Bednarski and Secretary, Department of Social Services (Social services second review)

Bednarski and Secretary, Department of Social Services (Social services second review) [2020] AATA 2364 (3 June 2020)
Division:GENERAL DIVISION
File Number(s): 2019/4727
Re:Jerzy Bednarski
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:3 June 2020
Date of written reasons: 20 July 2020
Place:Sydney

For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal affirms the decision under review, being the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal dated 17 July 2019.
.............................[sgd]...........................................
Emeritus Professor P A Fairall, Senior Member
CATCHWORDS
SOCIAL SECURITY – rate of age pension – residence requirement – pension portability rate calculator – Australian Working Life Residence – applicant resident of Poland – application of Social Security (International Agreements) Act 1999 (Cth) Sch 25 – totalisation – qualifying period – decision under review affirmed
LEGISLATION
Social Security (Administration) Act 1999 (Cth) (the Administration Act) s 29
Social Security (International Agreements) Act 1999 (Cth) ss 6, 12, 13, 15, 16, 17, 23, 24, Schedule 25 – Polish Agreement Arts 1, 10, 11
Social Security Act 1991 (Cth) s 43
SECONDARY MATERIALS
Explanatory Memorandum to the Social Services and Other Legislation Amendment Bill 2013 (Cth)
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
20 July 2020
INTRODUCTION

The applicant was born in Australia in 1952.[1] He lived and worked in Australia until 3 May 1997, when he departed Australia to live in Poland.[2] He has not lived in Australia as a permanent resident since 1997. On 27 April 2018, he lodged a claim form for age pension with the Department. He was then residing in Poland.[3] The claim form, signed 9 April 2018, was lodged on 27 April 2018, his pension age date. [4]
[1] T5/94.
[2] T21/277.
[3] T5/114. His pension age is 65 years and 6 months by virtue of his birthdate: T5/94.
[4] T5/109.
Age pension is governed by the Social Security Act 1991 (Cth) (the Act) administered by Services Australia (SA), previously known as the Department of Human Services, the respondent in these proceedings. For convenience I shall refer simply to ‘the Department’.
By letter dated 12 December 2018, the Department advised the applicant that his claim was approved. The commencement date was 27 April 2018.[5] The Department calculated his entitlement at 82% of the full age pension. This was based on an Australian working life residence (AWLR) of 343 months. (Under the changes that took place on 1 July 2014, a full age pension would require an AWLR of 420 months).
[5] T22/327.
On 18 March 2019, an authorised review officer (ARO) confirmed the departmental calculation.[6] On 17 July 2019, the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) affirmed the decision by the ARO.[7] On 6 August 2019, the applicant sought review of the AAT1 decision by the Administrative Appeals Tribunal (the Tribunal).[8]
[6] T18/238.
[7] T2/8.
[8] T1/1.
On 3 June 2020, I affirmed the decision under review, and now publish my reasons.
BACKGROUND
The following facts are not in dispute:
(i)The applicant lodged his claim for age pension on 27 April 2018;
(ii)He was not present in Australia on that date;
(iii)He was a permanent resident of Poland on that date; and
(iv)He departed Australia permanently on 3 May 1997.[9]
[9] T21/277.
There do not appear to be any contentious matters of fact between the parties.
The question before the Tribunal is narrowly confined. It is whether the Departmental decision to assess his AWLR at 343 months, as affirmed by the AAT1, was correct.
Under the relevant law, his rate of payment is determined by the AWLR factor.
The applicant did not dispute the inclusion of his Polish pension as income when calculating his notional rate, nor the exchange rate calculation made by the Department,[10] or the final calculation of the applicable international agreement portability rate.
[10] RSoFIC, para 4.
It is not disputed that the applicant is eligible to receive an Australian age pension.
He is eligible on the agreed facts only by virtue of the Polish Agreement,[11] which forms part of Australian law.
[11] Social Security (International Agreements) Act 1999 (Cth) sch 25; also referenced at [15] of this decision.
THE LEGISLATIVE FRAMEWORK
Section 29 of the Social Security (Administration) Act 1999 (Cth) (the Administration Act) requires that a person must be in Australia on the day the claim for age pension is made, and be an Australian resident.
Section 6 of the Social Security (International Agreements) Act 1999 (Cth) (the Agreements Act) provides an ‘override provision’. Section 6 provides:
(1) The provisions of a scheduled international social security agreement have effect despite anything in the social security law.
(2) Subsection (1) applies to a provision of an agreement only in so far as the provision is in force and affects the operation of the social security law.
Schedule 25 of the Agreements Act is headed AGREEMENT BETWEEN AUSTRALIA AND THE REPUBLIC OF POLAND ON SOCIAL SECURITY. I will refer to this agreement as ‘the Polish Agreement’.
Article 10 of the Polish Agreement contains the important deeming provision:
ARTICLE 10
Residence or Presence in the Republic of Poland
Where a person would be qualified under the legislation of Australia or by virtue of this Agreement for an Australian benefit except for not being an Australian resident and in Australia on the date on which the claim for that benefit is lodged, but,
(1) is an Australian resident or a resident of the Republic of Poland, and
(2) is in Australia or the Republic of Poland,
that person, so long as he or she has been an Australian resident at some time, shall be deemed, for the purpose of lodging that claim, to be an Australian resident and in Australia on that date.
Article 11 of the Polish Agreement contains the totalisation provision, under which ‘a period of insurance in Poland’ may be added to periods of Australian residence for certain purposes.
ARTICLE 11
Totalisation
1.        Where a person to whom this Agreement applies has claimed an Australian benefit under this Agreement and has accumulated,
(1)     a period as an Australian resident that is less than the period required to qualify that person under the legislation of Australia for that benefit, and
(2)     a period of Australian working life residence equal to or greater than the period identified in accordance with paragraph 4 for that person, and
(3)     a period of insurance under the legislation of the Republic of Poland,
then, for the purposes of a claim for that Australian benefit, that period of insurance in the Republic of Poland shall be deemed to be a period in which that person was an Australian resident only for the purposes of meeting any minimum qualifying periods for that benefit set out in the legislation of Australia.(emphasis added)
2.        For the purposes of paragraph 1, where a person,
(1)     has been an Australian resident for a continuous period which is less than the minimum continuous period required by the legislation of Australia for entitlement of that person to a benefit, and
(2)     has accumulated a period of insurance under the legislation of the Republic of Poland in two or more separate periods that equals or exceeds in total the minimum period referred to in subparagraph (1),
the total of the periods of insurance under the legislation of the Republic of Poland shall be deemed to be one continuous period.
3.        For the purposes of this Article, where a period by a person as an Australian resident and a period of insurance under the legislation of the Republic of Poland coincide, the period of coincidence shall be taken into account once only by Australia as a period as an Australian resident.
4.        The minimum period of Australian working life residence to be taken into account for the purposes of paragraph 1 shall be as follows,
(1)    for the purposes of an Australian benefit that is payable to a person who is not an Australian resident, the minimum period required shall be 12 months, of which at least six months must be continuous,
(2)    for the purposes of an Australian benefit that is payable to an Australian resident, there shall be no minimum period.
Article 12(1) of the Polish Agreement provides:
ARTICLE 12
Calculation of Australian Benefits
1. Subject to paragraphs 2 & 3, where an Australian benefit is payable only by virtue of this Agreement to a person who is outside Australia, the rate of that benefit shall be determined according to the legislation of Australia but on the basis that the additional child amount rate is nil. (emphasis added)
Section 12 of the Agreements Act provides:
12 Rate of pension or allowance payable under agreement where rate to be determined under law of Australia
(1) If:
(a) a social security payment is payable to a person under a scheduled international social security agreement; and
(b) the person is outside Australia; and
(c) the agreement provides for the rate of the social security payment to be determined according to the law of Australia; (emphasis added)
the rate of the social security payment is the person’s international agreement portability rate worked out in accordance with Part 3.
(2) A reference in the agreement to a person’s period of residence in Australia is to be taken to be a reference to the period of the person’s Australian working life residence for the purposes of this Act.
The relevant legislation for working out the applicant’s international agreement portability rate is found in Part 3 of the Agreements Act, consisting of sections 13 – 24. Section 13, Part 3, contains the overall calculation process, and references Division 2 (sections 15 – 21) for the person’s AWLR factor; and Division 3 (sections 23 – 24) for the residence factor.
13 Overall calculation process
(1) A person’s international agreement portability rate is worked out as follows:
(a) the period of the person’s Australian working life residence in Australia (the residence period) is worked out according to Division 2;
(b) the person’s residence factor is worked out according to Division 3;
(c) the person’s notional agreement pension rate is worked out by calculating the rate that would be the person’s social security payment rate if this section did not apply to the person but taking into account section 14;
(d) if the person’s notional agreement pension rate is nil, the international agreement portability rate is also nil;
(e) if the person’s notional agreement pension rate is not nil, add the additional child amount or amounts (that are applicable in accordance with section 14A) to the person’s notional agreement pension rate. This new amount is the person’s total notional rate;
(f) multiply the person’s total notional rate by the person’s residence factor: the result is the person’s international agreement portability rate.
The relevant AWLR is worked out in accordance with Part 3, Division 2 (sections 15 – 21) of the Agreements Act.
I set out the relevant sections of Division 2.
Division 2—Australian working life residence
15 Working life
For the purposes of this Division, a person’s working life is the period beginning when the person turns 16 and ending when the person reaches pension age.
16 Australian working life residence generally
Subject to sections 17 and 21, a person’s period of Australian working life residence at a particular time is the number of months in the period, or the aggregate of the periods, during the person’s working life during which the person has, up to that time, been an Australian resident.
17 Calculation of period of residence
(1) If a person’s period of Australian working life residence would, apart from this subsection, be a number of whole months, the period is to be increased by one month.
(2) If a person’s period of Australian working life residence would, apart from this subsection, be a number of whole months and a day or days, the period is to be increased so that it is equal to the number of months plus one month.
The relevant residence factor is worked out in accordance with Part 3, Division 3 (sections 23 – 24) of the Agreements Act.
23 Residence factor: Australian working life residence of 35 years or more
If a person’s period of Australian working life residence is 420 months (35 years) or more, the person’s residence factor is 1.
24 Residence factor: Australian working life residence of less than 35 years
If a person’s period of Australian working life residence is less than 420 months (35 years), the person’s residence factor is the fraction represented by:
Person’s period of working life residence
420
Under Australian law, the rate at which the pension is paid is determined by a person’s Australian working life residence amount (AWLR), divided by 420.
The aforementioned provisions are well understood and have not generated much traffic in the Tribunal: see Carapeta and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2013] AATA 285; Wesselbaum and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 241; Meletiou and Secretary, Department of Employment and Workplace Relations [2006] AATA 899.
ANALYSIS
Section 29 of the Administration Act would ordinarily bar a claim for age pension by an overseas resident, but section 6(1) of the Agreements Act (the override provision), and Article 10 of the Polish Agreement, are designed to overcome this obstacle.
It is agreed by the parties that the applicant more than satisfies the general eligibility requirement of 10 years residence contained in section 43(1)(a) of the Act.[12] He did not need to rely on the totalisation provisions contained in Article 11 of the Polish Agreement to establish his eligibility for the age pension.
[12] The term ‘qualifying Australian residence’ is defined: see the Act, s 7(1) and (5).
The applicant’s concern is with the calculation of the AWLR factor. He contends that although he has less than 420 months of actual working life residence in Australia, the Polish Agreement entitles him to be treated as if he had an AWLR of 420 months.
His argument is that, under the Polish Agreement, a period of residence in Poland can be added to periods of residence in Australia for the purpose of determining his AWLR. He says that he is therefore entitled to a full pension.
He supported his argument on two grounds, but only the latter was pursued before the Tribunal:
(a)that the governing law is that which prevailed prior to 1 July 2014; and
(b)that the principle of totalisation contained within Article 11 of the Polish Agreement can be used to supplement the amount of AWLR, and that his Polish residence can be added to his AWLR total, thereby boosting it to at least 420 months, permitting him to receive the full rate of age pension.
The first argument was without merit and was not pursued at the hearing. The applicant did not lodge his application until April 2018. His eligibility for the age pension and the rate of payment are subject to the legislative changes that occurred on 1 July 2014.
I turn to the substantive second argument. Article 11 of the Polish Agreement is the critical provision. It provides that under certain circumstances, a period of insurance in the Republic of Poland shall be deemed to be a period in which that person was an Australian resident. But this is ‘only for the purposes of meeting any minimum qualifying periods for that benefit set out in the legislation of Australia.’
The applicant says that the expression ‘any minimum qualifying periods’ refers not only to the qualification for the pension, but to the rate of calculation. In a communication to the Tribunal, he stated:
The phrase “any minimum qualifying periods” clearly shows plural. My interpretation there are 2 minimum qualifying periods.
Firstly 10 years or 120 months for a proportional Age pension.
Secondly 35 years or 420 months for the Outside Australia Basic Age Pension.
Therefore I do not see what I cannot use my Polish period of insurance which is approximately 21 years to Totalise to obtain the Full Outside Australia Basic Age Pension.
This interpretation of Article 11 is clearly not open. Article 1(7) states:
1. For the purposes of this Agreement…
(7) “period of Australian working life residence” means a period defined as such in the legislation of Australia but does not include any period deemed pursuant to Article 11 to be a period in which that person was an Australian resident. (emphasis added)
This categorical statement (‘does not include’) means that periods of ‘deemed residence’ cannot be added to periods of actual residence so as to increase the amount of AWLR. It is not necessary to refer to the policy guidelines in the Social Security Guide[13] to support this clear conclusion.
[13] Guides to Social Policy Law, Social Security Guide.
There is an explanation for the reference to qualifying periods in Article 11. Paragraphs (1)(1) and (1)(2) refer to different periods, and the principle of totalisation may apply to either.
It is very clear as a matter of construction that the principle of totalisation contained in Article 11 of the Polish Agreement is not relevant to the calculation of the AWLR. Periods of ‘deemed residence’ under Article 11 cannot be added to periods of actual residence so as to increase the period of AWLR.
I therefore find that the applicant’s AWLR does not include any periods of residence in Poland.
It is not disputed that the applicant departed Australia on 3 May 1997, 342 months and 6 days after he turned 16. The AWLR factor is therefore 343 months.[14]
[14] The Agreements Act, s 17(2).
DECISION
The correct and preferable decision is to affirm the decision under review.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member

................................[sgd]........................................
Associate
Dated: 20 July 2020

Date(s) of hearing: 3 June 2020

Applicant: By video

Solicitors for the Respondent: Ms E Ulrick, Services Australia

[2020] AATA 2364

3 June 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Appeal

Judicial Review

Procedural Fairness

Statutory Construction

Date(s) of hearing:	3 June 2020
Applicant:	By video
Solicitors for the Respondent:	Ms E Ulrick, Services Australia