BAIN PAINTER and SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

[2009] AATA 327

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 327

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/4126

GENERAL ADMINISTRATIVE  DIVISION		)
Re		BAIN PAINTER

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal J. W. Constance, Senior Member

Date11 May 2009

PlaceCanberra

Decision The reviewable decision of the Social Security Appeals Tribunal made 10 July 2008 is set aside and in substitution it is decided that the decision of the Review Officer made 4 January 2008 to raise and recover a debt of newstart allowance against Mr Painter in the sum of $13,700.49 is set aside.  

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

J. W. Constance, Senior Member

CATCHWORDS

SOCIAL SECURITY – newstart allowance – recovery of debt – failure to disclose income from partnership – partnership terms varied – Applicant did not earn, derive or receive income from partnership during relevant period – decision under review set aside

Social Security Act 1991 (Cth) – Section 8, 643, 1068

Partnership Act 1892 (NSW) – Section 19

Chan and Secretary, Department of Family and Community Services [2002] AATA 239

Secretary, Department of Social Security and Morris [1996] AATA 638

REASONS FOR DECISION

11 May 2009 J. W. Constance, Senior Member            

INTRODUCTION

1.      Mr Painter is seeking a review of a decision made by Centrelink to raise against and to recover from him a debt of $13,700.49.  The Secretary claims this is an amount of newstart allowance received by Mr Painter to which he was not entitled.  The Secretary says that Mr Painter did not disclose to Centrelink that during the period he was paid the allowance he was entitled to income from a partnership of which he was a member.

2.      For the reasons which follow the decision under review will be set aside.

FACTS

3.      Unless stated otherwise the following findings of fact are based on the evidence of Mr Painter.  I am satisfied of the facts found on the balance of probabilities.

4. The documents filed pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 are exhibit T1 in these proceedings.  A reference to a document with a “T” prefix is a reference to a document forming part of exhibit T1.

5.      No later than 1 July 1997, Mr Painter entered a business partnership with Ms Hailey. There was no written partnership agreement and the agreement between them as to the distribution of profits varied from time to time. At times there was an equal distribution between the two partners. There is no dispute that this partnership continued at least until 1 March 2001.

6.      On 29 March 2001 Mr Painter lodged a claim for a newstart allowance.  With his claim he lodged a letter from his accountants addressed to Centrelink and which read in part:

Based on information supplied to us by Mr Painter we advise that Mr Painter has ceased to be a partner of the partnership of LYNN BAILEY [sic] & BAIN PAINTER, effective as from 1^st March 2001 and has not been in any receipt of income for this period.[1]

[1] T6.

The letter was dated 28 March 2001.

7.      Mr Painter also lodged with his claim a copy of a Certificate of Registration of Business Name of Absolute Outcomes, which showed that he and Ms Hailey were the proprietors of the name and that the registration was in force from 30 June 1999 until 30 June 2002.[2]  Mr Painter continued as a registered proprietor of this name after 29 March 2001.

[2] T8.

8.      On 2 March 2001 Centrelink notified Mr Painter that he had been granted a newstart allowance from 14 March 2001.  He was paid this allowance continuously until 31 December 2002.

9.      Mr Painter lodged individual and partnership tax returns for the financial years ended 30 June 2001[3], 30 June 2002[4] and 30 June 2003.[5]  These returns were all prepared by a tax agent.  They show that:

·during the financial year ending 30 June 2001 Mr Painter received benefits and income from the partnership of $11,547.00;

·during the financial year ending 30 June 2002 he received benefits and income from the partnership of $11,113.00;

·during the financial year ending 30 June 2003 he received benefits and income from the partnership of $25,042.00.

[3] T15 and T16.

[4] T17 and T18.

[5] T19 and T20.

10.     On the basis of this information Centrelink has calculated that Mr Painter was overpaid newstart allowances of $13,700.49 for the period 1 July 2001 to 30 June 2002 as the income and other benefits from the partnership during this period had not been taken into account.[6]  Mr Painter does not dispute these calculations if the receipts from the partnership are found to be correct.  He says that in fact he did not receive any of these benefits or income during the period 1 March 2001 to 31 December 2002.

[6] T34, T35 and T37.

11.     Mr Painter gave evidence that by the beginning of 2001 he was unable to contribute to the partnership’s business to the same extent as he had been able previously and the business was not generating sufficient income to support both partners.  He said that for this reason he and Ms Hailey agreed that from 1 March 2001 he would not receive any payment from the partnership and that he would seek work elsewhere.  When asked by Counsel for the Secretary whether he thought Ms Hailey would have given him money whilst he was not working in the partnership had he asked, he replied “no, she would have laughed.”

12.      For a short period after he stopped working in the partnership Mr Painter lived from his savings. He then applied for and was granted newstart allowance.  Mr Painter also gave evidence that he continued as a partner in Absolute Outcomes in the hope that Ms Hailey could improve the cash flow to the point that he would be able to return to work in the business.  By January 2003 the cash flow had improved and he was able to return to work in the business and to receive an income from it.  This continued until 2005 when he retired from the partnership by reason of his ill-health.

13.     When asked how he came to provide to Centrelink the letter stating that he had ceased to be a partner in the business, Mr Painter said that he told a Centrelink officer of the correct situation when he delivered the letter prepared by the accountants but that the officer “took it anyway.” In relation to the tax returns signed by him and showing an income from the partnership in the relevant period, he said that as these returns were prepared by the business’ tax agent, he (Mr Painter) signed and returned them without considering them carefully as he assumed they were correct.  He did not sign the 2001-2002 return until September 2003, after he had recommenced working in the business.

14.     I accept the evidence of Mr Painter that he did not receive any funds from the partnership during the relevant period and his evidence as to the reason for this.  Although the evidence of his lodgement of his and the partnership tax returns would normally be very persuasive of the receipt of partnership income, he impressed me as an honest witness who had been less than careful in considering the content of documents prepared for his signature by others.  Although the fact that he delivered to Centrelink the letter from his accountants when he knew it was incorrect is unsatisfactory, I am satisfied that the information it contained was incorrect and that Mr Painter did continue as a member of the partnership until he retired in 2005.

15.     In accepting the evidence of Mr Painter I have taken into account the written statement of Ms Hailey made 25 March 2009.[7]  Ms Hailey stated as follows:

… Mr Painter ceased involvement in the Patnership in March 2001, due to a major downturn in cash flow.

He did not recommence involvement in the partnership until January 2003, once cash flow, and the business had grown sufficiently, that I could offer Mr. Painter work in the business.

Between the fore mentioned time period Mr. Painter did not receive any income from the Partnership.

[7] Ex. A3.

The Secretary did not challenge this evidence.

16.     I have also taken into account that Mr Painter's bank statements for the period 30 March 2001 to 31 December 2002[8] and the partnership bank statements from 26 June 2001 to 31 December 2002[9] do not appear to record any transfer of funds from the partnership account to Mr Painter's account.

[8] Ex. A1.

9 Ex. A2.

17.     Mr Painter has not lodged amended tax returns for any of the financial years during which he disclosed income from the partnership but which on his evidence was not paid, or payable, to him.  However, I accept the unchallenged evidence of Mr Painter that the Commissioner of Taxation has waived the tax assessed on the partnership income disclosed by him during the relevant period and has not required him to lodge amended returns.

RELEVANT LEGISLATION

18. Under s 643 of the Social Security Act 1991, the rate at which newstart allowance is payable is calculated in accordance with Benefit Rate Calculator B set out in s 1068. A person’s ordinary income is taken into account in calculating newstart entitlements.  The term “income” is relevantly defined in s 8(1) as “an income amount earned, derived or received by the person for the person’s own use or benefit.”

THE ISSUE

19.     The issue for determination is whether Mr Painter “earned, derived or received” $13,700.49, or any other sum, from the partnership during the period 1 June 2001 until 31 December 2002.

THE SECRERTARY’S ARGUMENT

20.     The Secretary contended that the “wages and profits from the partnership…… should be considered as income for the purposes of calculating Mr Painter's newstart allowance.”[10]It was argued that income is derived so long as the person has a present legal entitlement to it, whether or not that income is actually received.  I was referred to the decision of the Tribunal in Chan and Secretary, Department of Family and Community Services [2002] AATA 239 in support of this proposition.

[10] Secretary’s Statement of Facts and Contentions, para. 21.

REASONING

21.     I agree with the proposition that income does not have to be actually received to come within the provisions of the Act to which I have referred, and that the words “earned” and “derived” have a wider connotation.  This is in accordance with the decisions of the Tribunal in Chan and Secretary, Department of Family and Community Services (supra) and Secretary, Department of Social Security and Morris [1996] AATA 638.

22.     I agree also with the proposition that a person must be presently entitled to income in the period under consideration before it can be said to be income which has been “earned, derived or received”for the purposes of calculating that person’s entitlement to newstart allowance.  The Macquarie Dictionary defines “earn” to include “to gain as due return or profit” and “derive” to include “to receive or obtain from a source”.These definitions both have the connotation of an existing entitlement.  The proposition is also consistent with what was said in the decisions to which I have referred.

23. On the basis of the facts, I have determined Mr Painter was not presently entitled to any income of the partnership during the 2001-2002 financial year, the period under consideration. It is clear that until March 2001 the profits of the partnership were shared equally between Mr Painter and Ms Hailey. However, by agreement the terms of the partnership were varied so that for the period 1 March 2001 to 31 December 2002 Mr Painter was not entitled to any benefit from the partnership, nor to share in any income it earned during that period. Such a variation is provided for by section 19 of the Partnership Act 1892 (NSW):

The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing.

24.     The statements of income earned made by Mr Painter in the various tax returns do not affect the decision I have reached.  In my view those statements were incorrect and should not disentitle Mr Painter to an allowance to which he was otherwise entitled.  The fact that the Commissioner of Taxation has chosen to waive the tax assessed on the basis of these returns rather than to require Mr Painter to file amended returns which accurately reflect the situation is a matter for the Commissioner.

DECISION

25.     The reviewable decision of the Social Security Appeals Tribunal made 10 July 2008 is set aside and in substitution it is decided that the decision of the Review Officer made 4 January 2008 to raise and recover a debt of newstart allowance against Mr Painter in the sum of $13,700.49 is set aside.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of J. W. Constance, Senior Member.

Signed:         ..................[sgd]..............................................................
  T. Aviram, Associate

Date/s of Hearing  27 March 2009
Date of Decision  11 May 2009
Applicant self-represented               
Counsel for the Respondent     Ms J. Furner, Centrelink Legal Services