Blowers and Secretary, Department of Family and Community Services

[2000] AATA 958

DECISION AND REASONS FOR DECISION [2000] AATA 958

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2000/546
  )               Q2000/547

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      KENNETH AND JEAN BLOWERS        
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Dr E K Christie, Member   

Date2 November 2000

PlaceBrisbane

Decision      The decision under review is affirmed.  This means Mr. and Mrs. Blowers' application is unsuccessful.      

............(Signed)................................
  DR E K CHRISTIE

MEMBER

CATCHWORDS
SOCIAL SECURITY – age pension – calculation of entitlement – arrears payments
Social Security Act 1991: s.8(1)
Re Durrant and Secretary, Department of Social Security (AAT 4386, 4 June 1999)
Re Geddes and Secretary, Department of Social Security (AAT 1018, 30 October 1985)
Re Guarnaccia and Secretary, Department of Social Security (1989) 18 ALD 67
Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348
Re Secretary, Department of Social Security v Davies (1999) 47 ALD 634
Re Zanon and Secretary, Department of Social Security (1989) 18 ALD 82

REASONS FOR DECISION

2 November 2000   Dr E K Christie, Member               

1. This is an application by Kenneth and Jean Blowers for a review of a decision made by the Social Security Appeals Tribunal ("the SSAT") on 31 May 2000 to affirm the following decisions under review:

   (a)The decision made by Centrelink on 18 February 2000 to include the amount of United Kingdom age pension in the calculation of the applicant's [Mr. Blowers] Australian age pension;  and

   (b)The decision made by Centrelink on 18 February 2000 to include the amount of United Kingdom age pension in the calculation of the applicant's [Mrs. Blowers] Australian age pension, and a further decision not to pay arrears of her [Mrs. Blowers] Australian pension from 1991.

2. The evidence before the Tribunal comprised the documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 (the "T" documents).

3. A telephone directions hearings ("TDH") was held on 2 October 2000 prior to the application being decided on the papers.  Both parties had consented for the application to be determined from the papers.  Neither party attended the TDH in person.  The purpose of the TDH was to clarify any outstanding issues and to provide the parties with an opportunity to present submissions on how the application should be decided.  Mr. K. Blowers and Mr. S. Letch, a Departmental Advocate, participated in the TDH.

SSAT FINDINGS OF FACT

1. The SSAT made the following findings of fact:

   "*  Mr Blowers was in receipt of UK pension of 26.70 pounds from 19 January       1999.

   *  Mrs Blowers was in receipt of UK pension of 15.87 pounds from 25 January 1999.

   *  The rates of Mr and Mrs Blower's Australian age pensions were calculated    taking into consideration UK pension amounts as income from 4 February 1999.
   * Mr and Mrs Blowers advised Centrelink on 4 February 1999 of other revised UK pension rates."

ISSUES TO BE DECIDED

1. There was only one issue for the Tribunal to decide:

   ·     Whether Mr and Mrs Blowers' UK pensions, which are currently being withheld by the UK Department of Social Security ("DSS-UK") in order to recover a debt with them, should be assessed as income when determining the rate of age pension.

2. In a letter to the Tribunal, prior to the TDH (5 September 2000), Mr and Mrs. Blowers acknowledged:

   "Arrears arising from underpayment
   We accept the application of Social Security Act 80(5) prevents the payment of arrears, arising from deductions made in relation to DSS-UK pensions payments which are now ruled to be overpayments."

CONTENTIONS AND SUBMISSIONS OF THE PARTIES

1. Mr. Blowers current rate of UK pension is 26.70 pounds;  Mrs. Blowers receives a current UK pension rate of 15.87 pounds.  There is no dispute as to these rates.  Rather, Mr. Blowers contends that these moneys are never received by them as they are being withheld for a period of eight years (to 2008) and so do not fall within the meaning of "income".

2. Mr. Blowers also contended that it is illogical to define a suspended [or withheld] payment as "income".  He challenged that a withheld pension continues to be paid.  Mr. Blowers submitted that a withheld pension was one in which payment of the pension stopped.  This had not occurred in their situation.

3. It was Mr. Blowers' contention, when DSS-UK suspended payments of pension to Mr. and Mrs. Blowers, that all payments ceased.  Moreover, that such suspended pensions did not come within the meaning of "income" until such payments were resumed.  Based on current estimates of time, their payments of DSS-UK pensions will not resume until 29 December 2008.

4. The Department's submissions were that the DSS-UK pension payments, currently being withheld to Mr. and Mrs. Blowers came within the meaning of:

   (a)"ordinary income";

   (b)"income" in s.8(1) of the Social Security Act 1991 ("the Act") and

   (c)did not fall within any of the stated exclusions defined in s.8(1), specifically:

   ·that a person's rate of age pension is subject to their "ordinary income" (see 1064-E1);

   ·that under s.1072, a person's "ordinary income" is their gross ordinary income from all sources without any reduction, other than certain deductions the Act allows for business income;

   ·that s.8(1) stated that "ordinary income" means "income that is not maintenance income or an exempt lump sum" .

5. Furthermore, because a UK pension was neither maintenance income nor an exempt lump sum, it was "ordinary income" if it came within the definition of "income".

6. The Department further submitted the fact that UK pensions were being withheld from Mr. and Mrs. Blowers and did not alter the fact that they were "deriving" these monies.  An analysis of case law1 indicated that "deriving" income and "receiving" income were separate concepts.  It was the Department's contention that moneys which a person was legally entitled to and which were used for their benefit, notwithstanding they were not received – for example to pay a pre-existing debt, were money derived by such persons.

7. The Department's submissions also distinguished between a "suspended" payment and a "withheld" payment.  It was contended that a "suspended" payment meant the person would receive no payment at all.  In contrast, a "withheld" payment referred to moneys derived which could be used to repay a debt.

8. The Department contended that as the UK pension moneys were being used by Mr. and Mrs. Blowers to repay their debt, the UK pension payments were for their "own use or benefit".

9. The Department also contended, by applying the decision in Secretary, Department of Social Security v Davies (1999) 47 ALD 634, that Mr. and Mrs. Blowers' UK pensions were "periodical" payments as they were based on a weekly rate and were payable monthly in arrears.

1  See     Re Durrant and Secretary, Department of Social Security (AAT 4386, 4 June 1999)
         Re Geddes and Secretary, Department of Social Security (AAT 2365, 30 October 1985)
         Re Siebel and Director-General of Social Security (1983) 5 ALN N194

LEGAL FRAMEWORK

1. The Social Security Act and relevant case law need to be considered.

   (a)SOCIAL SECURITY ACT 1991

   The expression ''ordinary income'' is defined to mean "…income that is not maintenance income or an exempt lump sum' (s.8(1)).  The word "income" means:

   "(a)an income amount earned, derived or received by the person for the person's own use or benefit;  or

   (b)a periodical payment by way of gift or allowance;  or

   (c)a periodical benefit by way of gift or allowance;

   but does not include an amount that is excluded under subsection (4),    (5),(7A) or (8)".  (sub-section 8))
   An 'income amount' referred to in the definition of 'income' means:

   "(a)    valuable consideration;  or
   (b)     personal earnings;  or
   (c)     moneys;  or
   (d)     profits;
   (whether of a capital nature or not)"

   A reference to an 'income amount earned, derived or received' in that definition means:
   "(a)    an income amount earned, derived or received by any means;  and

   (b)an income amount earned, derived or received from any source (whether within or outside Australia)."

(b)CASE LAW

The following decisions are relevant in deciding whether Mr. and Mrs. Blowers' UK pensions, currently being withheld by DSS-UK, should be assessed as income when determining their rate of age pension in Australia:

·     Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348

"(1)  Each of the terms, 'earned', 'derived' and 'received' used in the definition of 'income' [in the Social Security Act 1991] was intended to have a separate meaning. Moneys to which a person was periodically entitled were moneys derived by the person, and thus income for the purposes of the Social Security Act, notwithstanding that the moneys were not received until a later date."

·     Re Guarnaccia and Secretary, Department of Social Security (1989) 18 ALD 67

"The whole of the applicant's INPS [overseas] pension entitlement was income derived by him, even though the applicant only received the net amount transferred to him in Australia after the deduction of Italian tax and bank charges."

• Re Zanon and Secretary, Department of Social Security  (1989) 18 ALD 82

  "(ii)  In calculating the level of the applicant's income, Italian taxes and bank charges relating to the applicant's pension entitlement should not be deducted from that entitlement."

• Re Geddes and Secretary, Department of Social Security (AAT 1018, 30 October 1985)

  "The use of the term 'derived' indicates that the Act is not concerned merely with cash flow. That the applicant received a certain amount of cash in his hand is irrelevant in determining the amount of the personal earnings which he derived. In Siebel's case (supra) compulsory capital repayments of superannuation which had been overpaid were held not to be deductible in arriving at the amount of income derived by the applicant even though it meant that whilst he was making these payments he had that much less cash in his hand. If one were to appeal to logic to justify the view that 'income' was 'take home pay' then any sum of money representing any item on any account which affected that cash flow would have to be similarly treated.  Repayments of credit union loans, Medibank payments or superannuation contributions (to give only a few examples) would have to be deducted before arriving at the net income. Clearly this was not intended."

• Re Durant and Secretary, Department of Social Security (AAT 4386 4 June 1999)

  "Payment of tax from money which Mr Durant earns, derives or receives is part of the money for his own use or benefit.  It is for his own use or benefit that he pay his taxation obligations whether those obligations arise in Canada or Australia.  The fact that he is not called upon to meet those obligations from the pensions moneys he actually receives and that the money is deducted before the balance is sent to him is of no consequence."

CONSIDERATION OF THE ISSUES

1. The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times.  The relevant legislation, the Social Security Act 1991, sets the boundaries for the facts that are relevant to deciding the issue in dispute. That is, whether the UK pensions and their application to recover a debt, are "income" for the purposes of the Act.

2. The Tribunal concludes, based on all of the material before it, together with an analysis of the legal framework, that it can make no other finding than to conclude that the withheld UK pension is "income" under the Act because it is income that has been "derived" by Mr. and Mrs. Blowers for their "own use or benefit" i.e. repayment of Mrs. Blowers' debt. Mr. and Mrs. Blowers are legally entitled to their UK pensions and these moneys so derived are being used for their benefit to repay a pre-existing debt with DSS-UK.

3. Accordingly, the Tribunal further concludes that it is correct to use the amount of UK age pension in calculating Mr. and Mrs. Blowers' Australian age pension under ss.1064-E1 and 1064-E2 of the Act.

4. Whilst this decision may be regarded as harsh, it may be more appropriate to consider it as unfortunate, as the Act provides no discretion for the Tribunal to make any other decision. The end result is that a couple, on age pension, are confronted with an enormous debt load for the next eight years. This problem appears to have arisen from a situation where Mrs. Blowers was incorrectly paid the UK pension when she reached age 60 in 1991. Instead, she should have been paid the UK pension only from the time Mr. Blowers reached age 65 in 1999.

5. Coupled with this debt, is the Tribunal's findings that the DSS-UK pension entitlements derived by Mr. and Mrs. Blowers to repay their DSS-UK debt  result in Mr. and Mrs. Blowers' Australian age pension entitlement being reduced.

6. Mr. Blowers has acknowledged they have no recourse to the income arrears provisions of the Act (see paragraph 6) presumably because they first became aware, on 2 March 1999 (T46) that:

   (a)They had to repay their UK pension debt of 20612.69 pounds for the period 1991-1999;  and

   (b)Of the existence of the "income arrears provisions" of the Act.

7. The Tribunal makes the observation that Mr. and Mrs. Blowers might wish to pursue with Centrelink the possibility of seeking an "Act of Grace Payment" in relation to their reduced age pension entitlements.  An Act of Grace payment can only be made in cases that involve:

• The consideration of purely moral or humanitarian grounds;  or

• Questions of legislation producing unintended, anomalous,  inequitable;  unjust or otherwise unacceptable results in the particular circumstances;  or

• A matter not covered by legislation but where it is intended to introduce such legislation and it is desirable to apply the benefits of the proposed legislation retrospectively.

1. The Tribunal makes the further observation that is has no statutory power to make an Act of Grace payment.  Rather, any such possibility for a payment is one which must be pursued by Mr. and Mrs. Blowers with Centrelink,

2. For all of the above reasons, the decision under review is affirmed.  This means Mr. and Mrs. Blowers' application is unsuccessful.

   I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Dr E K Christie, Member.

   Signed:         .....................................................................................
              R. Hayes, Associate

   Date/s of Hearing  Matter heard on the papers
   Date of Decision  2 November 2000
   Applicant  Mr. Blowers, himself
   Respondent  Mr. S. Letch, Departmental Advocate