Beesley and Secretary, Department of Social Services (Social security) - [2025] ARTA 658

Beesley and Secretary, Department of Social Services (Social security) [2025] ARTA 658 (6 March 2025)

Applicant: Mrs Beesley

Respondent: Secretary, Department of Social Services

Chief Executive Centrelink

Tribunal Number: 2024/S191870

Tribunal: General Member A Shelley

Place: Canberra

Date: 6 March 2025

Decision: The Tribunal affirms the decision under review.

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances – age pension – lump sum compensation payment – a preclusion period – straitened financial circumstances are not so unusual as to constitute special circumstances – decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

Statement of Reasons

BACKGROUND

This is an application by Mrs Beesley for review of a decision by Services Australia (Centrelink) to reject a claim for age pension because of the imposition of a lump sum compensation preclusion period.
Mrs Beesley was injured in a motor vehicle accident in the course of her employment in 2022. She received periodic compensation payments for incapacity up to 23 February 2024, at which point she was compensated $85,000 for permanent impairment and resolution of her workers’ compensation claim.
Mrs Beesley submitted a claim for age pension on 15 February 2024, ahead of her [age]th birthday on [date] April 2024.
On 28 February 2024 Centrelink wrote to Mrs Beesley to advise that in view of the lump sum compensation payment, it had calculated a preclusion period that started on 24 February 2024 and would end on 25 October 2024, during which Mrs Beesley would be unable to receive income support from Centrelink.
On 6 March 2024 Mrs Beesley sought review of that decision through her lawyers, seeking that the preclusion period end on 20 April 2024.
The age pension claim was explicitly rejected on 26 June 2024 by reference to the compensation payment.
On 10 October 2024 Centrelink’s authorised review officer affirmed the decision to reject the claim, finding the lump sum compensation preclusion period was correctly calculated and special circumstances justifying a change did not exist.
Age pension was subsequently accepted from 26 October 2024.
On 4 November 2024 Mrs Beesley applied to the Tribunal for a review of the decision to reject the earlier claim. The matter proceeded to a hearing on 24 February 2025. Mrs Beesley was represented by Ms [A] of [a firm]. I had before me the hearing papers numbered 1 to 191 and a Statement of Financial Circumstances completed by Mrs Beesley.

ISSUES

The decision under review is a decision that Mrs Beesley’s claim for age pension was correctly rejected, in view of Centrelink’s finding that she was subject to a lump sum compensation preclusion period.
Entitlement to social security payments, including age pension, is governed by the provisions of the Social Security Act 1991.
Relevantly, section 1169 of the Act provides that certain social security payments (referred to as ‘compensation affected payments’ which section 17 says includes age pension) are not payable to a person who has received a lump sum compensation payment during a ‘lump sum preclusion period’.
I have looked first at whether the lump sum preclusion period has been correctly calculated, and then whether the period should be shortened.

CONSIDERATION

Has the lump sum preclusion period been correctly calculated?

The number of weeks in the lump sum preclusion period is calculated under section 1170 of the Act. Relevantly, if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period:
· starts the day after periodic payments end, and
· runs for the number of weeks that is the ‘compensation part of a lump sum’ divided by the ‘income cut-out amount’ (and rounded down to the nearest whole number).
Section 17 of the Act provides that the ‘compensation part of a lump sum’ is, where the payment is made in settlement of a claim, 50% of the payment. The ‘income cut-out amount’ is the amount above which no pension is payable to a single person under the ordinary income test. As at February 2024, that amount was $1,198.70.[1]
[1] Page 142 of the hearing papers contains a list of the ‘divisor’ amount over time.
Information provided by insurer [says] weekly compensation was paid up to and including 23 February 2024.[2]
[2] Page 156 of the hearing papers.
Mrs Beesley received $85,000 (inclusive of legal costs), comprised of $18,070 paid under a deed of release and $66,930 for permanent impairment paid under a ‘complying agreement’ made under section 66A of the Workers Compensation Act 1987 (NSW).
Mrs Beesley does not dispute Centrelink’s calculation of the period.
Applying the definitions in section 17 of the Act, the compensation part of Mrs Beesley’s settlement was $42,500, being 50% of $85,000. Based on the applicable divisor, subject to resolution of the issue below, the preclusion period should run for 35 weeks from 24 February 2024, which is to 25 October 2024, as calculated.

Can the lump sum compensation preclusion period be shortened?

Despite that finding, section 1184K of the Act provides a discretion to treat all or part of a compensation payment as not having been made, if it is appropriate to do so, in the special circumstances of the case. The effect of treating part of the compensation payment as not having been made, would be to reduce the ‘compensation part of a lump sum’ and so reduce the length of the lump sum preclusion period calculated under section 1170 of the Act.
Previous decisions of courts and tribunals establish that for special circumstances to be found to exist it is necessary to examine the individual circumstances of the case and find something about a person’s circumstances to take their situation out of the usual or ordinary course (for example, Dranichnikov v Centrelink [2003] FCAFC 133 in relation to the usage of the term special circumstances in the family assistance legislation). That may be where it would be unfair, unintended or unjust for the entire lump sum preclusion period to apply (Groth v Secretary, Department of Social Security [1995] FCA 1708 at [12]).
The exercise of a discretion is often accompanied by policy guidance on when the discretion ought or ought not to be exercised, to foster consistency in decision‑making. The Department of Social Services’ policy guidance is relevantly contained in the Social Security Guide. The Tribunal is not bound to apply government guidelines but will usually do so unless there are cogent reasons not to (Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] AATA 179).
Topic 4.13.4.20 of the Guide gives a non-exhaustive list of factors that may be relevant to an assessment of whether there are special circumstances. Those factors include, relevantly, whether there has been an unjust or unintended consequence of applying the legislation.
With the benefit of submissions and Mrs Beesley’s evidence, the material circumstances are these:
· Treating 50% of the lump sum as compensation for economic loss produces, in Ms [A]’s submission, an unfair result for Mrs Beesley.
· Mrs Beesley’s financial circumstances are straitened.
I have examined and commented on those two matters in isolation before returning to the question of whether it is appropriate to exercise the discretion to treat all or part of a compensation payment as not having been made.

The breakdown of the lump sum

As set out above, the calculation of the preclusion period treats 50% of a lump sum as the ‘compensation part of the lump sum’.
The purpose of the preclusion period is that a person should not receive compensation for loss of income and social security support in respect of the same period (Naim Haidar v Secretary, Department of Social Security [1998] FCA 994).
The purpose of the 50% rule, which effectively appoints half of the lump sum as future economic loss, is explained by the Federal Court in Kertland v Secretary, Department of Family & Community Services [1999] FCA 1596, to which Ms [A] referred. Justice Merkel observed that for claims that are contested, and not settled, the compensation part of a lump sum payment is “so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn”. In contrast, for claims that are settled, the “adjustment of 50% was arbitrarily prescribed by Parliament to prevent parties adjusting their settlement calculations to understate the amount of the settlement sum attributable to loss of earning capacity and thereby minimising the loss of a claimant's social security benefits.” (See also Re Secretary to the Department of Social Security v John Alexander Banks [1990] FCA 196.)
Section 151G of the Workers Compensation Act provides that the only damages that may be awarded for a work injury compensable under NSW workers’ compensation legislation are for past and future economic loss due to loss of earnings.
Section 151A of the Workers Compensation Act provides that if a person recovers damages in respect of an injury, the person ceases to be entitled to any further compensation under the Act. Any amount already paid by way of weekly compensation is to be deducted from the damages amount. Section 151IA provides that in awarding damages for future economic loss due to deprivation or impairment of earning capacity, the court (in awarding damages) is to disregard any earning capacity of the injured worker after pension age (as defined in the Act – [age] years of age for Mrs Beesley).
If a claim does not resolve under section 151A, section 52 of the Workers Compensation Act provides an injured person may be entitled to receive weekly payments of compensation until the first anniversary of reaching pension age.
Section 66 of the Workers Compensation Act provides for compensation for permanent impairment, where the degree of whole person impairment is greater than 10%. The amount of compensation for permanent impairment, flowing from a percentage of whole person impairment, is fixed.
In Mrs Beesley’s case, she received lump sum compensation for 24% whole person impairment, an assessment of impairment made by Dr [B]. Under section 66 of the Workers Compensation Act, she received $66,930.
That was not, Ms [A] told me (and I accept), a negotiable sum. It had to flow from the assessment made by Dr [B].
The compensation Mrs Beesley received in resolution of the rest of her claim, $18,070, was net of payments already made (including, significantly, for past economic loss). In Ms [A]’s submission, it could not – because of section 151IA – include compensation for economic loss beyond Mrs Beesley’s [age] birthday. The application of the 50% rule, which has the effect of denying Mrs Beesley the age pension past that point, is therefore unfair and inconsistent with the purpose of the preclusion period, and occasions a finding of special circumstances.
There is an extensive history to this line of argument.
In Kertland, the Court endorsed comments made by von Doussa J in Secretary, Department of Social Security v David A Smith [1991] FCA 280, rejecting an argument that an equivalent section in pre-1991 social security legislation did not empower an exercise of the discretion that would defeat the operation of the 50% rule.
In both Smith and Kertland, the Court held that the Administrative Appeals Tribunal (AAT) did not fall into error by finding special circumstances where the 50% rule applied unjustly.
In Kirkbright v Secretary, Department of Family & Community Services [2000] FCA 1876 found that the Tribunal erred by misapprehending the purpose of the preclusion period as requiring a claimant to support themselves with available funds before turning to social security. That misapprehension:
… influenced the Tribunal into excluding from consideration unfairness in the strict application of the legislation as possibly demonstrating that special circumstances exist in the applicant's case. Indeed, in my view, s 1184 is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act.
In Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, the AAT had heard an argument that the compensation amount could be broken into its constituent parts and found special circumstances by reference to the relatively low amount of compensation for economic loss. Mrs Chamberlain did not have significant earnings and the amount attributed to economic loss in the settlement was only nominal.
In the Federal Court, the Secretary argued that the decision-maker ‘can never take into account what was actually received by way of compensation for economic loss in considering the circumstances of the particular case’. Justice Kiefel (as she then was) agreed, finding:
32 In each of Smith and Kertland it may be said that their Honours took into account the true position. The facts of those cases were unusual. It does not follow that the true facts in every case will have that quality. In those cases it could be seen, objectively, that there could not have been a double payment. In such a circumstance it might be concluded that the statutory assumption operated unjustly. This would not seem to me a situation which would often arise and sets these cases apart from the usual.
33 In the present case the Tribunal considered that the application of the formulae was unfair to the applicant because she would have to pay more than she had received by way of compensation for economic loss, indeed twice as much. That factor will however be present in most cases and is an aspect of the application of the formulae. In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary.
34 The basis for the Tribunal's view was its acceptance of what the parties to the settlement said had been offered and accepted for the economic loss component. It was far less than the statute assumed to be the case in applying the formulae. Again, however, this will be so in many, if not most, cases to which the Act applies. Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary "special circumstance". The statute has selected a figure which may operate in an arbitrary way.
35 The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s 1184. The latter does not alter the objective and must be read in light of it.
The matter was remitted to the AAT. In Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487, the AAT found no special circumstances existed:
The real lesson from Chamberlain and the other authorities seems to be this: once the Tribunal has satisfied itself the statutory formula was correctly applied, the Tribunal is not otherwise interested in the formula and whether or not it accurately reflects the ‘true' position. The logic of the legislative scheme removes the need for that investigation. It is irrelevant that an applicant might have been treated more favourably if the rule were modified to reflect the amount actually allocated in respect of economic loss in a given case. The Tribunal must instead focus on whether special circumstances exist following the application of the rule and the imposition of the preclusion period (or the extraction of the sum under s 1166). If special circumstances do exist, the exercise of the discretion may be justified.
The Court followed Chamberlain in Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076. Mr Clark had received weekly compensation under the Workers Compensation Act, which – because of section 52 (cited above) – stopped a year after he reached pension age. He received lump sum compensation very soon before reaching that point. In that decision, Lindgren J said:
75 I respectfully agree with the approach that was taken by Kiefel J. The expression "special circumstances" in s 1184K does not embrace the circumstance that the 50 percent rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances.
76 Once one embarks on an inquiry of the kind that would be required in such a case, one is defeating the legislative intention. The Parliament must be taken to have contemplated as "usual" or "ordinary" the circumstances of people placed as Mr Clark is. In effect, by adopting the rough and ready 50 percent rule, the legislature has faced such people with a choice: not sue at all and to rely, instead, on such other entitlements as may be available; litigate to trial so that the Court will identify a figure for loss of earnings and of earning capacity; or settle subject to the operation of the 50 percent rule.
77 In the present case, Mr Clark must be taken to have decided against the former two courses. I do not know why he did so. In one sense, it seems unfair that Mr Clark should suffer a preclusion period until 15 February 2008, but I do not think that this constitutes "special circumstances" in the light of the legislative intention.
78 If the position were otherwise, the régime that was introduced in 1988 would be defeated because it would be again open to parties to a settlement to attribute an artificially low figure to loss of earnings and earning capacity, and to the injured person, through s 1184K of the SS Act, to initiate the very kind of investigation that it was the intention of the 1988 amending Act to eliminate.
The application of those authorities by the AAT has varied, to some extent.
In Brimley and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 250 the AAT said:
I am bound by Justice Lindgren’s view [in Clark] that “even a grossly excessive preclusion period”, having regard to a component for loss of earnings, is not embraced in the expression “special circumstances”. Justice Lindgren is particular about the preclusion possibly being excessive due to the loss of earnings component and age not being special circumstances but does not elaborate on what other circumstances are possibly not special.
It was put to me by the Secretary’s counsel that Lindgren J held that unfairness in the application of the Act cannot be a special circumstance. In this respect, I acknowledge that His Honour did approve the words of Keifel J in [Chamberlain] at [34-35] where Keifel J noted the statute has selected a methodology which may operate in an arbitrary way and that this does not alter the objective or change the way it must be read. However, the view that an arbitrary effect cannot be a special circumstance in any situation is not universally held or was not so held in 2000 [in Kirkbright].
Similarly, in De Araugo and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 986 the AAT said:
As mentioned above, Ms Giaretto contended that the factor referred to in paragraph 41(e) above [that the economic loss component had been reduced due to contributory negligence], is not an unusual circumstance. In support of this aspect of her argument, Ms Welfare referred in particular to a passage from the judgment of Lindgren J in Clark at [75], which suggested that even a gross disparity between the statutory formula and the amount actually recovered for loss of earnings cannot be a special circumstance at all.
However, his Honour expressly said in the passage in question that he agreed with the approach of Kiefel J in [Chamberlain] at [33]. In that paragraph her Honour made it clear that the relevant disparity could not “by itself” amount to special circumstances, or a matter out of the ordinary, and I do not think that Lindgren J intended by the relevant passage to convert her Honour’s qualified proposition to an absolute proposition, as submitted by Ms Giaretto.

In Tisdell and Secretary, Department of Social Services (Social services second review) [2015] AATA 582, though, the AAT took a more restricted view, finding:
In light of [Clark], I cannot decide that application of the 50% rule to Mr Tisdell constitutes special circumstances. In fact, I don’t see how application of the 50% rule could ever constitute special circumstances, no matter what proportion of a compensation payment was compensation for economic loss. Section 1184K of the SS Act is designed to ameliorate unfairness or injustice, but not unfairness or injustice that results from the application of the 50% rule.
In Ward and Secretary, Department of Social Services (Social services second review) [2022] AATA 57, the AAT – citing Chamberlain but not Clark – said:
Clearly, based on [Chamberlain], as well as [Smith] and [Kertland], it is open and appropriate to consider what an applicant actually received by way of compensation when assessing if special circumstances exist. However, the fact that application of the 50% deeming provision may result in an applicant paying more to the Commonwealth than what they received does not, by itself, establish special circumstances. Other factors need to be in play before it could be said that special circumstances exist.
In Lazarov and Secretary, Department of Social Services (Social services second review) [2022] AATA 3238 the AAT found that:
The facts of [Clark] bear a strong resemblance to the present case. Mr Clarke had received a workplace injury before reaching his retiring age. The Workers Compensation Act 1987 (NSW) (WC Act) provided for statutory benefits. Section 52 of the WC Act provided that a payment was not to be made in respect of any resulting period of incapacity occurring after the first anniversary of the date on which the person reached the retiring age. The question arose whether the combined operation of the statutory formula and section 52 created a ‘special’ circumstance. ...
I note that Kiefel J did not opine [in Chamberlain] that the earlier decisions in Kertland and Smith were wrong, or that they should not be followed. It may therefore be an overstatement to say that the decision-maker can never take into account what was actually received by way of compensation for economic loss in considering the circumstances of the particular case. Chamberlain accepts that in some cases, it may be seen that ‘objectively’ there could not have been a double payment, and in such cases it might be concluded that the statutory assumption operated unjustly, but these cases were ‘unusual’.
In this case, there was no statutory preclusion from receiving compensation for economic loss, such as existed in Kertland. The present facts are also distinguishable from those in Smith, where the claimant was disqualified from receiving payments for economic loss while he was on sick leave following the accident. Section 13.3 merely precludes statutory benefits by the insurer beyond a certain point in time, defined in terms of the anniversary of a person’s eligibility for the age pension.
In my view, the present case is governed by Clarke. In that case, section 52 of the WC imposed a time limitation on receipt of statutory benefits; in this case it was subsection 13(3) of the MAIA. It is hard to see any substantial difference between the two cases. With respect, there may be a question whether Lindgren J was correct to consider the case before him as governed by Chamberlain, where the reasoning of Kiefel J did not turn on the application of a provision such as section 52 (or section 13). However, Clarke is binding on this Tribunal.
The reasoning in Lazarov is persuasive. Where Lindgren J in Clark did not seek to set aside Smith and Kertland, rather approving of Kiefel J’s treatment of those decisions, I do not think the strict view adopted in Tisdell is necessarily the correct position. I observe, as the AAT did in Brimley and De Araugo, that there is some tension in the reasons in Clark between the approval of Kiefel J’s reasons (which leave open the possibility that if it could be ‘objectively’ demonstrated that there could be no payment of both compensation and social security for the same period, there might be special circumstances) and the ‘absolute proposition’ (as it was put in De Araugo) then arrived at, that special circumstances simply cannot lie in an unfair application of the 50% rule.
I observe that Mrs Beesley had the choice described in Clark, between settling her workers’ compensation claim (where she could have expected that 50% of the agreed sum would be treated as economic loss for the purposes of a social security payment) and continuing to receive weekly compensation until her [age] birthday (unless, of course, she recovered from her injuries).
There may be some case where what has been called the “true position” of a settlement sum gives rise to special circumstances. The difficulty for Mrs Beesley, though, is that the facts of her case are not materially different from the facts in Clark, or indeed Lazarov. In each case, the effect of the 50% rule is that the preclusion period comfortably exceeds the period of time for which the person could have received compensation for non-economic loss. Mrs Beesley’s case is perhaps even a step beneath Mr Clark’s case, as the preclusion period – at least – does not run past the one‑year anniversary of her reaching pension age. I am bound by Clark: that cannot constitute special circumstances.
I will note for completeness that the lump sum amount also included an amount for legal costs. There is a good deal of commentary about whether it is appropriate that an amount of legal costs included in lump sum compensation be treated as not having been made on the basis of special circumstances (see Secretary, Department of Social Services and Cooper [2015] AATA 41 at [25]-[31]).
Here, though, where the amount of costs included in the lump sum is a mere $700, it is simply not a determinative issue.

Hardship

Mrs Beesley told me that she had had a difficult time following the injury. Her car was written off in the accident and it was underinsured. Other unexpected expenses emerged, with the result that she dipped into her superannuation when that had been available. Her partner had had a period of unemployment. He is now engaged in shift work, and working as many weekends as possible to try to remedy their financial situation. As things stand, with the state of their mortgage and superannuation, he will not be able to retire upon reaching 67.
Mrs Beesley produced a Statement of Financial Circumstances to the Tribunal, current as at February 2025. She declared that she had about $50,000 in savings, which she told me is the remaining money from her compensation. Some of the compensation money had gone towards paying off the mortgage, and large expenses like vehicle registration and insurance. She and her husband are trying very hard not to touch the remaining money as they have little else. She observed that they were not able to take holidays or enjoy other discretionary spending.
I do not discount Mrs Beesley’s experience of her financial position. She left work earlier than she may have intended to and her injuries impacted her partner’s ability to work.
I observe, though, that where the AAT had been prepared to find special circumstances on the grounds of financial hardship, the person was impecunious or close to it, such that without the exercise of the discretion they were at risk of homelessness or extreme poverty (for example, Thomas and Secretary, Department of Family and Community Services [2003] AATA 842; O’Neill and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 619).
This is not such a case, and Mrs Beesley’s straitened financial circumstances are not so unusual as to constitute special circumstances.

The exercise of the discretion

My task is to examine the totality of the circumstances, and determine whether, in the special circumstances of the case, it is appropriate to treat some part of the compensation payment as not having been made.
Where I find that I am bound not to find that special circumstances lie in the amount of the lump sum received by Mrs Beesley that could be for economic loss, and where Mrs Beesley’s straitened financial circumstances do not rise to the level of special circumstances, it follows that it is not appropriate to exercise that discretion.

DECISION

The Tribunal affirms the decision under review.

Date(s) of hearing:	Monday, 24 February 2025
Representative for the Applicant:	Ms [A], Mortimer Fox Lawyers