Amanda Gellel and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Secretary, Department of Education, Employment and Workplace Relations

[2012] AATA 290

[2012] AATA 290 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2012/0356
Re	Amanda Gellel
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Secretary, Department of Education, Employment and Workplace Relations
RESPONDENTS

DECISION

Tribunal	Senior Member A K Britton
Date	14 May 2012
Place	Sydney

The decision under review is affirmed.

...............................[sgd].........................................

Senior Member A K Britton

CATCHWORDS

SOCIAL SECURITY - Disability Support Pension - Newstart Allowance - compensation charge - calculation of compensation charge - ordinary income - discretion to treat all or part of compensation payment as not having been made - erroneous legal advice - complexity of compensation payments - poor health - special circumstances not made out

LEGISLATION

Social Security Act 1991 (Cth) - ss 8, 1064, 1068, 1072, 1173(4), 1184, 1184A, 1184K

Workers Compensation Act 1987 (NSW) - ss 87E, 87EA and 87F

CASES

Beadle v Director-General of Social Security (1984) 7 ALD 670; [1984] AATA 176

Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531; [1999] FCA 106
Groth v Secretary, Department of Social Security (1995) 40 ALD 541; [1995] FCA 1708
Secretary Department of Social Security v Hodgson (1992) 37 FCR 32
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52; [2010] FCA 441
Secretary to the Department of Family & Community Services v Allan (2001) 116 FCR 1; [2001] FCA 1160

Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

SECONDARY MATERIALS

Guide to Social Security Law

REASONS FOR DECISION

Senior Member A K Britton

14 May 2012

1. In August 2007 Ms Amanda Gellel was injured in a motor vehicle accident for which her (then) employer was liable. She received compensation for that injury under the Workers Compensation Act 1987 (NSW) (the WCA Act), including a component for loss of income (“weekly compensation”). She initially received $100 per week in compensation for lost income but in August 2011, after the intervention of her lawyers, the employer’s Insurer, GIO, agreed that Ms Gellel’s entitlement was $360, not $100, per week. As a consequence, arrears of compensation in the sum of $57,720 (gross) were payable to Ms Gellel for the period 10 August 2007 to 24 August 2011.

2. At the time of the accident, Ms Gellel was receiving Newstart Allowance and continued to do so until June 2010. In March 2011, she was granted Disability Support Pension (DSP) which she received until cancelled in December 2012. 

3. Following receipt of advice from GIO that Ms Gellel had an entitlement to arrears of weekly compensation, the respondent Secretary raised and recovered a “compensation charge” of about $26,500.  Ms Gellel unsuccessfully challenged that decision in the Social Security Appeals Tribunal. She now seeks review of that decision by the Administrative Appeals Tribunal. The key issues that fall to be determined are:

   (i)whether Centrelink was entitled to raise and recover a “compensation charge”; and

   (ii)if so, whether, the “compensation charge” was correctly calculated; and

   (iii)if so, whether the discretionary power conferred by the Social Security Act 1991 (Cth) (the Act), to treat all or part of a compensation payment made to Ms Gellel as not having been made, should be exercised.

   WAS CENTRELINK ENTITLED TO RAISE AND RECOVER THE “COMPENSATION CHARGE”

4. Central to the resolution of this question is whether by the operation of s 1173(4) of the Act, some or all of Ms Gellel’s entitlement to the arrears of weekly compensation should be treated as “ordinary income”.

5. In August 2011 GIO notified Centrelink of Ms Gellel’s entitlement to the sum of $57,720 (gross), being for arrears of weekly compensation for the period from the date of injury to 3 September 2011. The Secretary determined that by the operation of s 1173(4) of the Act, the arrears must be treated as “ordinary income” and taken into account in calculating the rate of Disability Support Pension and Newstart Allowance payable to Ms Gellel throughout the period for which the arrears were payable. Adopting that approach, the Secretary determined that Ms Gellel had been overpaid Disability Support Pension and Newstart Allowance, and issued a compensation recovery notice under s 1184 of the Act to GIO, for the sum of $26,508.43. GIO remitted that amount to the Secretary (“the offending deduction”) and, after deducting tax, paid Ms Gellel the sum of $22,826 ($57,720 – $34, 894 i.e. $26,508 + tax of $8386). 

6. Ms Gellel contends that the Secretary was not entitled to make the offending deduction because first, it was taken from money paid to compensate her for injuries sustained in the 2007 motor vehicle accident and, second, it had been paid under a lump sum commutation agreement and was therefore immune from any compensation charge.

7. Section 1173(4) of the Act provides:

   Effect of periodic compensation payments on rate of person's compensation affected payment

   (4)  If:

   (a)  a person receives periodic compensation payments; and

   (b)  at the time of the event that gave rise to the entitlement of the person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and

   (c)  the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period; the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act.

8. Section 17 of the Act contains the following definitions relevant to the operation of s 1173(4).

   "Periodic payments period":

   (a)  the period to which a periodic compensation payment, or a series of periodic compensation payments, relates; or

   (b)  in the case of a payment of arrears of periodic compensation payments — the period to which those payments would have related if they had not been made by way of an arrears payment.

   “Compensation”:

   (2) Subject to subsection (2B) [compensation for a criminal injury], for the purposes of this Act, compensation means:

   …

   (b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

   (c)  a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

   …

   (whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

9. Ms Gellel is mistaken in her belief that lump sum payments of compensation are exempt from the operation of s 1173(4). As made plain by the definition of compensation set out above, the manner in which the compensation was paid — lump sum or periodic payment — is irrelevant. Providing the subject compensation was wholly or partly payable for lost earnings or capacity to earn, it will constitute compensation for the purposes of s 1173, irrespective of whether it was paid or payable in a lump sum. The $57,720.00 which triggered the offending deduction was paid in respect of lost earnings and therefore constitutes compensation for the purpose of s 1173.

10. It is unclear whether, as Ms Gellel asserts, her entitlement to $57,720 was paid under the commutation agreement entered into with GIO in December 2012 for the sum of $250,000 (T43). But even if her understanding is correct, this does not assist her argument. That agreement was made under Part III, Division 9 of the WCA Act. Under this Part, where various conditions are met, by agreement a liability in respect of any weekly payments of compensation and medical and associated expenses can be commuted to a lump sum (ss 87E, 87EA and 87F). The commutation agreement entered into between Ms Gellel and GIO was stated to be in respect of weekly income (see T44, Q 11,12).

11. Each of the elements of s 1173(4) are satisfied: Ms Gellel received periodic compensation payments (par (a)); she was receiving a compensation affected payment, namely Newstart Allowance when the 2007 injury which gave rise to her entitlement to compensation occurred (par (b)); and, she had been receiving compensation affected payments, Newstart Allowance and Disability Support Pension, for part of the period for which the arrears of compensation was payable, 10 August 2007 to 10 June 2010 and 11 March 2011 to 24 August 2011 (par (c)). Accordingly, the compensation payable by GIO to Ms Gellel for arrears of weekly compensation for the period during which she was receiving either Newstart Allowance or Disability Support Pension, by the operation of s 1173(4), must be treated as ordinary income of Ms Gellel for the purposes of the Act.

    The effect of treating compensation as “ordinary income”

12. To understand the effect of treating Ms Gellel’s entitlement to arrears of weekly compensation as ordinary income, it is necessary to outline how the rate of Disability Support Pension and Newstart Allowance is calculated. Each must be calculated by applying complex formulae set out in the Act. While different formulae apply, a person’s “ordinary income” must be taken into account in calculating their rate of Disability Support Pension or Newstart Allowance. Put simply, where a person’s ordinary income meets the threshold prescribed by the Act, their rate of Disability Support Pension or Newstart Allowance is reduced.

    Calculation of DSP   

13. Section 1064 of the Act provides a person’s rate of disability support pension is to be calculated using the Pension Rate Calculator A attached to that section. In short this involves:

    ·calculating the person’s maximum payment rate (s 1064-A1, step 1-5);

    ·working out the person’s “income reduction” by applying the ordinary income test (s 1064-A1, steps 5, 8);

    ·calculating the person’s “income reduced rate” by subtracting their income reduction from their maximum payment rate (s 1064-A1, step 8);

    ·calculating the person’s “assets reduced rate” by subtracting their “reduction for assets” from their maximum payment rate (s 1064-A1, step 9, 10);   

    ·determining the person’s provisional annual rate by identifying the lower of their income reduced rate and assets reduced rate (s 1064-A1, step 11); and

    ·calculating the person’s “rate of pension” by subtracting from, and adding to their provisional annual rate, various amounts and allowances – none apply to Ms Gellel (s 1064-A1, step 12).

    That rate gives an annual rate which is then divided by 364 to give the person’s pension daily rate (s 1064-A1).

14. The “ordinary income test” is set out in Module E of s 1064-E1. The effect of a person’s ordinary income on their maximum payment rate is worked out by (s 1064-E1): 

    ·calculating their “ordinary income”, that is “income that is not maintenance income or an exempt lump sum” (s 8). “Ordinary income” is taken to be the person’s gross ordinary income from all sources (s 1072) but does not include “an exempt lump sum”. An “exempt lump sum” is defined to mean an amount received by a person that is not a “periodic amount” (s 8(11)). A periodic payment is defined to mean (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 (s 8(11A));

    ·working out the person’s “ordinary income free area” that is, the amount of income they can receive without effecting their maximum daily rate (s 1064-E1, Step 2 and s 1064-E4);

    ·deducting the person’s ordinary income free income from their ordinary income – the “ordinary income excess” (s 1064-E1, Step 5); and

    ·using the person’s ordinary income excess to work out their “reduction for ordinary income” (s 1064-E1, Step 6 and 1064-E10- 1064-E12).

    Calculation of Newstart Allowance  

15. The overall rate of a person’s Newstart Allowance is derived in accordance with the rate calculator at the end of s 1068. Module A of that rate calculator establishes the overall calculation process and in short involves:

    ·Working out the person’s “maximum payment rate” (Module A, Steps 1-4);

    ·Working out the person’s “income reduction” (Module A, Step 5);

    ·Calculating the person’s provisional fortnightly payment rate by deducting their income reduction from the maximum payment rate (Module A, Step 6); and

    ·Calculating the rate of benefit by subtracting various allowances and deductions from the person’s provisional fortnightly payment rate (Module A, Step 7).

16. A person’s ordinary income and income reduction is worked out by applying the method statement in Module G of s 1068.

    WAS THE COMPENSATION CHARGE CORRECTLY CALCULATED? 

17. The compensation recovery notice issued by the Secretary to GIO under s 1184 of the Act was for the sum of $26,508.43. That amount, “the section 1184 recoverable amount” was said to have been calculated in accordance with s 1184A.  In this matter the s 1184 recoverable amount represents: 

    s 1184A

    …

    (c)  the difference between:

    (i)  the sum of all compensation affected payments made to the person that relate to a day or days in a periodic payments period; and

    (ii)  the sum of all compensation affected payments that would have been made to the person in relation to any such day or days had those payments been reduced in accordance with section 1173;

18. The s 1184 recovery amount calculated by the Secretary was made up of:

    ·a Newstart Allowance compensation charge of $23,407 (for the period 10 August 2007 to 10 June 2010); and

    ·a Disability Support Pension compensation charge of $3101.43 (for the period 11 March 2011 to 24 August 2011).

19. These figures were stated to represent the difference between the sum total of Newstart Allowance and Disability Support Pension payments actually received by Ms Gellel in the above periods and the amount she was entitled to receive after taking into account the amount payable for arrears of weekly compensation, for the corresponding period. 

20. I am satisfied that each of the factual assumptions on which these calculations are based is correct. These figures have now been checked on five occasions — by the recovery officer in September 2009, by the original decision-maker in August 2011, by the Authorised Review Officer in September 2011, by the SSAT in January 2012 and again by Centrelink at the commencement of these proceedings. I am also satisfied that each of the figures have been correctly calculated. 

21. It follows that the decision made by the Secretary to raise and recover a “compensation charge” in the sum of $26,508.43 was correct.

    SHOULD ALL OR PART OF THE COMPENSATION PAYMENT MADE TO MS GELLEL BE TREATED AS NOT HAVING BEEN MADE?

22. Section 1184K(1) of the Act provides that a decision-maker may treat the whole or part of a compensation payment as “not having been made” if they think it is appropriate to do so in the special circumstances of the case. Ms Gellel submits that special circumstances exist and that the power to treat the $57,720 as not having being paid should by exercised. The Secretary disagrees. 

23. The term “special circumstances” has been the subject of exhaustive consideration by the AAT and the Federal Court. (See for example Beadle v Director-General of Social Security (1984) 7 ALD 670; and French J in Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 at 535.) While the Federal Court has declined to adopt a prescriptive formula, nonetheless the Court has emphasised that the term denotes a requirement that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. As Hill J cautioned in Secretary Department of Social Security v Hodgson (1992) 37 FCR 32 at 42, there is no requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”. Nor is there a requirement that the circumstances be unique to the individual — circumstances might be special though they apply to more than one person or to a class of persons, provided they are not of universal application: per Katzmann J in Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52.

24. In Secretary to the Department of Family & Community Services v Allan (2001) 116 FCR 1 at 1, Heerey J observed that the “basic policy” underlying those provisions which suspend social security benefits due to the receipt of compensation for loss of earnings is to avoid "double dipping" — that is, “people should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source”.

25. The Guide to Social Security Law (the Guide) provides direction to decision makers on the application of the “special circumstances” discretion (see s 4.13.4.20). The Tribunal is not bound to apply the policy expressed in the Guide, but may do so and, indeed, will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60).

26. In support of her claim that special circumstances exist, Ms Gellel contends:

    ·she is entirely reliant on the compensation payments she has received to support herself, given Centrelink’s recent decision to cancel her Disability Support Pension;

    ·part of those payments have already been used to repay family members and friends who have been providing her with financial assistance since the injury;

    ·she has no assets and now resides in a caravan park;

    ·she suffers from multiple and complex health problems, including failing eye sight which has recently been diagnosed;

    ·the work injury has left her physically and psychologically scarred;

    ·her costs of medical treatment are significant and will be on-going; and

    ·she has been subjected to gross injustices by her lawyers, GIO and Centrelink.

27. To put these submissions in context, it is necessary to mention the recent decision made by the Secretary to cancel Ms Gellel’s Disability Support Pension and preclude her from receiving Disability Support Pension until 1 January 2016. The stated reason for that decision was Ms Gellel’s entitlement under the terms of the commutation agreement to a compensation payment of $250,000.  That decision, which Ms Gellel advised she intends to challenge, is not the subject of this review, but is relevant to an assessment of her current circumstances. 

28. It is possible that Ms Gellel received erroneous advice about the impact that her entitlement (i.e. to payments of arrears of weekly compensation) would have on her rate of Newstart Allowance and Disability Support Pension. However, that claim is unsupported. Indeed, there is significant documentation to indicate that Ms Gellel was advised that the payment of arrears of weekly compensation would adversely affect her entitlement to social security benefits (see for example the email to Ms Gellel from GIO, 18 August 2011, T1). It may well be, however, that Ms Gellel was confused about the effect her compensation entitlement would have on her social security benefits given the complexity of the interrelationship between payments made under the Social Security Act  and the Workers Compensation Act.  The Social Security Act affords different treatment to compensation payments made solely for permanent impairment and non-economic loss and those made for economic loss — the latter are treated as “ordinary income” and taken into account in calculating a person’s rate of Disability Support Pension or Newstart Allowance; the former are not. In the NSW workers compensation jurisdiction, the term “lump sum compensation” is used to describe the former. This may well have led to some confusion on Ms Gellel’s part, given that her entitlement to $57,000 for arrears of weekly compensation was paid as a lump sum and referred to, as “lump sum compensation”.

1. Even if accepted that Ms Gellel was confused about the status of the payment for arrears of weekly compensation, there is nothing before me to indicate that she acted on that understanding to her detriment, and nor has this been suggested. 

2. There can be no argument that Ms Gellel is in poor health. Her GP, in a letter dated 7 October 2011, outlined her multiple physical and psychological conditions and described the rapid deterioration in her health as “alarming”.  Nor can there be any argument that the injury left Ms Gellel significantly disabled. While no particulars have been provided about her current and future health costs, in all probability they will be significant.

3. Ms Gellel submitted that her financial position is precarious but declined my invitation to provide any particulars.  Documents produced by the Secretary reveal that she received $250,000 (gross) in December 2011 under the commutation agreement; just under $23,000 (net) in September 2011 for arrears of weekly compensation; $69,500 in September 2009 and a further $26,500 in July 2011 for personal injury and non-economic loss.

4. I accept Ms Gellel’s argument that these payments have not made her a wealthy person.  She apparently has no assets, will be without income for the next three and a half years and must self-fund any costs of medical treatment not covered by Medicare.  Nonetheless, she has no dependents, apparently no debt and not insignificant funds at her disposal. In my opinion it could not reasonably be argued that at this stage she is in financial difficulties.

5. Absent some evidence to support Ms Gellel’s claim about her financial predicament, I am not satisfied that her circumstances taken as a whole could be described as special, or that it is appropriate to exercise the power to treat some or all of her compensation payments as not having been made. In reaching that conclusion, I have taken into account Ms Gellel’s poor health, relatively limited financial means, inability to earn and her possible confusion about the status of her compensation payments vis-à-vis her entitlements to social security payments.

6. For these reasons I have decided to affirm the decision under review.

I certify that the preceding 34 (thirty four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.

................................[sgd]........................................

Associate to Senior Member A K Britton

Dated  14 May 2012

Date of hearing	2 May 2012
Applicant	In person
Solicitors for the Respondent	Ms P Sharma, Centrelink Program Litigation and Review Branch