ARC Recovery by the Commissioner of Taxation of Family Assistance Debts Inquiry – Terms of Reference

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  1. Background

    1. The Administrative Review Council (‘Council’) has resolved to inquire into and report on a systemic issue raised by the President of the Administrative Review Tribunal (‘ART’) in the Notice of Systemic Issue No. 1 of 2025, dated 16 September 2025 (‘Notification’).
    2. The Notification concerns the Australian Taxation Office’s (‘ATO’) practice of recovering debts owed to the Commonwealth arising from the overpayment of family assistance benefits, against affected individuals’ income tax refunds, upon being alerted to the debts by Services Australia.
    3. The President noted that financial hardship (which may sometimes be severe) is caused to recipients of family assistance benefits under the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (‘FAA Act’) by the Commissioner of Taxation’s (‘Commissioner’s’) ‘application’ under s 87 of the FAA Act of income tax refunds due to those recipients against debts to the Commonwealth in respect of alleged overpayments of such benefits, in circumstances where:
      1. Many of the recipients are vulnerable individuals, some of whom rely upon the expected income tax refund to meet basic life necessities.
      2. The ‘application’ process is automated, without any consideration being given to the circumstances of the recipient, including whether an approved repayment arrangement or repayment pause is in place between the recipient and Services Australia acting on behalf of the Secretary of the Department of Social Services (‘Secretary’).
      3. The Commissioner’s notice of assessment and statement of account which refer to the ‘application’ under s 87 do not advise the recipient of any avenues of review if the recipient is aggrieved by the decision, including the Commissioner’s power to reverse the decision, referred to in (1.3.5).
      4. An ‘application’ under s 87 of an income tax refund does not give rise to a decision either of the Secretary or the Commissioner, which is reviewable by the ART.
      5. It is possible that such an exercise of discretionary power under s 87 is infected by jurisdictional error, so that the Commissioner has power to treat the 'application' under s 87 as a nullity and for practical purposes reverse the decision.

  2. Scope

    1. The Council will review:

      1. The statutory framework relevant to the systemic issue, with particular regard to ss 82, 87, 91, 95, 162, and 162A of the FAA Act.
      2. The practices and procedures adopted by Services Australia, the Department of Social Services and the ATO to facilitate ‘application’ decisions under s 87 of the FAA Act.
      3. The internal and external review rights available to individuals who are the subject of a decision under s 87 of the FAA Act, including:
        1. whether those review avenues are adequate; and
        2. how information about those rights is communicated.
    2. As part of the inquiry, the Council will consider:
      1. Whether the powers conferred by the statutory provisions relevant to the systemic issue are being exercised within the scope of the relevant power, in conformity with administrative law principles), in conformity with privacy principles, fairly, and consistently.
      2. The information sharing practices between Services Australia and the ATO for the purposes of making ‘application’ decisions under s 87 of the FAA Act, including:
        1. the scope and operation of ss 162 and 162A of the FAA Act;
        2. the lawfulness of the practices of sharing protected information;
        3. whether those practices are consistent with the Australian Privacy Principles and the Privacy (Australian Government Agencies – Governance) APP Code 2017; and
        4. the use of automated decision-making in sharing information.
      3. The exercise of the discretionary power under s 87 of the FAA Act, including:
        1. whether its exercise involves excess of power, including whether a person who has entered a payment plan under s 91 of the FAA Act owes the entire debt to the Commonwealth for the purposes of s 87 at the time of the proposed ‘application’;
        2. whether the power is exercised in conformity with administrative law principles; and
        3. use of automated decision-making in the exercise of the discretion under s 87.
      4. The information available to affected individuals about the policies and practices of Services Australia and the ATO with respect to the systemic issue.
      5. The information available to affected individuals as to any associated review rights.
      6. The adequacy of the action currently being taken by Services Australia and the ATO to address the systemic issue while a long-term solution is developed and implemented.
      7. The factors that need to be considered when developing and implementing a long-term solution.
      8. The appropriateness of the long-term solution proposed by Services Australia and the ATO.

  3. Consultation

    1. The Council will engage with targeted stakeholders on the matters relevant to the inquiry.
    2. The Council will not conduct a public consultation process.

  4. Timeframe

    1. The Council proposes to report on its inquiry to the Attorney-General during the first quarter of the 2026–27 financial year.