Crandell and Department of Family and Community Services - [2002] AATA 392

DECISION AND REASONS FOR DECISION [2002] AATA 392

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/1034

GENERAL ADMINISTRATIVE DIVISION         )
           Re      Jay Crandell
  Applicant
           And    Secretary, Department of Family and Community Services
  Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date 27 May 2002
PlaceSydney

Decision The Administrative Appeals Tribunal affirms the decision under review.

..............................................
Ms N Isenberg
Member
CATCHWORDS
SOCIAL SECURITY - whether the decision to impose a reduction on Applicant's newstart allowance was correct - failure to disclose changes in financial circumstances - reasonable excuse for failure to provide information - 'unemployed culture'- disincentive to work- overpayment of pension - work for the dole program - waiver of penalty when engaged in work for the dole program- non-discretionary penalities - breach rate reduction period – no discretion- date of commencement of reduction period

Social Security Act 1991 sections 630AA(1), 630AA(2), 631B, 644AA, 644AB, 644AE

REASONS FOR DECISION

Ms N Isenberg, Member

DECISION UNDER REVIEW

The decision under review before the Administrative Appeals Tribunals ("the Tribunal") was the decision of the Respondent, the Secretary, Department of Family and Community Services ("the Department") dated 6 March 2001 (T28 ) as affirmed by the authorised review officer on 18 April 2001 (T99) and the Social Security Appeals Tribunal ("the SSAT") on 6 June 2001 (T2), to impose a 26 week rate reduction of 18 per cent on the Applicant's newstart allowance for the period 6 March 2001 to 21 August 2001.
APPEARANCES

A hearing was held before the Tribunal on 3 May 2002, in which the Applicant appeared without representation and the Respondent was represented by Mr George Lozynsky, an advocate from the Advocacy and Administrative Law Team at Centrelink.

ISSUE BEFORE THE TRIBUNAL

Whether the decision to impose a 26 week rate reduction of 18 per cent on the Applicant's newstart allowance for the period 6 March 2001 to 21 August 2001 was correct.
LEGISLATION

The relevant legislation in this matter is the Social Security Act 1991in particular sections 630AA(1), 630AA(2), 631B, 644AA, 644AB, 644AE. Those sections, so far as is relevant, provide as follows:
"S630AA Failure to provide information etc.
630AA(1) If a person:
(a) refuses or fails, without reasonable excuse, to provide information in relation to a
    person's income from remunerative work (the failure); or
(b) knowingly or recklessly provides false or misleading information in relation to the
    person's income from remunerative work (the provision of information);
when required to do so under a provision of this Act, a newstart allowance is not payable to the person.
630AA(2) If a newstart allowance becomes payable to the person after the time it ceases to
     be   payable under subsection (1), then:
(a) if the failure or the provision of information is the person's first or second activity
    test breach in the 2 years immediately before the day after the failure or the
   provision of information—an activity test breach rate reduction period applies to the
person; or
(b) if the failure or the provision of information is the person's third or subsequent
    activity test breach in the 2 years immediately before the day after the failure or
    the provision of information—an activity test non-payment period applies to the
   person.
S631B Penalty periods cease to apply on start of participation in approved program of work for unemployment payment
631B(1) In spite of any provisions in this Act, if:
(a) a penalty period or a number of penalty periods apply to, or, but for this section,
     would apply to, a person; and
(b) the person starts to participate in an approved program of work for unemployment
     payment;
the penalty period or periods cease to apply to the person on and after that commencement.
631B(2) Subsection (1) has effect whether or not the person completes the
            participation in that program.
S644AA Activity test breach rate reduction periods
If an activity test breach rate reduction period applies to a person under this
      Part, the period applicable to the person is 26 weeks.
644AB Commencement of activity test breach rate reduction periods
644AB(1) Subject to section 644AC, if an activity test breach rate reduction period
              applies to a person under this Part, the Secretary must give to the person
              a written notice informing the person of the commencement of the activity
              test breach rate reduction period applicable to the person.
644AB(2) Subject to section 644AC, the activity test breach rate reduction period
              commences on the day on which the notice is given to the person.
644AB(3) If, at the time of the commencement of an activity test breach rate
              reduction period under this Part, the person is already subject to an activity
              test breach rate reduction period (the pre-existing reduction period), the
              pre-existing reduction period is taken to end immediately before the
              commencement of the activity test breach rate reduction period under this
              Part.
644AB(4) Subject to section 644AC, if, on or before the day on which the period
              referred to in subsection (1) would (apart from this subsection) have
              commenced, newstart allowance ceases to be payable to the person, the
              period commences on the day on which newstart allowance ceases to be
              payable to the person.
Note: For activity test breach rate reduction period see subsection 23(1).
644AE Rate of newstart allowance where activity test breach rate reduction period applies
644AE(1) If:
(a) an activity test breach rate reduction period applies to a person under this Part; and
(b) the person qualifies for a newstart allowance; and
(c) a newstart allowance is payable to the person;
the person's rate of newstart allowance for the activity test breach rate reduction period is worked out as follows:
Newstart allowance rate calculator for activity test breach rate reduction period
This is how to work out a person's rate of newstart allowance for an activity test breach rate reduction period that applies to the person.
Method statement
Step 1. Work out the person's maximum basic rate of newstart allowance specified in:
(a) Table B of Module B of Part 3.5 (Benefit Rate Calculator A); or
(b)   Table B of Module B of Part 3.6 (Benefit Rate Calculator B):
the result is called the maximum payment rate.
Step 2. Work out the rate reduction amount in accordance with subsection (2).
Step 3. Take the rate reduction amount away from the rate of benefit worked out in
           accordance with Benefit Rate Calculator A in section 1067 or Benefit Rate
          Calculator B in section 1068, as the case requires:
the result is called the activity test breach reduced rate.
Note: An activity test breach reduced rate may be a nil rate.
644AE(2) A person's rate reduction amount is worked out as follows:
(a) if the activity test breach is the person's first breach in the 2 year period:
Maximum payment rate * 0.18
(b) if the activity test breach is the person's second breach in the 2 year period:
Maximum payment rate * 0.36
644AE(3) In this section:
2 year period means the 2 years immediately before the day after the activity test breach."

DOCUMENTARY EVIDENCE

The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence (T1-T37, pp 1-107).
In addition, the Applicant tendered further evidence, as follows:
Exhibit          Document    Date
A1      Applicant's Summary of events
A2      Applicant's Statement of Issues (Amended)
A3      Notice of Assessment from the Australian Taxation Office     1 December 2000
A4      Account Payable to Centrelink     6 March 2001
A5      Correspondence from Centrelink regarding Work for Dole Programme        17 August 2001 21 August 2001
A6      Travel Concession & Penalty       28 March 2001
A7      Submission Social Security Act 1991 s631B(1)
A8      Letter from Centrelink        21 April 1998
A9      Submission of Newstart/Abstudy
A10     Miscellaneous Correspondences Re: Abstudy
A11     Submission about rent assistance
A12     Extract of the Central Coast Express Advocate
A13     Independent Review of Breaches and Penalties in the Social Security System ('Making it Work')

The Respondent's documentary evidence was as follows:
Exhibit          Document    Date
R1      Respondent's Statement of Issues
R2      Respondent's Statement of Facts and Contentions

BACKGROUND

It was not in dispute that between August 1999 and February 2000 the Applicant had, each fortnight, completed an application for newstart allowance.
On no occasion, until 1 March 2000 (T20), did the Applicant disclose in the form, as he was required to do, that he had received income from Cassra Pty Limited, trading as Pacific Grove Constructions.
THE APPLICANT'S EVIDENCE AND SUBMISSIONS
The Applicant gave evidence and was cross-examined on behalf of the Respondent. Questions were also put to the Applicant by the Tribunal.
The Applicant conceded that he had completed all the newstart allowance forms until that of 1 March 2000, without disclosing his income and that, as such, he should be penalised. However, he suggested that he had a reasonable excuse for not disclosing the information, as required.
The Applicant's evidence was that, in order to obtain benefits he had no option but to agree to provide information about changes in financial circumstances. The form is not negotiable.
The Applicant said that it was his understanding that Centrelink permits a pensioner to earn up to $60 per fortnight before pension is affected. After that, Centrelink 'takes' 70 cents in the dollar up to $140, and then no pension is payable at all. He said that if he were to earn more than $60 it just isn't worth working once you take into account the cost of petrol to get to the job. Centrelink has made it so that there is no incentive to do any work.
The Applicant acknowledged that while 'legally, morally and ethically' he should have declared the income 'in the real world' no one does. Employers know that their workers continue to receive dole money, so they pay them little. The employers are saved from the administrative problems associated with having an employee on the books, and it is all done 'cash in hand'. This is part of the 'unemployed culture'.
The Applicant said that while he was prepared to pay back the overpayment of his pension he had been 'shocked' to learn of the penalty.
The Applicant had negotiated repayment of the $1000 or so overpayment at the minimum amount of $20 per fortnight. He was told there was no discretion however, either as to the amount of the penalty or its payment over a period of time to take into account his circumstances. The result was that his pension, on which he could barely make ends meet as it was, was reduced by about a quarter. That meant that each fortnight some bills did not get paid or he had to adjust what he could afford at the supermarket. At the same time he was paying his tax debt which was a further $20 per fortnight. In addition, his entitlement to travel concession had been affected because of the imposition of the penalty. He is 'disgusted with Centrelink' as they have made it 'impossible to survive' for the very people, that is, the unemployed, that they are supposed to help.
The Tribunal asked the Applicant why he had commenced to disclose his income, after months of not doing so. He said that he had thought he had declared more than what Centrelink asserted, but otherwise did not know why he had started to declare the income. In any event he no longer wanted to work for that company as he thought he was treated poorly.
The Applicant also made some submissions in relation to section 631B of the Social Security Act 1991. He said that he had been instructed to undertake the Work for the Dole program and had commenced work late in February 2001. About eight days later, on 6 March 2001, he was advised of the penalty, (section 644AB(2) provides that the rate reduction period commences on the day on which notice is given to the person) because he had, at that time, already started the Work for the Dole program, he was not entitled to the benefit of Section 631B.
The Applicant did not suggest that the delay had been deliberate but felt there was some irony in his missing out on the available waiver, given that he had provided the information upon which the penalty was based, about 12 months previously. He also felt there was some irony that he had only just completed paying back a $500 advance he had received from Centrelink to finance his studies.
The Applicant was further disadvantaged when, after that the Work for Dole program had concluded and he applied for a further program, some administrative errors occurred in Centrelink which meant his 'commencement to participate' in a second Work for the Dole program was delayed. This cost him about $100 in penalty for which he would have been entitled to waiver.
The Applicant considered that Centrelink regarded the penalty provisions as a revenue earner. He said he agreed with the concept of a penalty but thought there should be some element of discretion in its application.
The Applicant brought to the Tribunal's attention the Report of the Independent Review of Breaches and Penalties in the Social Security System ('Making it Work'), known as the 'Pearce Report', which, it was said, was critical of the present system.
THE RESPONDENT'S EVIDECE AND SUBMISSIONS
Mr Lozynsky, for the Respondent, said that Centrelink's responsibility was to administer the Act. He said that it was acknowledged that the Act had worked to the Applicant's disadvantage but the Act was clear that the 'clean slating' offered by section 631B was only available where the Work for the Dole program is commenced after the penalty is imposed.
The Respondent submitted, that the decision to impose the penalty was as a consequence of the Applicant's failure to advise Centrelink of his earnings, in accordance with the obligations he had acknowledged.
As to the Pearce Report, the advocate for the Respondent, said that there were diverse views expressed in the report and that the report did not have any legislative standing and did not represent the current law.
DISCUSSION AND FINDINGS
In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.
The Tribunal noted that there was no dispute between the parties that between August 1999 and February 2000, the Applicant had completed a number of applications for newstart allowance in which, on each occasion, he had answered "no" in response to the question:
"'Did you do any part-time, casual or temporary work in the period?'"
However on 1 March 2000 (T20), the Applicant disclosed that he had received income from Pacific Grove Constructions. Centrelink confirmed this with the employer and, on 6 March 2001, imposed a penalty under section 630AA of the Social Security Act 1991 for his failure to disclose the earnings in previous applications for newstart allowance.
The Applicant submitted that he failed to provide the information about his earnings because he had a reasonable excuse. He said to disclose income made it hardly worthwhile working, and that the deductions made by Centrelink once a relatively low threshold was reached, provided no incentive whatsoever to someone working. Employers took advantage of those on the dole and paid them little for their labours, because they know that the workers continue to receive social security benefits. This was said to be the 'unemployed culture'.
The Tribunal did not accept that, under any circumstances, this amounted to a reasonable excuse for the Applicant's failure to comply with his obligations under the Act.
Turning then to the penalty that was imposed, the Tribunal notes that the penalties provided by section 644AE(2) are not discretionary. This means, that even though Centrelink learnt from the Applicant himself (albeit belatedly), that he had received income, and recovered the amount of overpayment separately to the amount of $1000, the period for which the pension is reduced is fixed at 18 per cent for 26 weeks, which amounts to a total of about $850.
Having found that the Applicant had no reasonable excuse for his failure to advise Centrelink of his income, the Tribunal must find that the penalty was correctly imposed.
The Applicant had invited the Tribunal's attention to remarks in the Pearce Report about the unfair nature of the penalty provisions, but the Tribunal makes no comment in this regard. The Tribunal's role is to apply the current law, irrespective of whether it may be regarded as fair or otherwise in the Applicant's circumstances.
While not directly relevant to the decision under review there are, however, a number of issues raised by this case are worthy of comments.
The Applicant had noted the 'irony' in the timing of the imposition of the penalty. While it was not suggested that there was something sinister or machiavellian about the timing, it is curious that the penalty was not imposed until over 12 months after Centrelink became aware of the Applicant's false statements.
Furthermore, although that information was on hand, Centrelink required the Applicant to enter a Work for the Dole program, and in doing so, effectively denied him the benefit of the waiver provisions of section 631B.
In these circumstances it is understandable that the Applicant may be somewhat disillusioned with the present system.

DECISION

38. The decision under review is affirmed.

I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member
Signed:         S.Swamy           .....................................................................................
  Associate
Date of Hearing  3 May 2002
Date of Decision  20 May 2002
Representative for the Applicant   Self represented
Advocate for the Respondent       Mr George Lozynsky