Cocci and Secretary, Department of Family and Community Services
[2004] AATA 196
•27 February 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 196
ADMINISTRATIVE APPEALS TRIBUNAL )
) No T2002/122
GENERAL ADMINISTRATIVE DIVISION ) Re LUIGI COCCI Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Associate Professor B W Davis AM (Part-time Member) Date27 February 2004
PlaceHobart
Decision The decision under review is affirmed.
[Sgd B W Davis]
Part-Time Member
CATCHWORDS
Social Security - overseas pension - place of residence - income - income stream - age pension - Italy - Australia - international agreement - equal treatment - Social Security Appeals Tribunal.
Social Security Act 1991 and amendments
Social Security (Administration) Act 1999
Social Security and Veterans’ Affairs Legislation Agreement Act 1998
Social Security (International Agreements) Act 1999
Guide to Social Security Law
Agreement on Social Security between Australia and the Republic of Italy 1999
Re Drake and Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Re Rose and Secretary, Department of Social Security (1989) 17 ALD 615
Re Sallan and Secretary, Department of Family and Community Services (1999) AATA 539
Re Cremer and Secretary, Department of Family and Community Services (2001) AATA 509
Re Bersee and Secretary, Department of Family and Community Services (2003) AATA 201
Re Durant and Secretary, Department of Family and Community Services (1999) AATA 382
Re Zanon and Secretary, Department of Social Security (1989) 18 ALD 82
Re Nemaz and Secretary, Department of Social Security (1987) 12 ALD 107
REASONS FOR DECISION
27 February 2004 Associate Professor B W Davis AM (Part-time Member) Decision Under Review
1. The decision under review is a Centrelink decision made on 4 May 2001, subsequently affirmed by the Social Security Appeals Tribunal (SSAT) decision made on 11 July 2002, to assess Mr Cocci’s Italian pension as “income” and not as an “income stream” for Australian age pension purposes.
Issues
2. The issue in this case is whether the applicant’s Italian pension should be treated as “income” for purposes of calculating his rate of age pension.
Standard of Proof
3. The relevant legislation is the Social Security Act 1991 (“the Act”) and amendments. The standard of proof is on the balance of probabilities and to the reasonable satisfaction of the Tribunal.
Legislation and Guiding Principles
4. The following statutes, policy guidelines and agreements apply:
Social Security Act 1991 and amendments
Social Security (Administration) Act 1999
Social Security and Veterans’ Affairs Legislation Agreement Act 1998
Social Security (International Agreements) Act 1999
Guide to Social Security Law
Agreement on Social Security between Australia and the Republic of Italy 1999
Background
5. The applicant, Luigi Cocci, was born on 29 September 1929 and has been an Australian resident since 1957. Mr Cocci receives an Italian INPS retirement benefit and an Australian age pension (AP).
6. The current application for review concerns a decision of Centrelink made on 4 May 2001, to assess the full amount of overseas pension received by the applicant as income, in relation to his Australian age pension.
7. The SSAT reviewed and affirmed the original decision on 23 July 2002. Mr Cocci then lodged an application for review by the Administrative Appeals Tribunal on 27 August 2002.
8. The INPS is a retirement benefit based on the number of years of contribution, but with a top-up supplement applicable where contributions are less than a prescribed minimum. It is the Italian equivalent of an Australian social security age pension.
9. On 4 May 2001, Centrelink made a decision to treat the applicant’s Italian pension as “income” and not as an “income stream” as the applicant had suggested. This decision affected the rate of his Australian age pension, as gross income is assessed in calculating the latter.
10. Mr Cocci then sought a review of the decision by an Authorised Review Officer (ARO) who also affirmed the decision on 4 April 2002. On 8 May 2002 the applicant appealed to the SSAT which after hearing Mr Cocci’s views and examining the matter anew, affirmed the decision on 23 July 2002. Mr Cocci then sought review by the AAT on 27 August 2002. Counsel for Mr Cocci stated that he was not appealing the decision as a whole, but was questioning the definition in Article 4, paragraph 1, of the Social Security Agreement between Australia and the Republic of Italy.
Legislation and International Agreement
11. The relevant Australian legislation is the Social Security Act 1991 and the Social Security (International Agreements) Act 1999, particularly Schedule 2, which contains the “Agreement on Social Security between Australia and the Republic of Italy”. Other documents relevant in this case are the Guide to Social Security Law (Australia) and Taxation Ruling 2554, “Income Tax: Australia/Italy Double Taxation Agreement: Italian pensions derived by Australian Residents”.
12. The Social Security Act 1991 deals amongst other matters, with the definition and meaning of “income” and the method of calculation of pensions (ss8, 1072, 1064(1) and 1064-A1 being relevant). Section 1072 of the Act specifies that a reference to income involves gross ordinary income from all sources and the Guide to Social Security Law clearly states that the gross rate of overseas pensions and income is assessed as income for social security purposes (section 4. 3. 6. 10 of the Guide). A number of Tribunal decisions have further confirmed that gross income from overseas pensions is “income” for the purposes of social security law (see, for example, Sallan and Secretary, Department of Family and Community Services (1999) AATA 539 (20 July 1999) and Cremer and Secretary, Department of Family and Community Services (2001) AATA 509 (8 June 1999).
13. There is no provision in the Agreement on Social Security between Australia and the Republic of Italy whereby an Italian pension could be treated as an “income stream”, notwithstanding this has been sought by the applicant. It is important to note that in Australia, s9(1) of the Act, provides that the term “income stream” only applies to certain kinds of superannuation arrangements. While limited discretion may exist for the Secretary of the Department of Family and Community Services to deal with minor technical issues, it does not extend to recognising foreign sourced pension as “income streams”.
14. As Mr Cocci has also raised issues about “equality of treatment” of citizens of Italy and Australia and whether appropriate consultation occurs prior to or after changes in the Agreement are made, it is desirable to record current provisions:
Article 4 of the Agreement:
“Equality of Treatment
1. The citizens of each of the Parties shall be treated equally in the application of the legislation of Australia and of Italy respectively and, in any case where qualification for a benefit under the legislation of a Party depends, in whole or in part, on citizenship of that Party, a person who is a citizen of the other Party shall, for the purposes of a claim for that benefit, be deemed to be a citizen of the first mentioned Party.
2. All persons to whom this Agreement applies shall be treated equally by the Parties in regard to entitlements and obligations derived from the legislation of the Parties and from this Agreement.
3. A Party shall not be required to apply paragraphs 1 and 2 of this Article to a person who is present in the territory of that Party without lawful authority.”
Also Article 22, paragraph 3 of the Agreement:
“The competent authorities of the Parties shall advise each other of the legislation that amends, supplements or replaces the legislation within the scope of this Agreement promptly after the first-mentioned legislation is enacted.”
Original Decision and SSAT Review:
15. In rejecting the applicant’s claim to have his Italian pension treated as an income stream, the original decision-maker (a delegate of Centrelink) on 4 May 2001 relied upon s8 of the of the Act, which provides that money received from any source is deemed as income for purposes of the social security benefits. The same reason was given by an Authorised Review Officer on 4 April 2002.
16. In its review of the original decision the SSAT considered whether any other grounds existed for treating Mr Cocci’s pension as an income stream. They could not identify any such grounds and in noting Mr Cocci's request that the Secretary exercise discretion under s9(1)(f) of the Act, stated that INPS is not specifically included as a “public sector superannuation scheme” under Australian law and to recognise it would be in contravention of Australian government policy, as stated in the second reading speech concerning the Agreement (Social Security (international Agreements) Act 1999, Schedule 2).
17. A letter was sent to Mr Cocci on 23 September 2003, further explaining the application of discretion:
“The above discretion was included in the Act so that Australian sourced pensions or annuities that are similar in character to income streams specified in paragraphs (a) to (e) of the definition but which, in some minor respect, do not technically satisfy the definition in subsection 9(1), may be designated by the Secretary to be an income stream for the purposes of the Act. To use the discretion to designate your Italian INPS autonomous benefit as an income stream under the definition in s9(1) would not be consistent with this intention and would also be inconsistent with Government policy that foreign sourced pensions are not income streams for the purposes of the Act.”
Facts and Contentions
18. Both parties filed statements of facts and contentions prior to the AAT hearing. The applicant’s detailed submissions outlined the history of the case as he saw it, with the primary contention being that he had not received “equal treatment” as specified in Article 4 of the Agreement and the Social Security Guide was not a lawful document and discriminatory in character. The applicant also queried whether effective communication had occurred between Australia and Italy, following passage of the Social Security Amendment Act 1998, which he says introduced the notion of “income streams”. Mr Cocci sought deferral of an AAT decision until this matter was clarified.
19. The respondent’s primary contention was that Centrelink had acted lawfully and fully in accordance with provisions and intent of Australian legislation and the Social Security Agreement between Italy and Australia. There is no provision in the Agreement for an Italian pension to be treated as an income stream.
The AAT Hearing
20. The AAT hearing was conducted in Launceston on 2 February 2004. Mr Cocci represented himself and did not call witnesses. The respondent was represented by Mr Brian Sparkes.
21. Mr Cocci was sworn and gave detailed and protracted evidence, referring to a number of submissions and exhibits. Counsel for the respondent did not object to this material, but noted it was confusing, because it restated in part some earlier documentation, but did so with different page notations, so cross-referral to T documents was difficult. Counsel also objected to what he perceived as speculations and assertions made by the applicant, who was advised by the Tribunal to deal with facts and clearly identity when contentions were made.
22. The applicant indicated he was no longer appealing the decision as a whole, but would focus on three concerns:
(a)He considered there was a misunderstanding of the nature of the INPS pension system, as his pension was a superannuation payment which should be construed as an income stream;
(b)He queried application of the Guide to Social Security Law, since it was not a legal document and had been used in a somewhat arbitrary and discriminatory manner, in his case;
(c)He did not consider he had been given “equal treatment” as required by Article 4 of the Agreement, moreover he queried whether the consultation required by Article 22, paragraph 3 had occurred. He sought deferral of an AAT decision until this was clarified.
23. Under cross-examination, Mr Cocci was unable to point to any legislation which required an Italian pension to be treated as an income stream. He claimed the Secretary possessed discretion to do so and should have applied it. He was also asked about the meaning of “equal treatment”, Mr Cocci stating that in his experience he had been treated differently as an Italian from the treatment of Australian citizens. Counsel for the respondent refuted this assertion, stating that Australian social security law was based upon eligibility for benefits, not on citizenship, being applicable to residents whether Australian or not. Italy, by contrast, did have some social security provisions where citizenship was an issue.
24. The respondent then called Ms Monica Szigati, as witness, an officer in Centrelink’s International Services Section, with ten years experience of dealing with Italian pension matters at both policy and individual case levels. She said she was familiar with details of social security law in both nations and confirmed that in respect of Article 22 of the Agreement, regular consultation occurred about changes in social security law and policy, some of this at government to government level and other aspects at operational level.
25. Under questioning by the applicant, Ms Szigati said that the INPS pension system was based upon compulsory contributions, but the pension later paid took various factors into account and could not be regarded simply and solely as a superannuation scheme. Australian statutory provisions meant that such payments were treated as income for taxation purposes and could not be regarded as an income stream.
26. In closing submissions the applicant again stated that discretion could have been exercised under s9(1)(f) to treat his income as an income stream. He disputed the validity of material in the Guide to Social Security Law and was doubtful that effective consultation was occurring between Italy and Australia about aspects of the Agreement, especially “equal treatment” specified in Article 4.
27. Counsel for the respondent said that Centrelink would rely upon statutory provisions and government policy statements, bearing in mind the intent of legislation. There were a range of AT decisions which supported the contention of Centrelink that overseas income should be treated as ordinary income for taxation purposes. Counsel cited a range of these authorities and also noted Taxation Ruling 2554, dated 11 December 2001, explaining the manner in which Italian pensions are to be treated.
28. The respondent also rejected the proposition Mr Cocci had not been afforded “equal treatment” under Clause 4 of the Agreement between Italy and Australia. The Australian social welfare system handled all applications on a merits basis, irrespective of citizenship. The Agreement was intended to provide appropriate treatment and mutuality in application of national laws and there was frequent consultation between the parties to ensure this was occurring.
Analysis
29. The Tribunal is required to stand in the shoes of the original decision-maker, examining all evidence anew, giving due weight to statutory provisions and guiding principles, as well as any relevant prior determinations.
30. The decision under review is a Centrelink decision of 4 May 2001, subsequently affirmed by the SSAT on 11 July 2002, to treat Mr Cocci’s Italian pension as income and not as an income stream. Having examined all evidence anew, the Tribunal finds there are numerous statutory grounds, as well as relevant policy statements and past case determinations to confirm this is a valid and lawful approach for Centrelink to adopt. Indeed the applicant himself has testified he could not point to any legislation which required an Italian pension to be treated as an income stream.
31. As previously noted, the definition, meaning and method of calculating age pension are set out in ss8, 1064(1) and 1064-A1 of the Social Security Act 1991 and s1072 specifies that any reference to income means gross income from any source. The Guide to Social Security Law in s4.3.6.10 of that document states that gross income from overseas pensions is to be treated as income for assessment purposes. The applicant claims that the Guide to Social Security Law is not a legal document, but merely a guide for decision-makers; the Tribunal accepts that it is the statutory provisions which are paramount, however none of these validate Mr Cocci’s claims. There is nothing in the International Agreement on Social Security between Australia and the Republic of Italy whereby an Italian pension could be treated as an income stream.
32. Given the validity and weight of such evidence it is clear the decision under review should be affirmed.
33. If further confirmation is needed, a number of case determinations may be cited, concerning “income” and “income streams”. In Nemaz and Secretary, Department of Social Security (1987) 12 ALD 107, the Tribunal rejected the claim a component of contributions should be disregarded as income. In Zanon and Secretary, Department of Social Security (1989) 18 ALD 82, it was held that the gross Italian pension was income; similarly in Sallan and Secretary, Department of Family and Community Services (1999) AATA 539, it was held an INPS pension was income for the purposes of the Act. In Rose and Secretary, Department of Family and Community Services (1999) 17 ALD 615 a German pension was ruled to be income for purposes of the social security law and should be taken into account in calculating Australian pension. And in Bersee and Secretary, Department of Family and Community Services (2003) AATA 201 it was held that receipt of a Dutch pension did not meet the description of income stream and no reduction contributions should be made in assessment of the applicant’s ordinary income test. In short there is nothing here which supports Mr Cocci’s claims.
34. Mr Cocci has indicated he is no longer challenging the decision as a whole, but claims he has not received “equal treatment” as required in Article 4 of the International Agreement. The phrase is not defined in that document, so one must adopt the everyday English meaning, the Macquarie Dictionary treating it as a situation where individuals are treated the same, irrespective of rank or other distinction.
35. Having examined all evidence in the case of the Tribunal cannot find any instance where Mr Cocci has been treated differently from any other individual who might apply for an age pension or be considered for taxation purposes. In each instance reasons have been given for decisions taken, Mr Cocci has been advised of his rights and the options open to him and he has been accorded natural justice in terms of Centrelink’s willingness to consider all aspects of his case. As counsel for the respondent has pointed out, in the Australian social welfare system, applicants are treated on the merits of their case, irrespective of their citizenship.
36. The applicant has also queried whether the current Agreement reflects ongoing consultation about changes in social security law between Italy and Australia. The Tribunal is not in a position to know what is happening at government-to-government level, but there is written confirmation and witness evidence to prove that discourse is ongoing. In any event this does not constitute evidence supporting Mr Cocci’s claims of discriminatory treatment.
Decision
37. The decision under review is affirmed.
I certify that the 37 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor B W Davis AM (Part-time Member)
Signed: K L Miller (Administrative Assistant)
Date/s of Hearing 2 February 2004
Date of Decision 27 February 2004
Counsel for the Applicant Applicant appeared on own behalf
Solicitor for the Applicant
Counsel for the Respondent Mr Brian Sparkes
Solicitor for the Respondent Centrelink
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