Cumpsty; Secretary, Department of Families, Community Services and Indigenous Affairs

[2006] AATA 147

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 147

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2005/224-225

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Applicant

And HERBERT CUMPSTY and AUDREY CUMPSTY

Respondents

DECISION

Tribunal Deputy President S D Hotop

Date23 February 2006

PlacePerth

Decision The Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 17 May 2005 and remits the matter to the applicant for reconsideration in accordance with the direction that the rate of age pension payable to Mr and Mrs Cumpsty, as at 6 January 2005, is to be calculated on the basis that their combined annual “ordinary income” is $8,425.36.

......Sgd [S D Hotop]..................

Deputy President

CATCHWORDS

SOCIAL SECURITY – age pension – rate of age pension – ordinary income test – financial asset – deemed income from financial asset – decision under review set aside

Social Security Act 1991 (Cth) s 8(1), s 9(1), s 55, s 1064, s 1072, s 1077, s 1082 and s 1083

REASONS FOR DECISION

23 February 2006	Deputy President S D Hotop
Introduction

1.      Herbert Cumpsty and Audrey Cumpsty are a married couple and they have each been in receipt of an age pension under Australian social security legislation since 17 January 1991.

2.      Mr and Mrs Cumpsty were each notified by Centrelink, by letters dated 19 January 2005, that, from 27 January 2005, the rate of age pension payable to each of them would be $374.29 per fortnight.

3.      Following telephone calls from Mr and Mrs Cumpsty inquiring why the rate of their combined age pensions had been reduced by approximately $5.20 per fortnight, a Centrelink officer informed them, by letter dated 16 February 2005, that the decrease in the rate of their age pensions was due to an increase in the rate of Mrs Cumpsty’s Comsuper pension and a change in the foreign exchange rate which affected the amount each of them was receiving from a United Kingdom pension.

4.      On 22 March 2005 an Authorised Review Officer within Centrelink affirmed the decision to reduce the rate of age pension payable to Mr and Mrs Cumpsty.

5.      On 17 May 2005, however, the Social Security Appeals Tribunal (“SSAT”) set aside the abovementioned decision and remitted the matter to Centrelink for reconsideration in accordance with the direction that:

“the age pensions paid to Mr and Mrs Cumpsty be calculated on the basis that interest from their financial investments is currently $1.57 per annum”.

6.      The Secretary, Department of Family and Community Services (now the Secretary, Department of Families, Community Services and Indigenous Affairs) (“the applicant”) has applied to this Tribunal for a review of the decision of the SSAT.

7. The Tribunal has, pursuant to s 34J of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”), conducted this review “on the papers” without holding a hearing.

The Issue

8. The issue to be determined by the Tribunal is the amount of the combined annual “ordinary income” of Mr and Mrs Cumpsty for the purpose of determining the rate of age pension payable to each of them, as at January 2005, in accordance with the “ordinary income test” in Part 3.10 of the Social Security Act 1991 (Cth) (“the Act”).

Relevant Facts

9. The Tribunal, on the basis of the documents lodged by the respondent in accordance with s 37 of the AAT Act, makes the following findings of fact.

10.     Mr Cumpsty has, at all material times, been in receipt of a United Kingdom retirement pension in the amount of £37.78 per week. On 4 January 2005 the foreign exchange rate, as between the pound sterling and the Australian dollar, changed from A$0.4260 (as at 1 December 2004) to A$0.4506, thereby increasing the amount received by Mr Cumpsty in Australian currency from his United Kingdom pension from $88.68 per week to $93.14 per week.

11.     Mrs Cumpsty has, at all material times, been in receipt of a United Kingdom retirement pension in the amount of £15.71 per week. As a result of the abovementioned change in the foreign exchange rate on 4 January 2005, the amount received by Mrs Cumpsty in Australian currency from her United Kingdom pension increased from $36.87 per week to $38.73 per week.

12.     Mrs Cumpsty has also, at all material times, been in receipt of a pension from Comsuper. On 6 January 2005 the rate of her Comsuper pension increased, in line with an increase of 0.9% in the Consumer Price Index, from $57.47 per fortnight to $57.99 per fortnight.

13.     At all material times Mr and Mrs Cumpsty had a joint savings account at a bank with a credit balance of $2,012.91. In the 2003/2004 financial year, they received interest in the total amount of $1.57 on that account.

The Relevant Legislation

14. By ss 55 and 1064(1) of the Act, the rate of Mr and Mrs Cumpsty’s age pensions is to be calculated in accordance with Pension Rate Calculator A at the end of s 1064. The relevant calculation process involves, inter alia, working out the person’s “maximum basic rate” of pension and applying the “ordinary income test” in order to determine the effect of the person’s “ordinary income” on their “maximum basic rate”. The “ordinary income test” is set out in Module E of Pension Rate Calculator A. Section 1064-E1 prescribes the method for working out the effect of the person’s “ordinary income” on their “maximum basic rate”. Note 2 to s1064-E1 states that the application of the “ordinary income test” is affected by provisions concerning, inter alia, “deemed income from financial assets (sections 1076 to 1084)”.

15. Section 8(1) of the Act contains “income test definitions”, including:

“deposit money, in relation to a person, means the person’s money that is deposited in an account with a financial institution.”

“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

...

Note 1: See also sections 1074 and 1075 (business income), sections 1076-1084 (deemed income from   financial assets)...”

“income amount means:

(a)    valuable consideration; or

(b)personal earnings; or

(c)moneys; or

(d)profits;

(whether of a capital nature or not).”

“ordinary income means income that is not maintenance income or an exempt lump sum.

...

Note 3: For provisions affecting the amount of a person’s ordinary income see sections 1072 and 1073 (ordinary income concept), sections 1074 and 1075 (business income), sections 1076-1084 (deemed income from financial assets)...”

16. Section 9(1) of the Act contains the following definitions:

"financial asset means:

(a) a financial investment; or

...”

"financial investment means:

(a) available money; or

(b) deposit money; or

...”

"pensioner couple means a couple, one or both of the members of which are receiving a social security pension, a service pension, income support supplement or a rehabilitation allowance.”

The expression “social security pension” is defined in s 23(1) of the Act to mean, inter alia, “an age pension”.

17. Part 3.10 of the Act contains general provisions relating to the “ordinary income test”. Section 1072 provides:

“A reference in this Act to a person's ordinary income for a period is a reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 2 or 3.

Note 1: For ordinary income see subsection 8 (1).

Note 2: For other provisions affecting the amount of a person's ordinary income see sections 1074 and  1075 (business income), sections 1076 to 1084 (deemed income from financial assets)...”

Section 1077 relevantly provides:

“1077(1) This section applies to the members of a pensioner couple.

Note: ...

1077(2) If one or both of the members of a couple have financial assets, the members of the couple are taken, for the purposes of this Act, to receive together ordinary income on those assets in accordance with this section.

1077(3) If the total value of the couple's financial assets is equal to or less than the couple's deeming threshold, the ordinary income the couple is taken to receive per year on the financial assets is the amount worked out by multiplying the value of those assets by the below threshold rate.

...

1077(4) Each member of the couple is taken, for the purposes of this Act, to receive, as ordinary income during each week, an amount worked out under the following formula:

Amount calculated under subsection (3) or (3A)  x 0.5”.

52

Section 1082 provides for the “below threshold rate” to be determined by the Minister. By Social Security (Threshold Rates) Determination 2004 (No 1) made under s 1082 of the Act, the Minister for Family and Community Services determined, with effect from 20 March 2004, that the “below threshold rate” is 3.0%. Finally, s 1083 of the Act relevantly provides:

“1083(1) Subject to subsection (2), any return on a financial asset that a person actually earns, derives or receives is taken, for the purposes of this Act, not to be ordinary income of the person.

...”

Analysis and Findings

18.     There can be no dispute that the moneys received by Mr and Mrs Cumpsty from their United Kingdom pensions, and the moneys received by Mrs Cumpsty from her Comsuper pension (as specified in paragraphs 10-12 above), constitute their “ordinary income”, for the purposes of the “ordinary income test” in Pension Rate Calculator A, and the Tribunal so finds.

19.     The only outstanding matter which the Tribunal is required to determine is the amount of “ordinary income” received by Mr and Mrs Cumpsty on their bank account referred to in paragraph 13 above.

20.     As regards the credit balance of $2,012.91 in the abovementioned bank account at the relevant time, the Tribunal finds that it is:

·“deposit money” as defined in s 8(1) of the Act; and, therefore,

·a “financial investment” as defined in s 9(1) of the Act; and, therefore,

·a “financial asset” as defined in s 9(1) of the Act.

21. By reason of s 1083(1) of the Act, the amount of interest actually received at the relevant time by Mr and Mrs Cumpsty on that “financial asset” – namely, $1.57 – is taken not to be “ordinary income” for the purposes of the Act.

22. By reason of s 1077(2) of the Act, however, Mr and Mrs Cumpsty are taken, for the purposes of the Act, “to receive together ordinary income on” their abovementioned “financial asset” in accordance with that section. In accordance with s 1077(3), the “ordinary income” that Mr and Mrs Cumpsty are taken to receive per year on that “financial asset” is “the amount worked out by multiplying the value of [that asset] by the below threshold rate”. That amount (as calculated at the relevant time) is $60.38 ($2,012.91 x 3%). By applying the formula set out in s 1077(4), Mr and Mrs Cumpsty are each taken to receive “ordinary income” on that “financial asset” in the amount of $0.58 per week ($1.16 per fortnight).

23.     Accordingly, the Tribunal finds that, as at January 2005, the deemed annual “ordinary income” of Mr and Mrs Cumpsty from their “financial asset” – namely, the credit balance of $2,012.91 in their joint bank account – is $60.38.

24. The Tribunal finds, therefore, that, for the purpose of applying the “ordinary income test” in Pension Rate Calculator A in Part 3.2 of the Act in order to work out the rate of age pension payable to Mr and Mrs Cumpsty as at 6 January 2005, the combined annual “ordinary income” of Mr and Mrs Cumpsty is made up as follows:

·Mr Cumpsty’s United Kingdom pension ($93.14 per week) – $4,843.28;

·Mrs Cumpsty’s United Kingdom pension ($38.73 per week) – $2,013.96;

·Mrs Cumpsty’s Comsuper pension ($57.99 per fortnight) – $1,507.74;

·deemed income from Mr and Mrs Cumpsty’s joint bank account – $60.38.

The total combined annual “ordinary income” of Mr and Mrs Cumpsty is, therefore, $8,425.36, and the Tribunal so finds.

Decision

25.     For these reasons the Tribunal sets aside the decision of the SSAT dated 17 May 2005 and remits the matter to the applicant for reconsideration in accordance with the direction that the rate of age pension payable to Mr and Mrs Cumpsty, as at 6 January 2005, is to be calculated on the basis that their combined annual “ordinary income” is $8,425.36.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President S D Hotop

Signed:         ......................Sgd[S da Motta]...............

Associate