Clements and Secretary, Department of Family and Community Servic Es
[2004] AATA 7
•9 January 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 7
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2003/699
GENERAL ADMINISTRATIVE DIVISION ) Re DARRYN CLEMENTS Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr R G Kenny, Member Date9 January 2004
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ..................(Sgd).......................
R G Kenny
Member
CATCHWORDS
SOCIAL SECURITY – benefits and entitlements -- newstart allowance -- income test -- meaning of exempt lump sum -- moneys received in settlement of a claim not an exempt lump sum -- use of the Guide to Social Security Law
Social Security Act 1991 ss 8(1), 8(11), 1073
Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409
Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82
Re Davies and Secretary, Department of Family and Community Services [2002] AATA 904
Re Dainty and Minister for Immigration and Ethnic Affairs (1987) 6 AAR 259
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Varcoe and Secretary, Department of Family and Community Services [2000] AATA 1002
Re Secretary, Department of Family and Community Services and McLaughlan [2003] AATA 298REASONS FOR DECISION
9 January 2004 Mr R G Kenny, Member Decision Under Review
1. Prior to 30 April 2002, Darryn Clements (the applicant) was in receipt of newstart allowance, which is payable in accordance with the terms of the Social Security Act 1991 (the Act). He received a lump sum settlement of $12,301.96 on 30 April 2002 and, on 4 November 2002, a delegate of the Secretary, Department of Family and Community Services (the respondent) decided to maintain the lump sum payment as ordinary income over a period of 52 weeks. On 8 May 2003, an authorised review officer and, in turn on 10 June 2003, the Social Security Appeals Tribunal (the SSAT) affirmed the decision. On 18 August 2003, the applicant sought review of that decision by the Administrative Appeals Tribunal (AAT).
Hearing
2. At the hearing, the applicant was not represented. The respondent was represented by Ms J Hamilton from the respondent’s Service Recovery Team. The following materials were taken into evidence:
Exhibit 1 -the documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents – T1-T57);
Exhibit 2 -a letter, dated 24 June 1998, from Michael Cusack, Corporate Services Manager with PCS Resources Pty Ltd;
Exhibit 3 -a letter, dated 25 June 2001, from Klooger Phillips Scott; and
Exhibit 4 -a letter, dated 11 May 2001, from the Australian Government Solicitor.
Issues and Legislation
3. In this matter, the Tribunal must decide the appropriate characterisation of the lump sum which the applicant received for the purposes of determining the manner in which is to be treated in the calculation of his newstart allowance. Relevant to that determination are the following provisions of the Act:
“Income test definitions
8(1) ‘income’, in relation to a person, 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) or (8);
…
8(11) An amount received by a person is an exempt lump sum if:
(a) the amount is not a periodic amount (within the meaning of subsection 10(1A)); and
(b) the amount is not a leave payment within the meaning of points 1067G-H20, 1067L-D16 and 1068-G7AR; and
(c) the amount is not income from remunerative work undertaken by the person; and
(d) the amount is an amount, or class of amounts, determined by the Secretary to be an exempt lump sum.
…
Certain amounts taken to be received over 12 months
1073(1) Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
1073(2) Subsection (1) applies to a person who has claimed one of the following allowances:
(a) newstart allowance; …
during the period of 12 months referred to in subsection (1).”
Background
4. Most of the factual issues in this matter are not in dispute. On 30 April 2002, the applicant received the lump sum payment of $12,301.96 pursuant to a court order. This included reimbursement of costs of $2,250 which represented outlays paid by him over a number of years of his involvement in a class-action which commenced in 1998. He advised Centrelink of the receipt of the payment on 8 May 2002. On 20 May 2002, he attended a Centrelink office and provided further details of the settlement by completing an “Income and Investments” form (T5) where he described the lump sum as a “cost reimbursement and settlement”.
5. At the time that he received the lump-sum, the applicant was required to provide a continuation form for payment of his newstart allowance every four weeks. One of the payment periods was from 26 April 2002 until 9 May 2002 and, although he did not lodge a form for that period, he was, nevertheless, paid his usual level of allowance at that time.
6. After receiving the information about the lump sum payment, Centrelink officers applied it as income over the 12 month period starting from 30 April 2002 which was the date when the moneys were received by the applicant. This had the effect of decreasing the level of fortnightly allowance to which he was entitled during that period. Because he had already been paid for the fortnight from 26 April 2002 to 9 May 2002 at the previous rate, this meant that there was an overpayment during that period. This was in the amount of $194.50 which was raised by Centrelink as a debt against the applicant on 27 August 2002 although, subsequently, this debt was waived.
7. On 30 May 2002, Centrelink sent a letter to the applicant advising him that he had not lodged his continuation form for the period commencing 23 May 2002 and also indicating that, if such form were not lodged within 14 days, his payments would be cancelled (T8). As no such form was lodged by him, Centrelink, on 17 June 2002, sent a letter to the applicant advising him that his allowance was cancelled with effect from 26 April 2002 (T9). On 10 October 2002, the applicant reapplied for newstart allowance and payment was resumed although at a rate which reflected that the lump sum that he had received was being maintained against him as income over the 12 month period as indicated earlier. As noted above, newstart allowance was actually paid to the applicant in the period commencing 26 April 2002 even though, ultimately, it was determined that the allowance was to be cancelled in that period.
Applicant's Case
8. The applicant contended that the lump-sum payment should not be treated as any form of income in his hands as it was a one-off payment. He submitted that it was not a redundancy package as he had received one of these when his employment had been terminated in 1998. He also submitted that it was not a payment for unfair dismissal because he had not been employed by the corporate entity against which the class-action was taken. He said that, from the beginning and until the payment was received by him, he was required to make contributions to the litigation fund, that, at any stage, he could have discontinued his involvement and that, indeed, many did this over the years. He said that there was no guarantee that they would receive payment even if they went to court and there was always the prospect that the overall costs involved could exceed any benefits returned to him and his fellow litigants. He said that the documentation in relation to the terms of the court order or the itemised components of the payment was not available because of a confidentiality clause which prevented release of any such information.
9. In relation to the prospective outcome of the action in which he was involved, the applicant referred the Tribunal to a letter from his lawyers Klooger Phillips Scott, dated 25 June 2001 (Exhibit 3) which, in part, reads:
“It is of vital importance that you all understand that there are no guarantees that this matter will settle in your favour and we must all continue to focus our energies on having this matter proceed to a trial. Of course, we are aware that there are many of you who wish to see this matter proceed to trial regardless of any settlement offers that may be made.”
10. The applicant submitted that the sum should not be taken into account in the calculation of his newstart allowance in the manner that was done by the respondent. He also adopted as correct the submissions he had made to the SSAT that he had not lodged a continuation form for newstart allowance in respect of the period from 26 April 2002 until 9 May 2002 and had not been aware of his receipt of those payments until the overpayment was raised against him in August 2002.
Respondent's Case
11. Ms Hamilton noted that the applicant received the lump sum on 30 April 2002 and that this date fell within the payment period from 26 April 2002 until 9 May 2002 when newstart allowance was paid to him even though he had not lodged a continuation form and even though, subsequently, it was determined that the allowance was to be cancelled with effect from 26 April 2002. She referred to the observation by the SSAT that he was, technically, in receipt of newstart allowance on the day that he received the lump sum payment. Ms Hamilton submitted that the payment in the period from 26 April 2002 until 9 May 2002 had not been made in error because the applicant had been on the four weekly lodgment procedure and the continuation form was not necessary in order for him to be paid in the period.. In any event, she submitted, section 1073 of the Act was relevant in this matter and the operation of that provision did not depend upon whether or not the applicant was in receipt of newstart allowance at the time the lump sum was received.
12. Ms Hamilton submitted that the lump sum that the applicant had received was embraced by the definition of income in section 8 of the Act but that it should not be characterised as being income within the meaning of Divisions 1B or 1C of Part 3.10 of the Act, income from remunerative work, income in the form of periodic payments or an exempt lump sum. She submitted that the relevant provision for determining the character of the lump sum was subsection 8(11) of the Act and that section 1073 the Act required it to be taken as having been received over the 12 month period.
13. In relation to what constitutes an exempt lump sum, Ms Hamilton referred the Tribunal to the terms of the Social Security Guide and submitted that the kinds of items which would meet that description were such things as lottery wins, legacies, bequests or one-off gifts which were unexpected and non-anticipated amounts. She submitted that, in the applicant's case, he had outlaid costs in excess of $2,000 and that this indicated that he did expect to receive a return. She submitted that, therefore, the amount that he received could not be considered to be an exempt lump sum as provided for under the Act.
Consideration
14. Section 8 of the Act makes provision for various definitions relating to income and the definition of the term income is found in subsection 8(1) of the Act. This is set out above and I am satisfied that the lump sum that the applicant received does not meet any of the elements of that definition. Subsection 8(8) of the Act sets out amounts which do not constitute income for the purposes of the Act and, whilst it is not produced above, it was set out in the material before the Tribunal (T3). I am satisfied that the lump sum that the applicant received does not fall within the ambit of that provision.
15. Subsection 1073(1) of the Act makes provision for certain amounts to be taken to have been received over a 12 month period. This applies to amounts which are not:
§income within the meaning of Division 1B or 1C of Part 3.1.10 of the Act;
§income in the form of periodic payments;
§ordinary income from remunerative work undertaken by the person; or
§an exempt lump sum.
16. Divisions 1B and 1C of Part 3.1.10 of the Act deal with income from financial assets and income from income streams, respectively. I am satisfied that the applicant's lump sum does not meet either of those descriptions. I am also satisfied that the amount that he received was not income in the form of periodic payments or ordinary income from remunerative work that he undertook. The respondent has contended that the lump sum also falls outside the scope of the term exempt lump sum and, therefore, is to be dealt with under subsection 1073(1) of the Act. As I understand the submission of the applicant, he has contended that the amount is an exempt lump sum and therefore an amount which falls outside of the scope of subsection 1073(1) of the Act.
17. The definition of the term exempt lump sum is provided in subsection 8(11) of the Act and this is set out above. It provides that an amount will meet that description if it satisfies all four of the requirements listed in the provision and that, therefore, it is:
(a)not a periodic amount;
(b)not a leave payment;
(c)not income from remunerative work; and
(d)is an amount or class of amounts determined by the Secretary to be an exempt lump sum.
It is not disputed in this case that paragraphs (a), (b) and (c) in that provision are met and, accordingly, the issue is whether the amount satisfies paragraph 8(11)(d) of the Act.
18. Some assistance as to the meaning of the term exempt lump sum is provided in a subsection 8(11) of the Act which, pursuant to subsection 39(1A) of the Act, is taken to be part of that provision. The note reads:
“Note: Some examples of the kinds of lump sums that the Secretary may determine to be exempt lump sums include a lottery win or other windfall, a legacy or bequest, or a gift-if it is a one-off gift.”
19. Reference is also made to the meaning of the term exempt lump sum in the Guide to Social Security Law (the Guide) which is published by the respondent to provide assistance to those who administer the Act. The Tribunal, whilst not bound to apply policy guidelines of the kind referred to in the Guide (see Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), may do so and, indeed, will usually apply the guidelines unless there are cogent reasons in a particular case for not doing so: see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645; Re Dainty and Minister for Immigration and Ethnic Affairs (1987) 6 AAR 259 at 267; and Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82 at 86. In this case, there is no material before the Tribunal to indicate that the Guide should not be applied.
20. Extracts from the Guide were in evidence (T3). A definition of exempt lump sum is given at paragraph 1.1.E.180 which reads:
“For the purposes of all income support payments, exempt lump sums are amounts that are unlikely to be received again and cannot reasonably be expected to be received or anticipated. They do not represent the receipt of money for services rendered directly or indirectly.
Examples:
§ one-off gifts,
§ lottery winnings (not winnings paid on a periodic basis), and
§ superannuation lump sums.”
21. Paragraph 1..1.L.140 of the Guide also makes reference to lump sums and declares that some of these are maintained over 12 months whilst others are not and, in the latter category, are exempt lump sums as set out in paragraphs 4.3.2.30, 4.3.2.31 and 4.3.2.35. These, in so far as relevant, read:
“4.3.2.30 Other Income Exempt from Assessment - Legislated
Summary
This topic provides information about the following income with legislated exemption from the income test: …
Exempt lump sums
Some lump sums are NOT treated as income for social security purposes. These lump sums are defined by their characteristics rather than by nominated lump sum types. These characteristics are:
unlikely to be repeated, and
cannot be reasonably expected to be received or necessarily anticipated, and
do not represent receipt of money for services rendered directly or indirectly.
They include items like:
one-off gifts, irrespective of the source of the gifts, if they are not of a periodical nature or representing a form of continuous support,
windfall gains such as lottery winnings, the distribution of capital from a legacy or inheritance, or
prizes/awards,
ex-gratia superannuation payments, for example, bona fide redundancy payments or the lump sum
payment of a superannuation invalidity benefit,
irregular superannuation amounts such as:
lump sum amount from the conversion, or
commutation of a superannuation pension, or
the payment of arrears at the time of commencing a superannuation pension.
…
Further references to exempt lump sums can be located in (4.3.2.31) Other Income Exempt from Assessment -Specifically Approved, details in lump sums exempted under section 8(11).
4.3.2.31 Other Income Exempt from Assessment - Specifically Approved
Summary
This topic provides information about the following income with specifically approved exemption from the income test: …
lump sums exempted under section 8(11).
Information about other income exempt from assessment can be found in (4.3.2.30).
…
4.3.2.35 Other Income Exempt from Assessment - Section 8(11) Exempt Lump Sums
Summary
This topic provides information about lump sums exempted from the income test under the Social Security Act 1991 section 8(11).
Information about other income exempt from assessment can be found in (4.3.2.30) Other Income Exempt from Assessment - Legislated and (4.3.2.31) Other Income Exempt from Assessment - Specifically Approved.
Lump sums exempted under section 8(11)
Lump sums exempted under section 8(11) are:
Payment or value of assistance to victims of Bali bombings of 12 October 2002:
Increased special zone B tax offset payment from the ATO for a person resident on King Island or the Furneaux Group of Islands at anytime during the period 1 July 1990 to 30 June 1997,
Ex gratia payment, due to the Prime Minister's decision of 17 July 2003, for a person's period of residence on King Island or the Furneaux Group of Islands at anytime during the period 1 July 1990 to 30 June 2001,
Queensland Government Indigenous Wages and Savings Reparations Process means a process by the Queensland Government to offer monetary compensation to certain individual Aboriginal and Torres Strait Islander (and any other) persons whose wages and salaries were controlled under a Queensland Government legislative regime known as the Protections Acts during the period 1897 to 1965,
Exit assistance of a one-off payment of financial assistance made by the Commonwealth of up to $45,000 for growers in the sugar industry as announced on 25 September 2002 by the Honourable Warren Truss, Minister for Agriculture, Fisheries and Forestry,
Victorian Department of Natural Resources and Environment payment to forest produce licence holders to compensate for being partially or completely excluded from the Box-Ironbark forest based industry,
French Decree 2000-657 payment to the orphans of persons who died during the deportation as part of the anti-Semitic persecutions during the German occupation of France during World War II (orphans must be under the age of 21 years at the time of deportation of their parent),
Dutch-Maror Fund payment to Jewish survivors of World War II who resided in the Netherlands during World War II or to their widow or widower or their child or children if the survivor died after V-E Day of World War II,
Household, Income and Labour Dynamics in Australia (HILDA) survey - financial assistance to complete the personal questionnaire,
One-off payment of $25,000 to Australian service personnel and civilians held as prisoners of war by the Japanese between 7 December 1941 and 29 October 1945, or their widows or widowers,
Rules Simplification Taskforce - financial assistance to participate in a focus group,
Rural Australia Medical Undergraduate Scholarship Scheme (RAMUSS) payment of $10,000 for the period 1 January 2000 to 31 December 2000 made after 15 September 2000 and before 31 December 2000,
Assessment and Contestability Trial for People with Disabilities - financial assistance payments,
Financial assistance associated with the Welfare Reform Pilots,
Farm Family Restart Scheme re-establishment grants paid on or after 1 July 1998,
Farm Family Restart Scheme re-establishment grants paid before 1 July 1998 which will have any waiting periods waived from 1 July 1998,
Dairy Exit Payments from the Australian Government Department of Agriculture, Fisheries and Forestry - Australia (AFFA),
Payments from a Swiss fund for needy Holocaust survivors, paid through the Executive Council of Australian Jewry,
Payments from the Australian Government DoHA associated with the Australian Human Pituitary Hormone Program and Creutzfeldt-Jakob Disease,
Home Equity Conversion loan amounts in excess of $40,000,
Certain amounts arising from alterations of income stream contracts,
ATSIC Indigenous Business Incentive Programme Grants paid under the ATSIC guidelines in effect prior to 1 July 1999,
ATSIC Business Development Programme grants paid under the ATSIC guidelines in effect from 1 July 1999,
Second compensatory payment to an allowee couple made by the Queensland Government through the Award Wages Process for Indigenous Queenslanders,
Compensation payments for NSW commercial fishermen by the NSW Fisheries Department, and
Other individual exempt payments, where customers will hold an 8(11) Determination signed by the Secretary of FaCS.
Exemption of a specific lump sum (for example, a payment such as those specifically named in the list above) for income test purposes is obtained through FaCS Means Test Policy Section.
Further references to more general exempt lump sums (such as a non periodical lottery win) can be located in (4.3.2.30) Other Income Exempt from Assessment - Legislated, details in Exempt lump sums.”
22. It is not the applicant's contention that monies of the kind that he received have been determined, in specific terms, by the Secretary to be an exempt lump sum and I am satisfied that it does not come within any of the categories listed above in paragraph 4.2.3.35 of the Guide. It has been held by the Tribunal that it has the same power as the Secretary to determine whether, in an individual case or class of case, a sum should be treated as an exempt lump sum: see Re Varcoe and Secretary, Department of Family and Community Services [2000] AATA 1002 and Re Davies and Secretary, Department of Family and Community Services [2002] AATA 904. However, the capacity of the Tribunal to make such a decision was doubted by the Tribunal in Re Secretary, Department of Family and Community Services and McLaughlan [2003] AATA 298 where the issue was whether the maturity value of life insurance policies constituted an exempt lump sum under paragraph 8(11)(d) of the Act. There, the Tribunal noted that no determination had been made under that provision in respect of such sums and said:
“42. In such circumstances I have considerable difficulty in understanding how I, or the SSAT can go behind the fact that, according to the present state of the law, the insurance profits are not exempt lump sums. As in Varcoe, the SSAT in the present case purported to exercise the Secretary's function - a legislative function - not an administrative function in making a determination pursuant to s8(11)(d) in favour of the respondent. Even if I were persuaded that there was merit in the argument that a determination should be made by the Secretary so as to exempt the relevant lump sums in the present case, this is not a decision which in the absence of persuasive authority I would regard myself as having power to make.
43. In my opinion this is a basic issue of jurisdiction. Even if a direct approach had been made to the Secretary to classify these sums as exempt lump sums and that request had been refused, I have considerable doubt as to whether a valid appeal under the relevant provisions of the Social Security (Administration) Act 1999 could be pursued. There may also be some doubt as to whether or not the Secretary may delegate the function bestowed upon him under s8(11)(d). As I have already said it seems to me that the power entrusted to the Secretary is a legislative power. Such a power is generally not delegable without express statutory authorisation ‘delegatus non potest delegare’.. However it is inappropriate to go down these paths or to attempt to resolve these issues in the absence of further argument and in my view that course is unnecessary having regard to the views which I have formed as to the intrinsic merits of the case.
44. The simple fact is, however, that the present appeal is not one against the Secretary's refusal to exercise his power under s8(11)(d). It is an appeal against an officer's decision that, in the absence of any such determination as might have been made favourably to the respondent in the exercise of such power by the Secretary, the proceeds of the respondent's policies (less premiums) should be classified as income received over a 12 month period. In my opinion this determination should not be disturbed.”
23. The adoption of the approach in Re Secretary, Department of Family and Community Services and McLaughlan would mean that the applicant will be unsuccessful in this matter because it would deny the exercise of any discretion by a decision-maker under the Act to treat a lump sum as being exempt unless the appropriate application was made to the respondent's Means Test Policy Section. That interpretation would appear to have the effect of negating the operation of the note to subsection 8(11) of the Act and also of paragraph 4.3.2.30 of the Guide which suggest that certain lump sums with the characteristics referred to above should be treated by a decision-maker as being exempt for the purposes of the provision. However, even if this discretion does arise under the Act, the applicant will also be unsuccessful because not all of those characteristics are applicable to the lump sum in this case.
24. The relevant characteristics are that the payment of the sum is unlikely to be repeated, was one which was not reasonably expected to be received or necessarily anticipated and which did not represent payment for services rendered. In the applicant's case, while I am satisfied that there was no guarantee that he would ever receive any amount of money, I am also satisfied that there was always a reasonable expectation and an anticipation that some amount would be received by him. It was for those reasons that he continued to attend meetings with his lawyers and fellow litigants and continued to make contribution to the costs of the litigation process. In that sense, the amount that he received cannot be equated with the matters referred to in the note to subsection 8(11) of the Act, namely one-off gifts, lottery winnings or superannuation payments. Similarly, I am satisfied that the amount cannot be equated with the kinds of matters referred to as examples in paragraph 4.3.2.30 of the Guide, as listed above.
25. I am satisfied that the amount of $12,301.96 which the applicant received on 30 April 2002 was not an exempt lump sum as that term is defined in subsection 8(11) of the Act. I am also satisfied that there is no provision in the Act for decreasing the quantum of that amount by taking into account that a component of it represented reimbursement of the costs that he had incurred. It follows that, pursuant to subsection 1073(1) of the Act, the amount is to be taken by the respondent to have been received by the applicant over a 12 month period commencing on 30 April 2002.
Decision
26. The Tribunal affirms the decision under review.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member
Signed: Sarah Oliver
AssociateDate of Hearing 18 December 2003
Date of Decision 9 January 2004The Applicant appeared in person
For the Respondent Ms Hamilton, Departmental Advocate
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