central issue between the parties was whether the Secretary should work out the fortnightly income under Step 1 in Point H1 and Point H23:

(1)    by disregarding the income in cross-over weeks (the income in dispute) altogether, on the basis that, although it is known when the income was received, it is also known that the income was earned earlier than it was received, but not known whether it was earned in the relevant Youth Allowance fortnight or the fortnight immediately before; or

(2)    by taking the income in dispute into account in the Youth Allowance fortnight in which it was received.

104    Mr Chaplin and Legal Aid (which was granted leave to intervene) submitted that, by reason of Point H23, the income must be ignored in working out the fortnightly income in Step 1 in Point H1. The Secretary submitted that the application of the relevant provisions to the facts as established by the material before the Tribunal on review resulted in the income in dispute being allocated when received.

CONSIDERATION

Introduction

105    As Kennett J observes, the first step is to identify with precision the decision under review. It is that decision which the Tribunal is to “remake” on review as if it were the original decision-maker, but on the material before it – see: Miller v Minister for Immigration, Citizenship and Multicultural Affairs [2024] HCA 13; 278 CLR 628 at [14] (Gageler CJ, Gordon, Edelman, Jagot and Beech-Jones JJ); Frugtniet v Australian Securities and Investments Commission [2019] HCA 16; 266 CLR 250 at [51] (Bell, Gageler, Gordon and Edelman JJ).

106    For reasons given below, we consider the better view is that the decision being reviewed comprised a number of “decisions” (used in a broad sense) in an administrative process which culminated in a request for repayment of an amount which the Secretary considered had been overpaid as Youth Allowance, thus giving rise to a debt.

107    The decision to request or demand repayment was taken knowing that Mr Chaplin had consistently under-reported his income over the many months he had received Youth Allowance. The decision included:

(a)    ascertaining (the rate of) Mr Chaplin’s Youth Allowance entitlement under the Act and Administration Act;

(b)    calculating how much Mr Chaplin had been overpaid by subtracting the amounts of his entitlement from the amounts he had been paid; and

(c)    deciding whether, as a first step in a process of recovery, the Department should demand repayment.

108    Mr Chaplin exercised his review rights at a time before the Secretary had gone further than deciding to demand repayment. A debt arising under s 1223(1) can be recovered by deductions from ongoing social security payments (not available on the facts in the present case), legal proceedings, a garnishee notice or repayment by instalments – see: ss 1222(2) and 1230C(1). A decision-maker may well have decided to pursue recovery of the debt by one those recovery mechanisms if Mr Chaplin had not exercised his review rights, but no decision to pursue recovery by those mechanisms is apparent from the material before this Court.

109    Accordingly, the last “decision” in the series of decisions (used in a broad sense) under review was the decision to demand repayment. For reasons further explained below, the decision to demand repayment was preceded by a decision about whether or not the decision-maker was satisfied that Mr Chaplin had an entitlement to Youth Allowance in the amounts received.

110    If the original decision-maker was not satisfied that Mr Chaplin had an entitlement to part of the Youth Allowance he had received (see s 37 of the Administration Act), then the decision-maker would be satisfied that a debt arose by operation of the Act (see s 1223(1) of the Act) and would then, subject to exercising an administrative discretion against taking such action, demand repayment by issuing a notice in accordance with s 1229 of the Act.

111    It is convenient next to explain why the identification and characterisation of the decision or decisions under review is important.

The significance of the characterisation of the decision

112    If a Tribunal on review finds itself in a state of uncertainty after considering all the available material, unable to decide a question of fact either way on the balance of probabilities, it will be necessary for it to consider the consequences of that fact to the decision under review, remembering that the Tribunal is “remaking” the original decision.

113    As Woodward J explained in McDonald v Director-General of Social Security [1984] FCA 59; 1 FCR 354 at 358 in the context of a pension entitlement based on a person being permanently incapacitated:

If the AAT finds itself in a state of uncertainty after considering all the available material, unable to decide a question of fact either way on the balance of probabilities, it will be necessary for it to analyse carefully the decision it is reviewing [being the decision it is making as if the original decision-maker]. If, for example, it is a decision whether or not to cancel a pension in the light of changed circumstances, then it has failed to achieve the statutory requirement of reaching a state of mind that the pension should be cancelled. If, on the other hand, it is a decision, to be made in the light of fresh evidence, whether or not the pension should ever have been granted in the first place, then it has failed to be satisfied that the person ever was permanently incapacitated for work.

114    The point of significance for present purposes is that the first decision in the continuum of administrative decisions, culminating in the decision to demand repayment of a debt, was a decision by the original decision-maker that Mr Chaplin was not entitled to that which he had been paid. It is from that essential starting point that the remaining decisions ensued. It is true that the decision about whether to demand repayment involves a decision about entitlement, but it is a question which arises only after ascertainment of the entitlement.

Decisions concerning recovery of overpayments

115    The nature of the decision in similar cases has been considered in at least three Full Court cases. The issue in those cases, however, was whether there was a decision at all, capable of being reviewed by the Tribunal. In each case, it was held that there was a reviewable decision and observations were made about the nature of that decision.

116    As will be seen, none of the three cases directly address the position of a decision-maker who is satisfied that there has been an overpayment but might be unable to ascertain the precise amount of the overpayment. None of these cases address whether such a decision-maker should:

(a)    demand repayment on the basis that the decision-maker is not satisfied about the underlying entitlement to the payment; or

(b)    not demand repayment to the extent the decision-maker cannot be satisfied about the exact amount of the overpayment.

Hangan

117    Mrs Hangan received child endowment payments under the Social Service Act 1947 (Cth) (1947 Act). The Department of Social Services alleged that Mrs Hangan had been overpaid and sought recovery. Mrs Hangan appealed to the Social Security Appeals Tribunal (SSAT) “against an overpayment of $3,373 that has been raised against me”: Hangan at 214. The SSAT stated that as “the excess payments arose from a breakdown in office procedures the Tribunal recommends that no action be taken to recover any amount”.

118    After that recommendation, a delegate of the Director-General concluded that, because of failures by Mrs Hangan to notify the Department of certain circumstances, Mrs Hangan had received payments to which she was not entitled and the delegate “decided” that the overpayment was recoverable. At that time, s 140(1) of the 1947 Act provided:

Where … in consequence of a failure or omission to comply with any provision of this Act, an amount has been paid by way of … endowment … which would not have been paid but for the … failure or omission, the amount so paid shall be recoverable in a court of competent jurisdiction … as a debt due to the Commonwealth.

119    Mrs Hangan appealed to the Tribunal. In addition to arguing the merits, the Director-General argued that there had been no decision, and the Tribunal therefore lacked jurisdiction: at 219. The Tribunal decided that it did have jurisdiction. It found that there had been an overpayment, but that the sum was not recoverable on the basis that Mrs Hangan’s failure to notify the Department was not the effective cause of the overpayment, but only a contributory cause and that, therefore, the overpayment was not recoverable as a debt due to the Commonwealth pursuant to s 140(1) of the 1947 Act.

120    The Director-General appealed under s 44 of the AAT Act. The Director-General argued that there had been no decision, and the Tribunal lacked jurisdiction: at 219.

121    The Director-General also argued that the Tribunal misconstrued s 140(1) in that it was sufficient if a failure was a contributory cause of the overpayment, even if not the effective cause: at 221. Each of the judges comprising the Full Court rejected this argument. Fox J agreed with Toohey and Fitzgerald JJ that it is sufficient if a failure is a contributing cause of an overpayment: at 215. It is not necessary further to address this issue for present purposes.

122    As to the first argument, the Director-General had submitted that there was no decision because the statute operated on the facts as they were so as to create a debt and s 140(1) did not require a decision to be made; the existence of the debt was the result of the existence of the circumstances set out in s 140(1), which was self-operating: at 232. The Full Court accepted that the debt was created by operation of s 140(1), but rejected the contention that there was no decision capable of review.

123    Fox J emphasised the administrative process. His Honour stated (at 215):

It is submitted that there was no decision because, given the facts, the law operated thereon so as to create a debt. The argument is that if there were overpayments to which s 140(1) applied, the amounts thereof were recoverable as debts by force of that sub-section, without any need, or place, for intervention by a decision of the Director-General, or, for that matter, any other person. If there were no such overpayments, there was no debt and recovery action would fail. This is an over-simplification, and is an incorrect view of the situation.

…

The [Director-General’s] submission fails adequately to recognise that what is under examination is an administrative process. It is a necessary pre-requisite to legal action but not a determinant of legal rights. Facts are not facts in the abstract; they must be collected and evaluated. A subordinate officer makes a decision or determination affecting matters such as the fact of overpayment, the amount of overpayment, and recoverability. There is a decision to approve this decision, and approval.

… The fact is that action to recover, or even to demand, is not an inevitable consequence of an administrative assessment that there is liability …

124    Toohey J stated (at 219–20):

There was no decision, it is said [by the Director-General], because s 140(1) does not require one. The subsection simply expresses a proposition, namely, that where in consequence of a failure to comply with the Act an amount has been paid which would not otherwise have been paid, the amount is recoverable in a court of competent jurisdiction. In other words, recoverability springs from the existence of the circumstances set out in the subsection; it is a self-operating provision … The relevance of this, it is said, is that recoverability cannot depend upon a decision by the Director-General.

…

[A]s a matter of administration, it is hard to see how such recovery could be effected without a decision by the Director-General or some other officer competent to make it. Certainly s 140(2) vests in the Director-General a discretion to determine whether any overpayment may be deducted from future benefits.

As the Tribunal pointed out in [Matteo and Director-General of Social Services (1981) 4 ALD 398] at 404, “there are certain administrative processes that must precede any move to seek recovery in a court in pursuance of s 140(1)”. An officer must form an opinion or reach a conclusion that there has been a failure or omission to comply with a provision of the Social Services Act 1947; he must satisfy himself that benefits have been paid in consequence of that failure or omission that would not otherwise have been paid; and that officer or another must decide to seek recovery.

125    Toohey J held that, even if recoverability of an overpayment as a debt does not depend on a decision by the Director-General, it did not follow that a decision by the Director-General was not a pre-requisite to any action taken for that recovery: at 220. His Honour characterised the relevant decision as involving decisions that: (a) an endowment had been paid which was not payable; (b) the endowment had been paid as a consequence of a failure or omission on the part of the recipient (in this case concerning s 104A); (c) the endowment would not have been paid absent the failure or omission; (d) the endowment was recoverable; (e) the endowment should be recovered: at 221.

126    Fitzgerald J was of the view that, although recoverability under s 140(1) depended on whether the specified circumstances existed in fact, the Director-General’s determination that they do exist and that an amount is recoverable was an administrative pre-requisite to any duty to recover that amount: at 234.

Hales

127    Mrs Hales received a supporting mother’s pension under the 1947 Act. In breach of the Act, she failed to inform the Department of an increase in her income disentitling her to the pension. Inconsistently with its usual practice, the Department had not made its annual request for details of her current income for a number of years. In 1978, the Department requested such information and, after receiving Mrs Hales’ response, advised her that she was no longer entitled to the pension: Hales at 375. In 1980, the Department informed Mrs Hales that she had been overpaid for the period 1974 to 1978 and asked her to refund the overpayment.

128    Mrs Hales appealed to the SSAT and later the Tribunal: at 375–6. The Tribunal found that Mrs Hales “was given to understand that there would be departmental review annually” and that it was “proper to regard the failure of the Department to perform its functions as the substantial or dominating cause of the overpayment” and that Mrs Hales’ “failure can best be regarded as a contributory cause but not the effective cause”, except for the first year of the period of overpayment: at 376–7. The Tribunal held, therefore, that s 140(1) of the 1947 Act did not authorise recovery other than for the first year. The Tribunal also found that, in any event, Mrs Hales’ financial and family circumstances were such that recovery would cause extreme hardship and that there was little chance of recovery action being effective and recovery should therefore be limited to the first year’s overpayment: at 377. The Director-General of Social Services appealed, including on the ground that there was no reviewable “decision” made.

129    There was no dispute before the Court that Mrs Hales’ pension was overpaid during the period 3 December 1974 to 25 May 1978 in the sum of $3,632.70: at 375–6, 396.

130    The main issue was whether there was a “decision” capable of review. On the meaning of “decision”, Lockhart J observed at 397:

It is necessary to examine the Act which confers jurisdiction on the Administrative Appeals Tribunal and the administrative framework in which it operates to determine whether there is a “decision” susceptible of review under the Administrative Appeals Tribunal Act. A pronouncement which alters rights or imposes liabilities is readily classified as a “decision”, but the word has a wider scope. It may include a declaration or statement which has a real practical effect although not altering rights or imposing liabilities: Duncan v Defence Force Retirement and Death Benefits Authority (1980) 47 FLR 256 (at 260).

131    His Honour noted that the identification of the relevant decision had been a “vexing problem” in the case before stating (at 397–8):

Its clearest formulation is that it is a decision that a benefit which had been paid to Mrs Hales was not payable, that it had been paid in consequence of her failure or omission to notify changes in her income, that it would not otherwise have been paid, that it may be recovered and that it should be recovered.

132    Later, his Honour stated (at 398–9):

… I fail to see how action for recovery of an overpayment can be taken otherwise than following a decision of the Director-General or his delegate to recover it …

I also reject the argument that a decision not to sue is not a relevant “decision” for present purposes. The decision of the Director-General to recover the overpayment from Mrs Hales, although not directly affecting her legal rights and obligations, plainly has a real practical effect on her. She becomes liable to be sued, she is required to defend or not defend the proceedings when commenced, to instruct solicitors and so on. For practical purposes the Director-General’s decision sets in train a series of events which affect Mrs Hales and her financial position in a real way.

133    His Honour considered there was a reviewable decision. His Honour accepted that the Tribunal erred in construing s 140(1) because Mrs Hangan’s failure only needed to be a contributory cause, not the effective cause, stating at 400:

In Hangan’s case the Full Court of this Court held that on the proper construction of s 140(1) it is not necessary that the failure or omission mentioned therein be the effective cause of the overpayment, that it is sufficient that the failure or omission be a contributory cause, that the relevant payment was made as a consequence of the failure or omission by the pensioner to comply with his obligations under s 104A of the Social Services Act and that the payments would not have been made had there not been such a failure.

134    However, his Honour considered the appeal should be dismissed by reason of the Tribunal’s alternative ground for its decision. His Honour stated at 401:

Notwithstanding the Tribunal’s error in its construction of s 140(1) and the application of that interpretation to the facts, I am satisfied that the Tribunal’s alternative finding of extreme hardship and scant chance of effective recovery was a proper exercise of its discretion in reviewing the Director-General’s decision, that this finding stands independently of the erroneous finding and is sufficient to support the Tribunal’s ultimate decision to set aside the Director-General’s decision and to remit the matter to him for reconsideration with the direction that only so much of the overpayment claimed by the Director-General as is referable to the first pension year after the review of Mrs Hales’ pension in 1974 be recovered from her. In these circumstances I see no necessity to remit the matter to the Tribunal to be heard and determined again.

Alvaro

135    Mr Alvaro had pleaded guilty to conspiring to defraud the Commonwealth in relation to his receipt of social security benefits: Alvaro at 215D. Section 1224(1) of the Act as it stood at the relevant time provided, in summary, that an amount paid because a person has made a false statement, or failed to comply with a provision of the Act, is a debt due by the recipient to the Commonwealth. After pleading guilty, Mr Alvaro received a letter from the Department which included (at 216A):

… An overpayment … has been calculated and the Department is required to recover this debt from you … I have made this decision as a delegate of the Secretary under the Social Security Act …

136    The Department’s decision was affirmed by the ARO on internal review and by the SSAT: at 216B–F. The Secretary sought review in the Tribunal. The Tribunal concluded that there was no reviewable decision and that it therefore did not have jurisdiction: at 217F. This conclusion was based on its lack of satisfaction that the officer had authority to make a decision under s 1224 of the Act: at 217E. The Secretary appealed under s 44 of the AAT Act: at 214B–C.

137    The Full Court followed Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; 41 FLR 338 at 314–5 and 339, concluding that a decision made by an administrator in purported or assumed pursuance of a relevant statutory provision is reviewable under the AAT Act even if the administrative decision is legally ineffective or void: at 219C.

138    The Secretary argued that s 1224(1) operates of its own force so that, where the prescribed factual circumstances exist, there is a debt due to the Commonwealth without there being any administrative decision or step taken by an officer of the Department: at 218C. Justice von Doussa (French and Spender JJ agreeing) stated:

In a sense that is correct, but no practical consequence flows from the mere statutory prescription that a debt exists. Administrative processes are necessary to recognise and record that debt as a debit in the accounting and other records of the Department. Sheppard J in Hales at 408–409 declined to express an opinion whether the mere entry of a debit against a beneficiary could constitute a “decision” reviewable by the AAT, but here the steps taken went further and included a decision that the debt should be recovered. It was the decision that the debt should be recovered that caused the recognition of the statutory debt to affect the interests of the respondent in a real, practical manner. The decisions in Hangan and Hales should be applied to s 1224, and the issues raised in this appeal should be considered on that footing.

139    The Tribunal’s findings of fact included that Mr Alvaro “had no entitlement to a pension or benefit for the whole of the [relevant] period”: at 215B. That is, the Full Court’s decision was concerned only with the original decision-maker’s decision to recover. The entitlement of Mr Alvaro to receive the social security payments he had received was not in issue: there was no entitlement, and Mr Alvaro did not seek to assert that he had an entitlement. Further, the original “decision did not purport to decide on the manner of implementation of recovery”: at 221B. And the review process initiated by Mr Alvaro did not seek to challenge such a decision: at 221F. The Full Court also described the decision as a “composite decision that there was a debt due to the Commonwealth under s 1224 and that it should be recovered”: at 221G. The matter was remitted to the Tribunal.

The decision under review

140    Returning to the present case, the ARO Decision describes the ARO as having “reviewed the decision made on 1 October 2019 to ask you to repay a Youth Allowance debt of $911.98 for the period 10 July 2014 to 24 June 2015”. 1 October 2019 was the date of issue of the “Account Payable”: Part C, page 80. The “Account Payable” included the statement that the Department had “reassessed your Youth Allowance”. The “Account Payable” complied with the requirements of s 1229 of the Act. It reflected both a reassessment of Mr Chaplin’s entitlement and a decision to demand repayment of the debt.

141    AAT1 described the subject of its review as a decision by an ARO affirming a decision by Centrelink as “rais[ing] a youth allowance debt against” Mr Chaplin also by reference to the date of 1 October 2019: at [3].

142    The Tribunal described the original decision by reference to the letter of 2 October 2019, as a decision of a delegate of the Secretary that Mr Chaplin: had failed to report the correct amount of earnings during the Period; had been overpaid youth allowance in the amount of $911.98; and owed a debt for that amount (at [3]). The letter of 2 October 2019 was expressly stated to be a “notice of decision under the social security law” and was titled “We have finished checking your past income”: Part C, page 88. The letter stated that the delegate had used updated information to “assess the amount of payments” Mr Chaplin had “received … in the past”. The letter identified an amount owed.

143    The “Account Payable” letter dated 1 October 2019, and the “notice of decision” letter dated 2 October 2019, result from the same set of underlying administrative decisions in the decision-making continuum culminating in the issuing of the two letters. Neither the letter of 1 October 2019, nor the letter of 2 October 2019, “raised a debt” in the sense of creating a debt; they “raised the debt” only in the sense of recognising the (asserted) existence of the debt to facilitate the administrative processes required to demand repayment of the debt and, if it were later considered appropriate, take enforcement action.

144    As has been mentioned, the underlying decisions were made in a context in which it was known that Mr Chaplin had consistently under-reported his income. The decisions included:

(a)    ascertaining (the rate of) Mr Chaplin’s Youth Allowance entitlement under the Act and Administration Act;

(b)    calculating how much Mr Chaplin had been overpaid by subtracting the amounts of his entitlement from the amounts he had been paid; and

(c)    deciding whether, as a first step in a process of recovery, the Department should demand repayment.

145    The demand for repayment was made by issuing an “Account Payable” on 1 October 2019, conforming with s 1229 of the Act, which identified the debt, the day on which it was due and payable and the range of options available for repayment. No decision was made to take recovery action beyond demanding repayment of the debt.

Ascertaining the rate and calculating the overpayment

146    Upon receiving the information from the ATO that Mr Chaplin had underreported his earning, the Department was required to consider whether Mr Chapman had been overpaid Youth Allowance. Before any decision could be made about demanding repayment, a determination needed to be made as to Mr Chaplin’s entitlement to Youth Allowance. As mentioned earlier, both the 1 October 2019 letter and the 2 October 2019 letter reflect the fact that a reassessment of entitlement in fact occurred.

147    The original decision-maker’s first step or “decision” of real significance to Mr Chaplin was to “reassess” or ascertain the rate of Mr Chaplin’s entitlement. This entitlement arose by operation of the Act. The rate of Mr Chaplin’s Youth Allowance entitlement at the time of his claim depended on his earnings. The rate altered automatically through the combined operation of the Act and ss 68(2) and 100 of the Administration Act. The alteration to the rate arose by operation of the statute without needing a formal decision, in the same way that s 1223(1) of the Act gave rise to a debt without a formal decision.

148    This “reassessing” step was also the first decision of real significance for the reviewing decision-makers, including the Tribunal, each of which was “remaking” the original decision.

149    The “reassessment” of Mr Chaplin’s entitlement was performed on the basis of the information provided by the ATO and Mr Chaplin.

150    After considering the information available and the operation of the statutory scheme, the Secretary’s decision was that Mr Chaplin was entitled to less than what he had been paid. This decision was based on a calculation: what Mr Chaplin had received, less his entitlement.

151    If, when Mr Chaplin first made a claim for Youth Allowance, the Department examined the material provided and formed the view it could not ascertain the Youth Allowance instalment fortnight in which particular income was earned, the delegate would have decided he or she could not determine the correct entitlement. That would not have led to the income in question being excluded such that Mr Chaplin’s entitlement increased. It would have led to Mr Chaplin not being entitled to anything more than the amount to which the decision-maker was satisfied Mr Chaplin was entitled on the material available – see: s 37 of the Administration Act. That position does not change by accepting that there is an objective truth as to his entitlement which the available material did not permit to be ascertained.

152    Mr Chaplin would be able to seek review of that decision, but a reviewing decision-maker could likewise not be satisfied that Mr Chaplin would be entitled to the Youth Allowance he claimed by ignoring the income known to have been received by Mr Chaplin on the basis that the decision-maker did not know to which of two consecutive Youth Allowance fortnights the income should be allocated.

153    In the present case, the original decision was not made at the time of determining whether to pay the Youth Allowance claimed. It was a decision made later, when information came to light that Mr Chaplin had consistently under-reported his earnings. The substance of the decision that was required to be made did not change. It was a decision of the second type of the two types of decision identified by Woodward J in McDonald. The decision was not one about whether Mr Chaplin’s rate should be reduced or whether there was a basis to cancel payments. It was a “reassessment” of entitlement. The amount of the debt flowed from a calculation (amount received less amount of entitlement), and the existence of the debt flowed by reason of the terms of the statutory scheme. The calculation was premised on the decision-maker failing to be satisfied that the recipient was entitled to the amount received.

154    It is perhaps worth observing that, in most cases, the issue of reassessment of entitlements will not arise. The issue only arises in this case because Mr Chaplin was known to have under-reported his earnings. In the absence of a basis for considering that information had not been accurately reported (or perhaps some administrative or other error), it would not generally be appropriate to revisit a recipient’s entitlement, which would ordinarily be presumed to have been correctly determined.

155    In summary, the original decision-maker knew Mr Chaplin had not made a correct disclosure of his income. The real issue was how much Mr Chaplin had been overpaid, which depended on a “reassessment” of his entitlement. Having performed that “reassessment”, the decision-maker was satisfied that Mr Chaplin was not entitled to the amount he had received but, based on the information available, was satisfied that he was entitled to a lesser amount. In performing that “reassessment”, the original decision-maker could not allocate all relevant amounts known to have been received to the precise days on which the amounts were earned by reason of a lack of information. The Secretary’s position was that those particular amounts should be taken into account when received, namely on the relevant Thursdays.

156    On each review of the original decision, the first question was whether a decision should have been made that was different from the decision made by the original decision-maker. This involved considering the same issues, starting with ascertaining Mr Chaplin’s entitlement on the basis of the available material.

157    On each review, the decision-maker could not be satisfied that Mr Chaplin was entitled to Youth Allowance in the amount he was in fact paid because it was known that he had consistently unreported his income.

158    Further, the correct or preferable decision was not to form a state of satisfaction about the extent of Mr Chaplin’s entitlement which excluded from the relevant calculation of the required income reduction for a Youth Allowance instalment fortnight – income which it was known Mr Chaplin had received in that fortnight, but which the decision-maker could not be satisfied had not been earned in the previous Youth Allowance instalment fortnight. In relation to income received on a Thursday, it was known that the income was earned in the immediately preceding pay week (Monday to Sunday). To form a view about Mr Chaplin’s entitlement to Youth Allowance in a fortnight by excluding income known to be received, on the basis that it could not be determined which day the income was earned, would necessarily result in a determination that Mr Chaplin was entitled to something to which it could not be known Mr Chaplin was entitled. No reasonable decision-maker could be satisfied that Mr Chaplin was entitled to an amount of Youth Allowance calculated on that basis.

Demanding repayment

159    Knowing that Mr Chaplin had consistently unreported his income, and having then reached a view about his entitlement to Youth Allowance, the decision-maker calculated the amount of Mr Chaplin’s overpayment and then continued the administrative decision-making process by making the unsurprising decision to demand that the amount calculated to have been overpaid be paid back.

160    The debt exists by operation of the statute, independently of any decision by the Secretary. A debt arising by operation of s 1223(1) can be recovered by deductions from a person’s entitlement to social security (if the person is receiving social security), legal proceedings, a garnishee notice or repayment by instalments – see: ss 1222(2) and 1230C(1). These provisions cannot sensibly be read as denying the ability to make a demand for repayment before taking recovery action of the kind those provisions contemplate.

161    The question of what would happen if the debt were sought to be recovered in a court, and what the Secretary could prove, is an important aspect of Kennett J’s reasoning in concluding that the income in dispute must be ignored. In our view, that issue is not relevant to forming a view about Mr Chaplin’s entitlement to Youth Allowance. Rather, a consideration of issues about what would happen in a recovery action, if that proves necessary when a demand for repayment is not met, is potentially relevant to the decision to take recovery action which may require a consideration of whether an amount is practically able to be recovered. In Hales at 398, Lockhart J said:

Certain administrative processes must precede any action for recovery in a court pursuant to s 140(1). Some officer in the Department must form an opinion that there has been a failure or an omission to comply with a provision of the Social Services Act or that there has been a false statement or representation, and that a benefit has been paid in consequence of that failure or omission or false statement or representation that would not otherwise have been paid. Some officer must decide that the overpayment is recoverable and should be recovered. The range of matters relevant for consideration by the Department is wide. The relevant officer may form the view that the Department’s case is strong or weak. He may consider that, whatever the strength of the Department’s case, litigation will be futile and a waste of public funds because the prospective defendant is penniless. These are the practical considerations which confront any potential litigant. He generally balances the strength of his case and that of his opponent and decides whether, at the end of the day, it is worthwhile risking his money in costs. The Department is in no different position. Not only will the appropriate officer in the Department form views as to the Department’s prospects of success in a proceeding to recover an overpayment under s 140(1) but he may, and often will, also consider the financial circumstances of the prospective defendant. If he ascertains that the overpayment has been made to a widow in indigent circumstances who is doing her best to support an invalid daughter, is it seriously to be suggested that these are irrelevant considerations in the process of departmental decision-making leading to an action for recovery of the overpayment? One might be forgiven for thinking that an action for recovery in these circumstances where there is no prospect whatever of recovering anything, irrespective of the strength of the Department’s case on the technical issues, would be a waste of public funds and perhaps an abuse of power. I reject the argument that the Director-General has no option but to sue once he concludes that the ingredients required by s 140(1) exist.

162    Even where there is a known overpayment, it is open not to demand recovery at all having regard to the circumstances. In Hangan at 232–3, Fitzgerald J stated that he was unconvinced that the “Director-General … has a duty to recover the amount overpaid” and continued:

He may, I think, not only have a discretion as to the method of enforcement which he will adopt. He may also have a discretion not to enforce, although the debt remains owing. Common sense suggests the exercise of such a discretion, in practice.

163    Given the attention given by Kennett J to what might happen should recovery action later be taken, we make the following observations. To succeed in recovering a debt in a court, the Secretary would need to prove by admissible evidence that the person had received more Youth Allowance than that to which the person was entitled. On the facts of this case, we are not satisfied that the Secretary would not be able to prove on the balance of probabilities that Mr Chaplin had received Youth Allowance to which he was not entitled in Youth Allowance instalment fortnights over the period he had received the relevant payments. He had reported his net earnings and not his gross earnings for that whole period. No doubt the ideal scenario would be proof of the exact amount of the entitlement in each fortnight. However, if that were not possible, it would be for a court to reach a view on the balance of probabilities as to the level of debt on the admissible evidence before the court. We disagree with Kennett J that an action in debt would necessarily fail if the Secretary could not positively establish in which of two consecutive fortnights the income was earned.

164    It is helpful in this context to consider the position of a recipient of benefits who knowingly made false claims and/or a person who may not be forthcoming with material necessary to enable a precise identification of when his or her income was first earned or derived, although it is known when that person received the income. While the Secretary in debt recovery proceedings would bear the legal burden of establishing that there is a debt, the nature and circumstances of a case may support an inference or presumption that shifts the evidentiary burden – see: Berry v CCL Secure Pty Ltd [2020] HCA 27; 271 CLR 151 at [29] (Bell, Keane and Nettle JJ). Where appropriate on the particular facts, “[a]n evidential onus might shift to a defendant in circumstances where the defendant’s wrongdoing has made proof of loss difficult or impossible or where adducing particular evidence is peculiarly within the power of the defendant” – see: Commonwealth of Australia v Sanofi [2024] HCA 47; 99 ALJR 213 at [14] (Gordon ACJ, Edelman and Steward JJ); Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; 98 ALJR 719 at [129] (Edelman, Steward, Gleeson and Beech-Jones JJ). Whilst the cases just referred to relate to claims for loss and damage, and stem from the oft-cited cases of Armory v Delamirie (1722) 1 Strange 505 and Blatch v Archer (1774) 1 Cowper 63 at 65, the process of reasoning is equally applicable to a cause of action in debt.

165    A part of the statutory design is for automatic rate reductions, resulting in automatic debts to the Commonwealth in cases of overpayment. The rate reductions and debts arise by force of the statute, not by reason of any decision. Automatic rate reductions occur for various reasons, including a failure to provide information.

166    The legislature should not be taken to have intended (Certain Lloyd's Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [25]) that a decision-maker could not “raise a debt” on the basis that the decision-maker, although knowing that there had been an overpayment, could not tie the overpayment to a particular fortnight because of a lack of information. The statutory scheme ought not to be construed as operating in a manner that would result in a person, who had knowingly misreported earnings in order to obtain a benefit to which that person was not entitled, being able successfully to challenge any decision to demand recovery of the debt by withholding information necessary to determine the precise fortnight in which the income was earned. It is unlikely that it was intended that social security recipients who fail properly to report their income would receive “windfall gains”. A construction of the legislative scheme that requires the decision-maker to be satisfied of the existence of an entitlement before being satisfied that a debt does not exist is consistent with the legislative intention.

167    In summary, Mr Chaplin’s entitlement and Mr Chaplin’s debt were both matters which existed by force of the statutory scheme. The ascertainment of the entitlement, the calculation of the amount of the overpayment and the decision to demand repayment were each decisions (in the broad sense) made under the Act. The ascertainment of the entitlement was a decision separate from but a prelude to a decision to demand repayment. Neither decision was foreclosed on the basis that some relevant income could not be precisely allocated to a particular day.

The Tribunal’s decision

168    The Tribunal on review was re-exercising the function of the officer who made the original decision to: (a) reassess or ascertain Mr Chaplin’s entitlement; (b) calculate the amount of any overpayment; and (c) demand repayment of the debt.

169    Having regard to the statutory context, the Tribunal’s decision should be understood to have the effect that the original decision was replaced by a decision that Mr Chaplin was entitled to Youth Allowance in an amount less than what he received and to demand repayment of the overpayment.

Errors in the Tribunal’s decision

170    The Tribunal was satisfied that the rate at which Mr Chaplin was paid was greater than the rate provided for in the Act. Both parties agreed that the Tribunal erred in its reasons for reaching this conclusion, but the respondent contended that the conclusion was correct. Both parties disagreed with one central aspect of the reasons of the Tribunal concerning the way Mr Chaplin’s entitlement to Youth Allowance should be calculated having regard to the income reduction required by Module H.

171    As noted earlier, the Tribunal concluded that Mr Chaplin earned income on a Sunday in respect of hours worked in the immediately preceding week ending on the Sunday. Both parties submitted that the Tribunal erred in this conclusion. Both parties submitted that the wages were “earned” at the latest on completion of each day on which hours were worked. It does not matter for present purposes whether the wages were earned at the end of each hour or at the end of each day.

172    The Tribunal erred in law in concluding that all of Mr Chaplin’s income was earned on Sundays when, according to the Tribunal, a legal entitlement to the week’s income first arose. It thereby misdirected itself and reached a conclusion which was not open on the facts. Whilst it depends on the terms of the relevant contract (and any other instrument or law affecting the terms of employment), generally casual employees earn wages as the service for which they are entitled to be paid is provided. Contracts for casual employment usually provide for service by the hour, shift or day, and so casual employees usually earn income by the hour, shift or day upon the rendering of that service. Wages are not “earned” only when a legally enforceable right to payment arises on the express or implied terms of the contract.

173    As noted earlier, the phrase “earned, derived or received” is ascribed an expansive meaning by s 8(1) of the Act. It is used in various places in the Act. The phrase has been previously considered by this Court. The phrase was considered by Sheppard J in Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307. Mr Inguanti, a social security recipient, was entitled to an Italian pension which he had not disclosed to the Secretary. Initially, that pension was paid at his direction to relatives in Italy. Later, he directed it be paid to himself in Australia. At the time of the Tribunal hearing, he had not in fact received any Italian pension payments because it took 12 to 18 months for the transfer of the pension to Australia.

174    The Court held that the Italian pension was income derived by Mr Inguanti, even though not received by him. As to the period when the pension was not paid to relatives, the delayed receipt of income by Mr Inguianti would only have failed to be “derived” by him if the prospect of the moneys ever being received was remote or so far in the future as to make entitlement to them of no relevant benefit. Of relevance to the present case, Sheppard J stated at 311:

The use of the verbs “earned”, “derived” and “received” in juxtaposition in the definition of “income” in the Act strongly suggests that each was intended to have a different meaning. Notwithstanding that the word “derived” can mean “received”, I reject the submission made on behalf of the applicant that “derived” is used in that sense here. Sometimes moneys will be earned, derived and received simultaneously. At others they will be earned or derived but not received until a later time. If one invests moneys and is entitled to interest at six monthly or yearly rests, one’s income, if it needs to be related to a weekly or a monthly period, is not properly stated unless one takes into account one’s expectation of payment of interest on the future day upon which it will be received. Countless pensioners were accustomed to invest in Australian Savings Bonds. Their entitlement to a pension is properly calculated upon the basis of the expectation they have that interest on their investment will be paid on the day promised. That is because they are “deriving” income from their investment. They do not receive it daily, weekly or monthly. But the moneys to which they are periodically entitled are moneys derived by them, and thus income for the purposes of the Act.

175    The phrase was also considered by Collier J in Secretary, Department of Employment and Workplace Relations v Richards [2007] FCA 1710; 98 ALD 310 at [34], where five propositions were listed. Those propositions were reproduced by the Tribunal at T[79], although it is not clear that the Tribunal particularly relied on them. In any event, the following observations should be made. The second proposition in Richards at [34] is that “income cannot be ‘earned, derived or received’ unless it is also realised”. This proposition appears to influence the third proposition (that income can be realised and received even if temporarily inaccessible) – although that proposition is correct if it is read as meaning that income can be received even if it is temporarily not accessible.

176    The second proposition seems to have proceeded on a misunderstanding of the point which was made by the High Court in Read at 67 (Mason CJ, Deane and Gaudron JJ). The relevant provision of the 1947 Act considered in Read referred to “any personal earnings, moneys, valuable consideration or profits earned, derived or received by that person for his own use or benefit by any means from any source whatsoever, within or outside Australia”. The relevant passage in Read at 67 was addressing unrealised gains from an increase in value of a capital asset, not the question of whether income must be “realised” for it to be “earned, derived or received”. The relevant passage (Read at 67) was:

… [A] mere increase in the value of an asset does not amount to a capital profit. A profit connotes an actual gain and not mere potential to achieve a gain. Until a gain is realized it is not “earned, derived or received”. A capital gain is realized when an item of capital which has increased in value is ventured, either in whole or in part, in a transaction which returns that increase in value.

177    The High Court was not stating that income needed to be “realised” in order to be “earned, derived or received”. Rather, the High Court was stating that one cannot derive a capital profit from a capital asset without selling the asset or venturing it in some way in a transaction that in fact returns a profit.

178    Both parties before us accepted that the Tribunal was correct in concluding that ordinary income is earned by a person for the purpose of Point H23 when that person becomes entitled to that income (T[133]) but erred in its application of that principle by conflating the concept of legal entitlement to be paid with the time at which an enforceable right to compel immediate payment arises or with the point in time at which wages are calculated. The error manifests at T[158].

179    There is nothing in the word “earned” in the context in which that word is used in the Act including in the general definition of the phrase “earned, derived or received” in s 8(1), or in the phrase “first earned, derived or received” in Point H23, which suggests that it was intended to refer to income in respect of which a legally enforceable right to require payment has arisen.

180    It is the service that “earns” the remuneration: Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; 72 CLR 435 at 465 (Dixon J). This is consistent with the definition of employment income in s 8(1A) in so far as that definition refers to income “from remunerative work undertaken by the person as an employee”. A casual employee earns income as the employee provides services under the contract. The services are the consideration for the entitlement to be paid and typically that income is earned on an hourly, daily or per shift basis.

181    The phrase “pay period” may refer to the period over which a person is required to provide services in order to discharge the obligation in respect of which the person is to be paid. The phrase may also refer to the period which an employer uses as an administrative basis to calculate and pay employees. The former is directly relevant to determining the time at which wages were earned or derived. The latter is not.

182    Mr Chaplin was entitled or legally entitled, at the end of each day (or hour) of work, to be paid for the work he had performed, whether or not he had a legal right to require payment immediately on completion of the work – compare: T[132], [133] and [136]. In any event, it is not clear why in this case a legally enforceable right to payment should be inferred to arise on Sundays and not either before, or on the following, Thursdays in accordance with the parties’ arrangements.

183    The Tribunal did not expressly approach the decision under review as one involving a decision about (ascertaining) Mr Chaplin’s entitlement, although that was an essential step in deciding whether a debt arose by operation of the statute and whether to demand repayment. In ascertaining Mr Chaplin’s entitlement, the Tribunal had to (but did not) consider whether the income in dispute was to be taken into account in Step 1 of the Method statement in Point H1 when received, given it was not known whether it was earned in the Youth Allowance fortnight of receipt or the fortnight before. It follows that the Tribunal erred on questions of law.

The meaning of “first earned, derived or received”

184    The first question for the Tribunal involved deciding or ascertaining Mr Chaplin’s entitlement. The Tribunal could not reasonably be satisfied that Mr Chaplin was entitled to what he had received, because it was known that he had under-reported his income for the whole period over which he was paid Youth Allowance. As a practical matter, the question was: when should the income in cross-over weeks be taken into account in Step 1 of Point H1 in reaching a view as to whether Mr Chaplin was entitled to the amount of Youth Allowance he had received, in circumstances where the decision-maker could not be certain about the day on which the income in dispute was earned? That income was known to be earned either in the Youth Allowance fortnight of receipt of the income in dispute or in the immediately preceding fortnight or partly in both.

185    Mr Chaplin submits, and Kennett J agrees, that the income in question must be ignored, with the result that his entitlement is not reduced by that income and he makes a windfall gain. This result flows notwithstanding that it is known that Mr Chaplin’s entitlement could not be, at least as concerns both fortnights, the amount that results by ignoring that income. The Secretary submits it was permissible to take the relevant income into account when it was received to the extent it could not be allocated to a particular day.

186    If one cannot take the income in question into account when earned because of a lack of information, and one cannot take it into account when it is received some days later, the result is that the Secretary would not be able to ascertain (the rate of) the actual entitlement to Youth Allowance. In this situation, the Secretary could only be satisfied about the rate of Mr Chaplin’s entitlement upon making calculations as to Mr Chaplin’s minimum entitlement on the various possibilities and paying the minimum entitlement so established. In this scenario, there is a risk that the Secretary could not be satisfied at all about Mr Chaplin’s entitlement to Youth Allowance.

187    It is worth considering the position if the situation were to arise whilst a recipient is receiving benefits. If – for whatever reason – a claimant knows that income was received but cannot establish the precise days it was earned and whether the earnings were in one Youth Allowance fortnight or another, then – if the income cannot be taken into account when received – the claimant faces the risk that the decision-maker cannot be satisfied (see s 37 of the Administration Act) as to the entitlement at all, or would need to assume the worst case scenario. That is unlikely to be the intended operation of the Act.

188    As a general proposition, the purpose of benefits under the Act is to “maintain a basic level of income for those who [are] unable to receive sufficient income to provide for themselves” – see: Secretary, Department of Employment and Workplace Relations v Richards [2008] FCAFC 97; 168 FCR 438 at [39] (French, Moore and Lindgren JJ) (Richards FCAFC), quoting Secretary, Department of Social Security v Garvey [1989] FCA 774; 19 ALD 348 (Spender J). The Youth Allowance is intended to provide an allowance to qualifying persons at an appropriate level having regard to various factors including the person’s means. The amount of Youth Allowance paid to qualifying persons is intended to vary according to aspects of a person’s circumstances, including the person’s income. Income-based means tests for social security benefits have a long history – see: Read at 68 (Brennan J); Richards FCAFC at [36] and [37] and the cases there cited.

189    If a person qualifies for Youth Allowance, it is necessary to determine the person’s “youth allowance rate”, which s 556 requires be worked out in accordance with the “Youth Allowance Rate Calculator in section 1067G”. Not everyone satisfying the qualifying criteria for Youth Allowance should receive the same amount. Indeed, the Youth Allowance rate may be nil – see: s 547.

190    One of the objects of the social security law is to provide benefits to those whom the legislature considers warrant those benefits, typically people in need. Another object, evident in relation to many benefits, is to ensure that limited financial resources are directed to recipients in amounts which have regard to the income or asset means of the recipients. The social security law contains provisions with various objects, capable of different characterisation depending on the degree of abstraction or the purpose for which the question is asked, such that it is oversimplistic simply to observe that the scheme as a whole is “beneficial” or “remedial” (which it is as a general proposition) – see: ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18; 254 CLR 1 at [29] (French CJ, Crennan, Kiefel and Keane JJ). It is the purpose of the provision in question which must be identified.

191    The purpose of Module A of the Youth Allowance Rate Calculator – which provides the overall calculation process – is to compute a figure for Youth Allowance on a fortnightly basis that is appropriate having regard to the particular circumstances of the relevant person, by increasing the maximum basic rate by reference to allowances and supplements (reflecting need) and decreasing that rate by reference to means.

192    The purpose of Module H of the Youth Allowance Rate Calculator is to reduce the maximum payment rate under an “income test”, to ensure that a person’s income is taken into account in determining the level of social security to be paid for a fortnight. Point H1 provides for how to “work out the effect of a person’s ordinary income … on the person’s maximum payment rate”. Step 1 of the Method statement in Point H1 requires that a person’s ordinary income be worked out on a fortnightly basis. Point H23 provides an instruction about the allocation of ordinary income to a particular fortnight. Unsurprisingly, and to prevent double counting, ordinary income is to be allocated only once. Point H23 requires ordinary income to be taken into account in the fortnight in which it is “first earned, derived or received”. The word “first” is intended to ensure that income which is earned or derived before it is received, or income received before it is earned or derived, is only taken into account once by taking into account at the time when the first of those events occurs. Contrary to the reasons of Kennett J, it is far from uncommon for income to be received before it is earned or derived.

193    In circumstances such as the present, if a decision-maker cannot work out (either through a consideration of direct evidence or through appropriate inference and having afforded procedural fairness) the fortnight in which income was “earned” or “derived”, but can work out the fortnight in which it was “received” (a few days after that income was “earned”), is the decision-maker disabled from making a decision about entitlement (with potentially unfortunate consequences for a social security claimant) or does the statutory scheme permit the taking into account of the income when it is received?

194    The legislature should not be taken to have intended that Point H23 was to operate such that income known to have been earned shortly before it was received should be entirely excluded from the relevant calculations because it cannot be determined whether it was earned in that part of the relevant week which fell within the Youth Allowance fortnight in which it was received or the Youth Allowance fortnight immediately before. That would result in the determination of an entitlement known to be wrong and is contrary to the statutory scheme.

195    Neither party placed emphasis on the use of the phrase “where appropriate” in Step 1 of the Module H Method statement. Those words precede the legislative instruction to “tak[e] into account the matters provided for in points 1067G-H2 to 1067G-H25”. Nor did either party place significant emphasis on the structure of Step 1 more generally, including the use of parentheses. Mr Chaplin submitted that the words “where appropriate” meant “where applicable” in the sense that one must apply, according to their terms, whichever of H2 to H25 are relevant to the person’s circumstances. The Secretary submitted that Step 1 in Point H1 requires fortnightly income to be worked out and, in doing that, one must take into account H23 (for example) if it is capable of application on the material available after reasonable inquiry.

196    Point H1 requires income to be taken into account. Point H23 must be applied where it is appropriate to do so. It will invariably be appropriate to attempt to apply Point H23 in undertaking the task in Point H1. A failure to be able to do so does not result in the income being excluded from the assessment Point H1 requires. The word “appropriate” denotes “effective” or “fitting” for a particular purpose: Vella v Commissioner of Police (NSW) [2019] HCA 38 at [11] (Kiefel CJ), [50] (Bell, Keane, Nettle and Edelman JJ). The particular purpose here is the calculation of the reduction in a fortnightly instalment of Youth Allowance on account of an amount of ordinary income earned, derived or received during that period. If Point H23 is not capable of being applied, then it might be thought that it is not applicable and not “appropriate” to take the rule in Point H23 into account in working out the fortnightly income under Step 1 of the H1 Method statement. Given the clear intent that income is to be taken into account to reduce social security payments as that income is earned, derived or received, it cannot have been intended that one ignore entirely income known to have been earned before it was received on the basis that it could not be determined in which of two weeks that income was earned.

197    When Step 1 of the Method statement in Point H1 and Point H23 are read together, in the context of the Act as a whole, including Module A, the better view is that income which was known to be earned before being received, but which is incapable of being allocated between the two weeks in which it was known to be earned, can be taken into account when it was received in undertaking the task required by Point H1 and in determining the extent of a recipient’s entitlement to Youth Allowance.

198    The word “first” in Point H23 is intended to ensure that income is taken into account only once and directs that income is to be allocated to the earliest fortnight in which the income can be identified as being “first earned, derived or received” on the available material. Point H23 does not confer a discretion as to which fortnight the amount is to be allocated, but it cannot be understood as authorising the formation of a state of satisfaction as to the extent of a recipient’s entitlement which is premised on income known to be earned, derived or received being ignored for the purposes of Step 1 in the Method statement in Point H1 because it is not possible to identify when the first of these occurred. The fact that there might not be one event which occurred “first” (because, for example, the events occurred simultaneously), or that the material does not allow more than a speculative conclusion as to which occurred first, should not be understood as authorising the non-inclusion of income when working out fortnightly income under Point H1. Nor does the fact that it is known that the income was first earned before it was received, but it is not known in which of the two weeks before receipt it was earned. Rather, one must revert to Point H1 because, although it is “appropriate” to take Point H23 into account, it is not possible to apply it.

199    Mr Chaplin submitted that the Secretary’s construction renders the application of Point H23 “inherently uncertain” because it relies on “subjective judgments about the strength of evidence”: ARS[24(b)]. A matter relied upon by Kennett J in concluding that the income in dispute must be ignored is the proposition that “the availability of evidence affects not only the outcome of a controversy concerning the application of the test [in Point H23] but the content of the test itself”.

200    Most administrative decision-making involves the evaluation of evidence or material before the decision-maker. It is true that minds can differ in the assessment of that material, but that is one reason for the availability of merits review. Whatever construction of Point H23 is adopted, the application of the provision will depend on the available material. It may be accepted that there is an objective truth about a person’s entitlement. However, the practicalities of decision-making are that the objective truth is established by the material before the decision-maker and inferences from that material. A decision-maker is not necessarily disabled from making a decision because of an uncertainty about objective truth provided the decision-maker is satisfied of the entitlement based on the available material.

201    As to the proposition that the content of the test changes depending upon the availability of evidence, Kennett J explains:

The amount of a person’s entitlement to youth allowance in respect of a particular fortnight could be $x at the end of the fortnight (when all of the information concerning the days on which they worked is available) but retrospectively become $y some time later when the possibility of an overpayment is being investigated if, as in this case, some information is no longer available.

202    As mentioned, there is an objective truth about a person’s entitlement. The person first earned, derived or received the income on particular days. There is nothing inherently unusual in a system in which claims are paid on the basis of information supplied by a claimant and potentially examined later in particular circumstances. This does not mean that the content of the test changes. The decision-maker’s decision about entitlement may have been different if the decision-maker was provided with different information because, for example, the task was undertaken when or soon after the claim was made and the material available at that time was different. It means that a decision-maker may, by the effluxion of the time, not be able to reach a decision about entitlement on the basis of information that was once available. The application of the test may be different because the information is different. The same would be true if the decision-maker makes a decision contemporaneously with a claim and shortly thereafter is provided further information, by a claimant or otherwise.

203    The decision-maker must take income into account (Step 1 in Point H1) and, where appropriate, it must be taken into account when first earned derived or received (Point H23). That does not have the result that income known to be received must be ignored under Step 1 in Point H1, because information which is likely once to have existed about when it was earned or derived is no longer available. It means that, in making a decision about a person’s entitlement in accordance with the statutory scheme, the entitlement is ascertained on the material available.

204    A consequence of the way in which the Act and Administration Act operate is that it is conceivable that information which was once available might have established an entitlement which was greater than that capable of being established at a later time. The following observations should be made in that respect:

(a)    There is nothing unusual in a statutory scheme for social security which permits payments being made in reliance on information provided by social security claimants, without necessarily examining the various aspects of each fortnightly claim in detail as and when such claims are made. Social security needs to be delivered quickly and efficiently at a reasonable administrative cost.

(b)    The information about earnings is information held by the social security recipient. If one takes the present case as an example, Mr Chaplin was informed about the importance of his earnings to the ascertainment of his entitlement at the time he was informed that the Department had decided that he would be paid Youth Allowance.

(c)    The Secretary has an administrative discretion about whether to demand repayment or seek recovery. As is demonstrated by the observations of Lockhart J in Hales at 398, the matters which may be properly taken into account are broad. There may be situations in which the probable loss of material which was once available militates against making a demand because of the likelihood that there exists an “unprovable” entitlement greater than that revealed by the available material. That is not this case. Here, it was known that Mr Chaplin had consistently under-reported his earnings over the whole period he had received Youth Allowance.

CONCLUSION

205    The Tribunal could not have been satisfied that Mr Chaplin was entitled to what he received. No decision-maker could reasonably have reached that conclusion on the available material. The Tribunal erred in the way it calculated Mr Chaplin’s entitlement. There is no utility in remitting the matter because, on the material before the Tribunal, the only reasonably open conclusion as to Mr Chaplin’s entitlement was that reached by the Tribunal by allocating income in the manner advanced by the Secretary. Apart from ignoring the income in question altogether, thus giving rise to an asserted entitlement which was known to be wrong, no alternative method of ascertaining Mr Chaplin’s entitlement by allocating the income in question was advanced by Mr Chaplin.

206    The only conclusion available to the Tribunal was to be satisfied that Mr Chaplin was entitled to $806.16 less than he received, and that this was a debt to the Commonwealth by force of s 1223(1). The Tribunal’s further conclusion that the amount of $806.16 should be demanded from Mr Chaplin was not shown to be attended by any error.

207    The appeal should be dismissed. The parties agreed that Mr Chaplin’s costs of this appeal were to be borne by the Secretary.

Associate:

Dated: 15 July 2025

REASONS FOR JUDGMENT

KENNETT J:

208    I have had the advantage of reading the reasons of Thawley and Hespe JJ in draft. It will be apparent from their Honours’ reasons that my reasoning and theirs have to some extent developed in dialogue with each other.

209    I gratefully adopt their Honours’ account of the background facts and the statutory scheme and will not repeat more of these than is necessary. I have unfortunately come to a different conclusion as to the proper resolution of the issues.

210    The issues that arise in this proceeding need to be approached with a proper understanding of the nature of the decision under review, the function of the Administrative Appeals Tribunal and the function of this Court in an appeal on a question of law.

211    Section 1223(1) of the Social Security Act 1991 (Cth) provides that, if a person receives the benefit of a “social security payment” and was not entitled to obtain that benefit, the amount of the payment is a “debt due to the Commonwealth” which is taken to arise when the person obtains the benefit of the payment. Section 1223(9) makes it clear that a “social security payment” includes part of a payment. In short, if a person receives more than they are entitled to receive, the difference is recoverable as a debt.

212    It has long been understood that a debt under s 1223 arises by operation of the Act and not as a result of any administrative decision. This was established in respect of s 1224, which similarly brought into existence a “debt due to the Commonwealth”, by Secretary, Department of Social Security v Alvaro [1994] FCA 1124; 50 FCR 213 at 218 (von Doussa J, Spender and French JJ agreeing), referring to the analysis of earlier legislation in Director General of Social Services v Hangan [1982] FCA 292; 45 ALR 23 and Director General of Social Services v Hales [1983] FCA 81; 47 ALR 281; 78 FLR 373. This understanding was common ground between the parties in this appeal. It has implications for the nature of the decisions made by the respondents and the review process. It also affects the correct approach to the substantive issues.

The decision under review and the decision of the Tribunal

213    The decision of the Social Services and Child Support Division of the Tribunal (AAT1) described the subject of its review as a decision by an authorised review officer affirming a decision by Centrelink. In the earliest decision in that chain (the original decision), as AAT1 put it, “Centrelink raised a youth allowance debt against” the present applicant (Mr Chaplin). The original decision was manifested by a letter to Mr Chaplin dated 2 October 2019 which said:

We have finished checking your past income

Thank you for checking and updating your past income information. We have used the information you told us to assess the amount of payments you received from us in the past.

What this means for you

*The amount you owe us may also include changes to other amounts and allowances you have received. For more information, view your online statement at humanservices.gov.au/confirmincome or call us on 1800 061 838.

This is a notice of decision under social security law. If you want to discuss or you do not agree with the decision, you can call us on 1800 061 838 to have the decision explained or reviewed.

What happens next

We will write to you again about the amount you owe and explain how to pay it. There are payment plans and options available to help you.

Yours sincerely

National Manager

Compliance Risk

(Emphasis in original.)

214    In the light of the objective operation of s 1223, this must be understood as an officer in Centrelink having formed an opinion about how much Mr Chaplin owed to the Commonwealth pursuant to that section and deciding to seek payment of that amount. Further communication including a demand for payment was foreshadowed by the final sentence of the letter.

215    A debt arising under s 1223 can be recovered by deductions, legal proceedings, a garnishee notice or repayment by instalments: ss 1222(2), 1230C(1).

(a)    Power to determine that an amount is to be deducted from payments that are otherwise due under the Act, in order to recover a debt, is vested in the Secretary by s 1231. It is not directly relevant in the present case as Mr Chaplin is no longer receiving payments under the Act.

(b)    Section 1230C(1)(d) permits the recovery of debts by way of legal proceedings (see also s 1232). Such debts are recoverable by the Commonwealth in a court of competent jurisdiction.

(c)    Section 1230C(1)(e) empowers the Secretary to issue a garnishee notice to a person who owes money to or holds money on behalf of a debtor. Non-compliance with the notice, to the extent it can be complied with, is an offence: s 1233(3)–(3B). A person who makes a payment to the Commonwealth in compliance with a notice is taken to do so under the authority of the debtor and the debt is reduced by the amount so paid: s 1233(5)–(6).

(d)    The Secretary is authorised by s 1230C(1)(c) (and see s 1234) to enter into an arrangement with a person for the repayment of a debt owed by the person to the Commonwealth.

(e)    Under s 1230C(2), a debt can be recovered by way of legal proceedings or a garnishee notice only if recovery by deductions or agreement has been attempted.

216    Each of these recovery provisions presupposes that there is a debt to the Commonwealth that arises under the Act. If there is a dispute about the amount of the debt, it must ultimately be resolved by a court. The most obvious situation where that would occur is the commencement of legal proceedings by the Secretary to recover the debt. It is also possible to envisage a debtor (or another interested party: eg Firth v Centrelink [2002] NSWSC 564; 55 NSWLR 451) challenging the efficacy of a garnishee notice or suing the Commonwealth or the Secretary in the event of an alleged over-recovery (although the right to receive payments is enforceable by public law remedies rather than as a debt: Walker v Secretary, Department of Social Security [1995] FCA 130; 56 FCR 354 at 372–4 (Cooper J, Spender J agreeing)). While these circumstances are probably unlikely to arise in practice, given the amounts of money involved and the very limited resources available to most people who receive payments under the Act, they represent the logical end-points of recovery action if the existence or amount of a debt is not agreed.

217    The original decision was therefore not an exercise of a statutory power to affect rights. It was not a decision “under” any statute in the sense discussed in Griffith University v Tang [2005] HCA 7; 221 CLR 99 at [79]–[81] (Gummow, Callinan and Heydon JJ). Nevertheless, decisions of this kind affect interests and there is authority that they are amenable to review by the Tribunal: see Alvaro at 218–9. In conducting a review, the Tribunal’s function is to “do over again” the task of the original decision-maker (eg Miller v Minister for Immigration, Citizenship and Multicultural Affairs [2024] HCA 13; 278 CLR 628 at [14] (Gageler CJ, Gordon, Edelman, Jagot and Beech-Jones JJ)) and it is vested with the powers and discretions of that decision-maker. It does not exercise any part of the judicial power of the Commonwealth. The Tribunal, therefore, was not deciding the amount of a debt owed by Mr Chaplin in any authoritative way. It was re-exercising the function of the officer who made the original decision, by reviewing that officer’s assessment as to what amount was owed pursuant to the Act and whether to seek payment of that amount from Mr Chaplin.

218    The decision in AAT1 was to set aside the decision of the authorised review officer and send the matter back to Centrelink for reconsideration in accordance with a direction that the amount of the debt was to be reconsidered in accordance with certain observations as to methodology. The decision on further review in the General Division of the Tribunal (AAT2) was:

Pursuant to section 43(1)(c) of the Administrative Appeals Tribunal Act 1975, the decision of the authorised review officer dated 28 April 2020 and the decision of the Administrative Appeals Tribunal dated 8 January 2024 are set aside, and the following decision is substituted: a debt in the amount of $806.16 is due to the Commonwealth by the respondent.

219    The Tribunal was, as noted earlier, not empowered to make any authoritative determination of the amount Mr Chaplin owed to the Commonwealth by operation of s 1223. That, if no agreement could be reached with Mr Chaplin, would ultimately be a decision for a court following recovery action. The Tribunal was standing in the shoes of an officer who had made an assessment that a certain amount was owed and that Mr Chaplin should be asked to pay that amount. Having regard to the statutory context, therefore, the decision in AAT2 should be understood to have the effect that the original decision is replaced by a decision to seek payment of $806.16 from Mr Chaplin. Given the status of the original decision, the Tribunal’s assessment of the amount due could not be binding in any direct way on Mr Chaplin (whether it might give rise to an issue estoppel against him is a question for another day).

220    The decision was made by the Tribunal under the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) and an “appeal” was brought to this Court under s 44 of that Act. Following the repeal of the AAT Act and the replacement of the Tribunal by the Administrative Review Tribunal, the proceeding continues on foot with the Court empowered to do anything that it could do in relation to the Tribunal under the old law: Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (Cth), Sch 16 item 25. The “appeal” to this Court is therefore an appeal under s 44 of the AAT Act “on a question of law”. Under s 44(4), the Court may make such order as it thinks appropriate in its disposition of the appeal, including (under s 44(5)) an order affirming the decision of the Tribunal or an order setting the decision aside and remitting the case to be heard again. However, the orders that will be appropriate in the exercise of that broad remedial power are limited by the nature of the judicial function and the confining of the subject-matter of the appeal to questions of law (see eg Hales at 309–10 (Lockhart J)). The Court commonly places quotation marks around the word “appeal” when referring to proceedings under s 44 because such proceedings are in the Court’s original rather than appellate decision. The proceedings are in substance a form of judicial review of administrative decisions in which the distinction between legality and merits must be observed.

221    As explained by Thawley and Hespe JJ, the Tribunal arrived at its assessment of the overpayment by treating employment income received by Mr Chaplin in respect of each of several weekly pay periods as having been “earned” at the end of that pay period. Both Mr Chaplin and the Secretary contend that that approach was wrong in law. I agree. There is no need to add anything to the reasoning of Thawley and Hespe JJ on this point.

222    The Secretary contends, however, that the decision in AAT2 should not be set aside because the amount that it assessed as owing by Mr Chaplin was the correct amount. The Secretary filed a notice of contention to provide a formal procedural basis for this argument.

223    Although the filing of a “notice of contention” in an “appeal” from the Tribunal is expressly contemplated by r 33.21 of the Federal Court Rules 2011 (Cth), the role of such a notice may be different to the role of a notice of contention in an appeal properly so called. This Court cannot substitute its own decision on the merits for that of the Tribunal and generally cannot make its own findings as to matters of primary fact. If the respondent to an “appeal” from the Tribunal establishes an error of law by the Tribunal, that may simply amount to a further reason why the decision of the Tribunal should be set aside. Here, the Secretary agrees that the Tribunal erred in its construction of the critical provision of the Act, but submits that the error is immaterial because the correct construction leads to the same conclusion as to the amount of the debt. The construction contended for by the Secretary, applied to the facts found by the Tribunal, leads (so it is said) to a figure which coincides with the one arrived at by the Tribunal.

224    I mention these matters because it is necessary to keep in mind that, in determining the “appeal” from the Tribunal, the Court is not making its own assessment of the amount of the debt. The Court is limited to determining whether the Tribunal’s assessment (which itself is authoritative only to the extent that it stands in place of the decision of Centrelink as to how much it seeks to recover) was materially affected by an error of law.

Substantive issues

225    Calculation of the debt (if any) that arises under s 1223 involves the comparison of two integers:

(a)    the amount of the payment that was made; and

(b)    the amount of any payment to which the person who received the benefit of the payment was “entitled”.

226    Because the debt arises by operation of the Act and not pursuant to an administrative decision, each of these integers must be understood as dollar amounts that arise and can be ascertained irrespective of any administrative decision-making process. Put another way, there is necessarily a single correct answer to each of the questions of how much was paid and how much the person was “entitled” to be paid. As to the latter question (which is the focus of the dispute here), therefore, there is necessarily a specific dollar amount that Mr Chaplin was entitled to be paid for each of the fortnights in respect of which Youth Allowance was paid to him.

227    This is consistent with how the benefit was conferred by the Act at times relevant to these proceedings. (In what follows I will refer to the relevant provisions in the present tense even though some have since been amended.)

228    Section 7 of the Social Security Administration Act 1991 (Cth) provides that the Secretary has the “general administration” of the “social security law”, which includes the Act. A person who wishes to receive a payment under the Act is required to make a claim (s 11 of the Administration Act), and the Secretary is required to “determine” claims: s 37. These steps appear therefore to be preconditions for the existence of any entitlement to receive a payment. However, once an entitlement arises, there is no provision in the Act or the Administration Act making the rate of payment depend on an administrative decision. The Secretary is vested with significant information gathering powers, but these must be understood to exist in order to ensure that the Secretary is in a position to make payments at the correct rates in accordance with the Act rather than to support the administrative determination of rates of payment. This explains why, in the decisions under review, Mr Chaplin’s entitlement to youth allowance has been understood as something requiring ascertainment by reference to evidence rather than something fixed by an earlier decision.

229    Relevantly to youth allowance, s 540 of the Act provides (subject to the other provisions in Subdiv A of Div 1 of Pt 2.11) that a person is “qualified” for youth allowance in respect of a period if they meet certain objectively expressed criteria. Division 2 of Pt 2.11 provides for various circumstances in which youth allowance is not “payable”, including “if the person’s youth allowance rate would be nil”: s 547(1). Section 556, which is of central importance here, provides as follows.

556    How to work out a person’s youth allowance rate

Subject to this section, the rate of a person’s youth allowance is to be worked out in accordance with the Youth Allowance Rate Calculator in section 1067G.

230    Although s 556 is framed in the form of an instruction to a decision-maker (as to how a rate is to be “worked out”), as noted earlier, nothing in the Act makes the rate at which youth allowance is payable dependent on an administrative decision.

231    Consequently, the duty to make payments under the Act (which, as noted above, is enforceable by public law remedies) is a duty to make payments in specific amounts determined by the operation of provisions of the Act. When one comes to the provisions of the “rate calculator” in s 1067G, therefore, the “method statements” in the various modules (despite their Plain English drafting style) cannot be construed as statements guiding the exercise of an administrative power of assessment. They are provisions whose application produces the single correct answer, as to how much youth allowance a person is entitled to be paid in respect of any given period, that is the foundation for the operation of s 1223.

232    The amount of youth allowance that a person is entitled to in respect of a period (in practice a fortnight) is fixed at the end of that period by the operation of the Act upon the circumstances that exist and events that occur during the period. The entitlement that crystallises at this time is the entitlement referred to in s 1223. The single correct answer to the question of entitlement in respect of a fortnight cannot change later as new evidence becomes available or relevant documents are lost, although the ability of interested parties to prove that correct answer may fluctuate (and difficulties of proof will necessarily have consequences for the outcome of any dispute).

233    Relevantly to this case, Step 1 of the “method statement” set out in Point 1067G-H1 provides as follows.

Step 1.    Work out the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in points 1067G-H2 to 1067G-H25).

234    Point 1067G-H23 then provided as follows.

Ordinary income generally taken into account when first earned, derived or received

1067G-H23    Subject to [provisions which are not relevant here], ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received.

235    The Secretary submits that, if there is evidence establishing the fortnight in which an amount of employment income was “earned”, it is to be taken into account in that fortnight; and that, if the evidence is insufficient to make that allocation, the income amount is to be taken into account in the fortnight in which it was “received”. In my view, this construction has three significant difficulties.

236    First, it requires a strained reading of the text of the provision.

(a)    It is reasonably clear (and not in dispute) that “earned”, “derived” and “received” have different meanings and describe different events: Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307 at 311 (Sheppard J).

(b)    Employment income is commonly “earned” before it is “received”. Other kinds of income are likely to be “derived” at a certain time and “received” at a later time. Some kinds of income (eg gifts) may simply be “received”.

(c)    The relevant phrase is “first earned, derived or received”; however, income is not (at least normally) “earned”, “derived” or “received” more than once. The effect of including the word “first” must therefore be that it is the earliest in time of the earning, deriving or receiving of an amount of income that fixes the fortnight in which that amount is taken into account.

(d)    In the case of employment income, the earliest event is usually (and was in this case) the “earning” of the income. However, the Secretary’s construction calls for some income to be taken into account in the fortnight in which it is “received”, even if it is known that the income was “earned” earlier (and possibly, or even definitely, earned in an earlier fortnight). That is directly contrary to the statutory instruction.

237    Secondly, although a strained construction can arguably be supported on the ground that it makes the provision workable (and avoids a result in which income known to have been received is not brought to account at all), that justification breaks down in a case where the particular fortnight in which an amount of income was “received” cannot be identified either. Such cases are no doubt very rare in practice (given the amount of detail about employment income collected by and available from the Australian Taxation Office), but they can at least in principle arise and may not have been so rare when the provisions were first enacted.

238    Thirdly, and most significantly, the consequence of the Secretary’s construction is that the availability of evidence affects not only the outcome of a controversy concerning the application of the test but the content of the test itself. The amount of a person’s entitlement to youth allowance in respect of a particular fortnight could be $x at the end of the fortnight (when all of the information concerning the days on which they worked is available) but retrospectively become $y some time later when the possibility of an overpayment is being investigated if, as in this case, some information is no longer available. That is inconsistent with recipients of payments under the Act having any certainty of income; and it is inconsistent with the existence of the single correct answer that s 1223 demands.

239    To be clear, I do not suggest that there is anything unusual or unacceptable in the notion that an assessment of the amount of a person’s entitlement (by an officer, a tribunal or a court) depends on the state of the evidence before the decision maker. What is incongruous is that, even though the entitlement arises objectively by operation of the Act (and not as a function of an officer’s assessment), what I have described as the single correct answer could wax and wane over time as the state of the evidence changes.

Resolution

My preferred approach

240    I would therefore reject the Secretary’s construction and approach the issues in this case as follows.

241    First, where wages are paid in arrears, Point 1067G-H23 brings each amount of employment income to account (so as to affect the amount of youth allowance to which the recipient is entitled) in the fortnight in which it is “earned”. As a matter of ordinary English, an employee “earns” an amount of income when they have done whatever they need to do in order to cause an entitlement to receive that income to arise. Usually at least, what needs to be done is the performance of work. Absent evidence of some particular contractual arrangement, therefore, if there was a proper inference to be made it was that Mr Chaplin earned income on each of the days he worked. The Tribunal therefore erred, either by misunderstanding the usual legal arrangements concerning casual employees (as Mr Chaplin submits) or by making a finding concerning his entitlement to wages that was not supported by any probative material (which is an error of law: see eg Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 at 355 (Mason CJ, Brennan J agreeing), 367–8 (Deane J)).

242    Secondly, the amount of youth allowance to which a recipient is entitled can only be conclusively established in respect of a particular fortnight by establishing the amount of income earned in that fortnight. Relevantly to Mr Chaplin’s case, that involves establishing the hours that he worked on particular days.

243    Thirdly, in order to succeed in recovering an overpayment (for example, by suing for it in a court), the Secretary would need to prove by admissible evidence that the amount of youth allowance received in one or more relevant fortnights was greater than the person’s entitlement for those fortnights. That would necessarily involve proving the facts necessary to establish what the entitlement was (or, possibly, that the entitlement could not have been more than a certain amount). Thus, if the alleged overpayment is said to have been caused by under-reporting of employment income, the Secretary cannot succeed in recovering the overpayment without proving, in relation to particular fortnights, that more income was earned than was reported in those fortnights.

244    Fourthly, a decision to “raise an overpayment” (ie, to identify a particular amount as a debt owed to the Commonwealth and seek repayment of that amount) proceeds on a misunderstanding of the applicable law if it relies on the allocation of income to particular fortnights in the absence of material capable of proving that the income was earned in those fortnights.

245    For these reasons, not only did the Tribunal fall into an error of law (by assuming that all of Mr Chaplin’s income was “earned” at the end of the relevant pay period), but it would also have erred in law if it had proceeded on the basis urged by the Secretary. It therefore cannot be concluded that the Tribunal’s decision would have been the same if it had proceeded on a correct understanding of the law.

246    This approach may be said to lead to a windfall for Mr Chaplin, in the sense that the Secretary may be unable to recover any amount from him even though it seems to be uncontroversial that he was consistently under-reporting his income. A partial response to that point is that it may well be possible to achieve some recovery. For example, it may be possible to combine consecutive fortnights and prove that, wherever the earning of income fell as between those fortnights, Mr Chaplin’s entitlement to youth allowance over the period could not have been more than a certain amount. If that amount was less than he received in respect of the period, an overpayment would be established to the extent of the difference. To the extent that recovery is precluded by the passage of time and consequent loss of relevant documents, this is a consequence of the legislature having chosen to enact a regime in which overpayments arise by operation of the Act and consequently may require proof.

Points of difference from the majority reasoning

247    It will be apparent that I have come to a different conclusion from Thawley and Hespe JJ as to the correct construction of Point 1067G-H23. I also respectfully differ from their Honours on three related points.

248    First, because applicable rates of youth allowance and the existence and amount of any overpayments arise by operation of the Act, I do not consider that any legal effect or status can be attributed to assessments of these matters made by officers on the material before them (despite the obvious practical importance of these decisions to applicants for and recipients of payments under the Act). Where there is a single correct answer to the question whether a person has been overpaid youth allowance (and by how much), the only opinion that can authoritatively decide that correct answer is the opinion of a court in a proceeding where the point is in issue. Hence, in my view, a “decision” to demand payment from a person on the footing that they have been overpaid must be made with an eye to what, on the known evidence, a court would find (cf [161]).

249    While I would respectfully endorse the observations of Woodward J in McDonald v Director-General of Social Security [1984] FCA 59; 1 FCR 354 at 358 (set out by Thawley and Hespe JJ at [113]), those observations concerned review of the exercise of an express statutory power conferred on the Director-General. Despite that, his Honour’s observations usefully make the point that the correct approach for a merits review tribunal (or for that matter a primary decision maker) in a position of factual uncertainty must depend on the nature of the decision to be made. Where the decision is whether to demand payment of a certain sum on the basis that it constitutes an overpayment, the correct approach must in my view take account of the fact that the final determination, if all else failed, would occur in a forum in which the Secretary would bear an onus of proof.

250    Secondly, while I agree that a necessary step in assessing the amount of any overpayment must be to identify the amounts of youth allowance to which the recipient of the allowance was entitled in respect of the relevant period, I do not think it follows that there is a sequence of separate “decisions” or “determinations” (cf [107]–[110], [144], [148], [167]). Faced with a potential overpayment, an officer has to assess whether there has been an overpayment, in what amount, and what action should be taken. The amount of the allowance to which the recipient was properly entitled is an integer in that calculation rather than a separate preliminary decision.

251    It follows from my understanding of the statutory scheme (and from the point made by Woodward J) that an officer should not resolve to seek repayment of any amount unless they are affirmatively satisfied that there has been an overpayment in that amount. If the material is insufficient to sustain that conclusion, it is not proper for a demand to be made or recovery action to be taken. I therefore do not accept, with respect, that the recipient’s entitlement to receive the amounts of youth allowance that were paid must be positively established in retrospect in order to resist the raising of an overpayment (cf [153], [157]). Taking that approach means that a person who receives no more than their entitlement, but subsequently loses relevant documents and is unable to substantiate that entitlement months or years later, will be found to have been overpaid. Such a surprising result is most unlikely to have been intended.

252    The burden of persuasion, for want of a better term, depends on what is sought to be done. A person who claims a benefit needs to persuade the relevant decision-maker that they are entitled to receive it. However, if it is proposed that money already paid should be recovered as a debt, the decision maker must feel a genuine persuasion (based on probative material) that what was paid exceeded the recipient’s entitlement before taking any steps to demand repayment.

253    Thirdly, for reasons already mentioned at [246] above, I do not accept that the view I take requires Mr Chaplin’s income to be “ignored” in circumstances where it is clear that he under-reported that income (cf [161], [185], [199]). An inability to be satisfied as to the exact amount of his entitlement in respect of each specific fortnight is not inconsistent with some amount of overpayment being established (for reasons mentioned at [246]). I therefore do not disagree with what their Honours say at [163]–[164]).

Proposed order

254    I would set aside the decision of the Tribunal in AAT2 and remit the case to the Tribunal for reconsideration in accordance with these reasons. There appear to me to be sound reasons why the case should go back to Centrelink for the relevant calculations to be done again from scratch, rather than the Tribunal taking on the role of a primary decision-maker. However that would be a matter for the Tribunal to decide.

Associate:

Dated: 15 July 2025