Allen; Secretary to the Department of Family and Community Servic Es
[2003] AATA 251
•18 March 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 251
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2002/1058
GENERAL ADMINISTRATIVE DIVISION
Re: SECRETARY TO THE
DEPARTMENT OF FAMILY AND
COMMUNITY SERVICES
Applicant
And: JAMES ALLEN
Respondent
DECISION
Tribunal: Mr B.H. Pascoe, Senior Member
Date: 18 March 2003
Place: Melbourne
Decision:The Tribunal sets aside the decision under review and in its stead decides that the respondent derived income of $6000 in the fortnight in which 24 August 2001 occurred and income of $500 in the fortnight in which 1 September 2001 occurred. The matter is remitted to the applicant to calculate the respondent's entitlement to youth allowance in accordance with this decision.
(sgd) B.H. Pascoe
Senior Member
SOCIAL SECURITY – youth allowance – award of scholarship – receipt of arrears of scholarship payment – whether exempt lump sum – fortnight in which earned, derived or received
Social Security Act 1991
Harris v Director‑General of Social Security (1985) 57 ALR 729
Secretary to the Department of Family and Community Servicesv Rolley (2000) 175 ALR 4
Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348
REASONS FOR DECISION
18 March 2003 Mr B.H. Pascoe, Senior Member
This is an application to review a decision of the Social Security Appeals Tribunal (SSAT) which set aside a determination of a Centrelink authorised review officer (the ARO) of the applicant and found that an amount of $6500, received by the respondent, was an exempt lump sum. The ARO had determined that the amount received on 10 September 2001 was to be brought to account as income for the period 10 September 2001 to 10 September 2002.
At the hearing of the application the applicant was represented by Ms E. King, an advocate with Centrelink, and the respondent was unrepresented. There was no dispute as to the facts of this case with the sole issue being the correct treatment of the amount under the Social Security Act 1991 (the Act).
The respondent, Mr J. Allen, unsuccessfully applied for a Rural Australia Medical Undergraduate Scholarship Scheme (RAMUS) in early 2001. He appealed against the decision not to grant him a scholarship. On 24 August 2001 he was advised that his appeal had been successful. The scholarship provided $10,000 per annum, payable at the rate of $500 on the first and fifteenth of each month, from 1 March to 15 December. On 10 September 2001, Mr Allen received $6500, being the arrears from 1 March 2001 to 1 September 2001. During the year, Mr Allen had been in receipt of Youth Allowance as a full‑time student at Monash University. An ARO of Centrelink made a decision on 14 May 2002 to treat the $6500 as income and, pursuant to s.1073(1) of the Act, that Mr Allen would be taken to receive one fifty‑second of that amount during each week, commencing on 10 September 2001. This calculation produced an overpayment of youth allowance for part of the period but the resulting debt was waived on the grounds of having occurred due to administrative error and the allowance having been received in good faith.
The primary argument of Mr Allen was that Centrelink had been inconsistent in applying different rules to the receipt of his amount of arrears of RAMUS payments to the RAMUS recipients of the prior year. As a result of delays in the implementation of the RAMUS scheme in 2000, its first year of operation, all 426 scholarship recipients received a lump sum payment of $10,000 in the third quarter of the year. On 15 September 2000, a delegate of the applicant made a determination, under s.8(11)(d) of the Act, that such payment made on or after that date and before 31 December 2000 was an exempt lump sum. Section 8(11) provides:
…
8(11) An amount received by a person is an exempt lump sum if:
(a)the amount is not a periodic amount (within the meaning of subsection 10(1A); and
(b)the amount is not a leave payment within the meaning of points 1067G‑H20, 1067L‑D16 and 1068‑G7AR; and
(c)the amount is not income from remunerative work undertaken by the person; and
(d)the amount is an amount, or class of amounts, determined by the Secretary to be an exempt lump sum.
Note: Some examples of the kinds of lump sums that the Secretary may determine to be exempt lump sums include a lottery win or other windfall, a legacy or bequest, or a gift — if it is a one‑off gift.
Section 10(1A) states:
…
10(1A) For the purposes of subsection (1), an amount is a periodic amount if it is:
(a)the amount of one payment in a series of related payments, even if the payments are irregular in time and amount; or
(b)the amount of a payment making up for arrears in such a series.
The decision of the SSAT was that the $6500 received by Mr Allen was not a periodic amount and determined the amount to be an exempt lump sum under s.8(11) of the Act. This was on the basis that s.10(1A) was for the purposes of s.10(1) which deals solely with child maintenance payments and the arrears referred to had to be arrears of such maintenance not of amounts such as RAMUS. Before this Tribunal, the applicant argued that such an interpretation was incorrect as s.8(11) draws on the definition in s.10(1A) for the purposes of that subsection. It was contended that the term within the meaning of section 10(1A) allows that definition to be applied to income under s.8 without restricting it to maintenance payments. It was acknowledged that the interpretation now contended by the applicant means that the determination of 15 September 2000 relating to the arrears paid to RAMUS recipients in 2000 was not a determination permitted by s.8(11).
The applicant then contended that the amount of $6500 fell to be dealt with by s.1073 of the Act, by apportioning it over the 52 weeks from the date of receipt. Section 1073(1) provides:
1073(1) Subject to points 1067G‑H5 to 1067G‑H20 (inclusive), 1067L‑D4 to 1067L‑D16 (inclusive), 1068‑G7AA to 1068‑G7AR (inclusive), 1068A‑E2 to 1068A‑E12 (inclusive) and 1068B‑D7 to 1068B‑D18, if a person receives, whether before or after the commencement of this section, an amount that:
(a)is not income within the meaning of Division 1B or 1C of this Part; and
(b)is not:
(i)income in the form of periodic payments; or
(ii)ordinary income from remunerative work undertaken by the person; or
(iii)an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty‑second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
It was said that none of the exceptions listed in this subsection applied to the amount in question here. However, it was acknowledged that, if the definition of periodic amounts contended for the purposes of s.8(11) applied also to periodic payments, s.1073 could not apply to RAMUS arrears. It was argued that the use of a different phrase indicates that Parliament did not intend to incorporate the s.10(1A) definition into s.1073. It was said that the words should be given their ordinary meaning and, while the ongoing payments of $500 twice in each month were clearly periodic payments, the sum of $6500 for arrears was not a periodic payment so that s.1073 applied to that amount. The applicant argued that s.1067G‑H23, which provides that ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received, applies to each $500 payment but, as this section is subject to section 1073, cannot apply to the $6500.
Mr Allen argued that the reasoning of the SSAT was correct and should be affirmed. He believed that it was appropriate that the amount representing arrears of RAMUS, which arose from no fault of his, should be treated in the same way as the arrears which were paid in 2000. Alternatively, he argued that the application of s.1073 resulted in double counting by adding a proportion of the arrears payment to the ongoing scholarship payments and precluding him from any entitlement to youth allowance in the succeeding period.
It is appropriate to deal first with the question of whether s.8(11) can apply to the $6500. It is clear from the examples cited as a footnote to s.8(11) and the Explanatory Memorandum when the provision was introduced that it is intended to apply to one‑off windfall amounts such as lottery wins, legacies or gifts. While it can lead to confusion by importing a definition of a periodic amount from another provision dealing with maintenance payments, I am satisfied that is solely the words of s.10(1A) which are to be imported into s.8(11) so as to include from that latter provision any payment of arrears of a series of related payments such as happened in this case. It follows that the determination of 15 September 2000 was not a determination which could be made under the Act and cannot be made in respect of the amount received by Mr Allen as it was a periodic amount as defined.
However, notwithstanding the difference in terminology used in s.1073(1), I am satisfied also that the amount is not covered by that section. The amount of $6500 is clearly income and, effectively, the first payment in an ongoing series of periodic payments. In my view, the amount itself is income in the form of periodic payments being the arrears of 13 periodic payments to which Mr Allen was entitled as a RAMUS holder. In my view, the purpose of s.1073 is to deal with income which is received in a lump sum and cannot easily be seen as relating to a specific period. An obvious example for the application of s.1073 is a distribution from a trust, particularly where a beneficiary becomes entitled to an amount of income at a time when the trustee exercises a discretion to distribute such income.
It is tempting to regard the $6500 as being income of Mr Allen on the first and fifteenth of each month, commencing on 1 March 2001 and to recalculate his entitlement to youth allowance from that date with a consequent debt for likely overpayments in that period. However, until late August 2001, he had no entitlement to receive any RAMUS amount. It was not until that date that he could be said to have earned, derived or received the scholarship money. In any of the months prior, he was not a RAMUS holder. The question then arises as to how the amount should be treated. Section 1067G‑H23 could be said to apply to treat the amount as income solely within the fortnight in which it was derived. Section 1067G‑H24 would not appear to be relevant as it applies only to the situation where a person receives a number of ordinary income payments and each payment is in respect of a period that is greater than a fortnight. In the Guide to Social Security Law (the Guide) there is a discussion in Part 4.3.3.20 on back pay paid to a person for a period of employment. It states:
…
Back pay paid to a person for a period of employment
Arrears of pay can be treated as income IF the person had a "present legal entitlement" to the payment of arrears at the time they were earned (for example, the person was underpaid due to administrative error on the part of the employer). A debt should be raised based on the under declared earnings.
Back pay paid to a person for a period of employment, where there was no "present legal entitlement" is NOT treated as income. "Present legal entitlement" at the time earned does NOT exist in situations such as where a Workplace Agreement backdates a pay increase. In those situations, "present legal entitlement" exists from the date of decision to increase pay, not the earlier date for the commencement of the back pay. Where a person receives arrears for which there was no "present legal entitlement", the payment, represents a period in the past. The arrears cannot be considered twice: once for the past period, and once for the fortnight of receipt, that is, the arrears are NOT assessed at all.
Example: A person received $600 back payment of wages on 1 May following a decision by an Industrial Tribunal on 1 April to back date a pay increase to 1 February. The payment of $400 representing arrears of wages from 1 February to 31 March is NOT treated as income as the person did not have "present legal entitlement" to the payment during that period. The $200 representing the arrears for the month of April, however, is income, as the person had "present legal entitlement" to the higher wage as from 1 April.
The Guide is simply that, a guide. It cannot take the place of legislation. The above comments do not discuss the actual terms of the legislation and provide a reasoned argument for the conclusion. It is clear that without the present entitlement such arrears cannot be considered as income of a prior period. However, the commentary appears to indicate that it cannot be considered as income in the fortnight of receipt as being applicable to a prior period and, as a consequence, cannot be assessed at all.
Clearly, the amount of $6500 is income. Section 1067G‑H1 requires the amount of a youth allowance recipient's ordinary income to be worked out on a fortnightly basis, taking into account the matters provided for in s.1067G‑H2 to s.1067G‑H25. It is relevant to note that, for many other social security recipients, income is required to be assessed on a yearly basis. Consequently, although useful, decisions in cases such as Harris v Director‑General of Social Security (1985) 57 ALR 729 and Secretary, Department of Family and Community Services v Rolley (2000) 175 ALR 4 are of limited assistance. Having found that neither s.1067G‑H24 nor s.1073 apply, there is no other provision which deals with payment of arrears of periodic payments other than s.1067G‑H25 which applies solely to arrears of periodic payments of compensation, and, possibly, s.1067G-H23A which applies to lump sums from remunerative work. Consequently, the only relevant provision is s.1067G‑H3. The scholarship income is ordinary income and can be taken into account only in the fortnight in which it is first earned, derived or received. Each of these terms was intended to have a separate meaning. Income can be derived in the sense of a person having a legal entitlement to money notwithstanding that the money is not received until a later date (see Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348).
Mr Allen was first advised that he had been successful in his application for RAMUS by letter from the then Minister for Health. It is not clear when that letter was dated. However, by letter of 24 August 2001, his acceptance was confirmed by the Project Manager from National Rural Health Alliance Inc and he was asked to complete the Agreement for Scholarship Holders and a recipient details form. At that time, he obtained a legal entitlement to the scholarship income payable to that date. Consequently, he derived $6000 in the fortnight in which 24 August 2001 occurred. The balance of $500 was the amount to which he became entitled and was due on 1 September 2001 and was income of the fortnight in which that date occurred. Thereafter, the regular payments of $500 would be ordinary income in the fortnight in which they were due and paid.
It follows from the foregoing that the decision of the SSAT should be set aside and in its stead a decision that Mr Allen derived income of $6000 in the fortnight in which 24 August 2001 occurred and $500 in the fortnight in which 1 September 2001 occurred. The matter should be remitted to the applicant to calculate the entitlement to youth allowance in accordance with this decision.
I certify that the thirteen [13] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B.H. Pascoe, Senior Member
(sgd) Catherine Thomas
Clerk
Date of Hearing: 11 March 2003
Date of Decision: 18 March 2003
Advocate for the applicant: Ms E. King, with CentrelinkSolicitor for the Respondent: Nil — Self‑represented
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