Elzey and Secretary, Department of Employment and Secretary, Department of Employment (Social services second review)
[2016] AATA 821
•18 October 2016
Elzey and Secretary, Department of Employment and Secretary, Department of Employment (Social services second review) [2016] AATA 821 (18 October 2016)
Division
GENERAL DIVISION
File Number(s)
2015/3672
Re
Sharon Elzey
APPLICANT
And
Secretary, Department of Employment
RESPONDENT
File Number(s)
2016/2505
Re
Sharon Elzey
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Dr L Bygrave, Member
Date 18 October 2016 Place Sydney
The Tribunal decides to:
· set aside the decision on 14 January 2015 in Application No. 2015/3672 and, in substitution, apply an income maintenance period of 16 August 2014 to 4 December 2014 to Ms Elzey; and
· affirm the decision on 12 January 2016 in Application No. 2016/2505 to impose a compensation preclusion period from 11 February 2012 to 27 January 2017 on Ms Elzey.
..................................[sgd]......................................
Dr L Bygrave, Member
CATCHWORDS
SOCIAL SECURITY – newstart allowance – termination payment – whether income maintenance period is correct – whether severe financial hardship exists due to unavoidable or reasonable expenditure – decision set aside and decision made in substitution
SOCIAL SECURITY – newstart allowance – compensation payment – whether compensation preclusion period is correct – whether special circumstances exist under which the compensation preclusion period can be waived – decision affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 19C, 1068-G7AH, 1068-G7AM, 1068-G7AQ, 1072, 1184K, 1169, 1170
CASES
Groth v Secretary Department of Social Security [1995] FCA 1708
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Dr L Bygrave, Member
18 October 2016
INTRODUCTION
On 11 February 2012, Ms Sharon Elzey sustained an injury in an accident (the accident).
Ms Elzey ceased work with Australian Rail Track Corporation (ARTC) on 8 August 2014.
On 11 August 2014, Ms Elzey unsuccessfully applied for the disability support pension. In her application for the disability support pension, Ms Elzey requested that she be assessed for newstart allowance while waiting for the outcome of her application. She was subsequently granted the newstart allowance.
Ms Elzey received final gross payments from ARTC that totalled $19,641 on 14 August 2014 and 27 August 2014 (termination payment). Centrelink advised Ms Elzey on 29 October 2014 that she had an income maintenance period that applied from 16 August 2014 to 12 December 2014 because she had received a termination payment.
On 13 December 2014, the income maintenance period ended and Ms Elzey was paid newstart allowance.
On 16 December 2014, Ms Elzey received a settlement of $485,000 (compensation payment) as compensation for the injury she sustained in the accident.[1]
[1] Exhibit T2-10.
Centrelink wrote to Ms Elzey on 12 January 2015 to advise that she had a preclusion period that applied from 11 February 2012 to 27 January 2017 because she had received a compensation payment. Ms Elzey was also required to repay the amount of $1,092.45 that she had received during this preclusion period.[2] An internal review by Centrelink on 5 February 2015 affirmed this decision.
[2] Exhibit T2-12 and T2-18.
There are two applications for determination before the Administrative Appeals Tribunal:
Application No. 2015/3672
Review of decision by the (then named) Social Security Appeals Tribunal (SSAT) on 14 January 2015, which affirmed the decision of Centrelink on 29 October 2014 to impose an income maintenance period from 16 August 2014 to 12 December 2014 on Ms Elzey.
Application No. 2016/2505
Review of decision by the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal on 12 January 2016, which affirmed the decision of Centrelink on 12 January 2015 to impose a compensation preclusion period from 11 February 2012 to 27 January 2017 on Ms Elzey.
The applications were heard in Sydney on 13 September 2016. Ms Elzey was self-represented and gave sworn evidence to the Tribunal by telephone.
RELEVANT LEGISLATION AND ISSUES
The issues for determination before the Tribunal are whether:
(a)an income maintenance period from 16 August 2014 to 12 December 2014 applies to Ms Elzey; and if so, whether it can be reduced because of severe financial hardship arising from reasonable and unavoidable expenditure;
(b)a compensation preclusion period from 11 February 2012 to 27 January 2017 applies to Ms Elzey; and if so, whether any special circumstances exist under which part or all of the compensation preclusion period can be waived.
Does an income maintenance period from 16 August 2014 to 12 December 2014 apply to Ms Elzey?
The Guide to Social Security Law (the Guide) sets out that an income maintenance period applies where a person has had their employment terminated and has received a termination payment.[3]
[3] Guide to Social Security Law, section 4.3.4.10.
Pursuant to s 1068-G7AH of the Social Security Act 1991 (Cth) (the Act), if a person’s employment has been terminated and they receive a termination payment, they are taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates.
Section 1072 of the Act states that a reference in the 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 1A’.
‘Termination payment’ is defined in s 1068-G7AQ of the Act and includes:
(a) a redundancy payment [which includes payment in lieu of notice]; and
(b) a leave payment [which includes “a payment in respect of sick leave, annual leave, maternity leave and long service leave”] relating to a person’s employment that has been terminated; and
(c) any other payment that is connected with the termination of a person’s employment.
The Guide notes that an income maintenance period is calculated using gross amounts of payments. Payments that are received as part of a termination payment become income assessed for a period that is equal to the amount of time the termination payment would have covered if they were paid in instalments equal to the person’s regular wage.
The employment separation certificate for Ms Elzey shows she ceased work on 8 August 2014 and received a total final gross payment including leave and redundancy payments of $19,641. On 14 August 2014, she was paid a gross amount of $7,209 for six weeks of annual leave and a gross amount of $6,989 for 29 days long service leave. On 27 August 2014, Ms Elzey was paid a gross amount of $4,354 for four weeks in lieu of notice.[4]
[4] Exhibit T1 at T7.
Ms Elzey claimed newstart allowance on 11 August 2014. After Ms Elzey received her termination payment (annual leave and long service leave) on 14 August 2014, Centrelink applied an income maintenance period that started on 16 August 2014.[5]
[5] Exhibit T1 at T11.
The decision by Centrelink dated 29 October 2014 stated:
The department decided to apply an Income Maintenance Period to your payment type for the period 16 August 2014 to 12 November 2014 comprising of $7,209, 33 days annual leave and $6,899, 32 days long service leave.
Your payment of $4,354 or 20 days payment in lieu of notice had not been considered…
An Income Maintenance Period for the period 16 August 2014 to 12 December 2014 will be applied to your Newstart Allowance.
This calculation was checked and found to be correct in the SSAT decision dated 14 January 2015.
I disagree with these calculations. Ms Elzey’s employment separation certificate stated an annual leave period payment of ‘6 weeks’, not ‘33 days’ as set out in Centrelink’s decision. Her employment separation certificate also set out long service leave of ‘29 days’ (not ‘32 days’) and payment in lieu of notice of ‘4 weeks’ (not ‘20 days’). If Ms Elzey’s income maintenance period started on 16 August 2014, I calculate that the income maintenance period should finish on 4 December 2016 (six weeks annual leave plus four weeks in lieu of notice plus 29 days long service leave equals a total of 79 work days).
I find that an income maintenance period applied to Ms Elzey from 16 August 2014 to 4 December 2014.
Can the income maintenance period be reduced because of severe financial hardship arising from reasonable and unavoidable expenditure?
The Act prescribes that an income maintenance period may be waived if a person is in ‘severe financial hardship’ because of ‘unavoidable or reasonable expenditure’: s 1068-G7AM.
‘In severe financial hardship’ is defined in s 19C(2) of the Act to mean when the value of a person’s liquid assets (within the meaning of s 14A(1)) is less than the fortnightly amount at the maximum rate of the payment, benefit, pension or allowance that would be payable to the person. The Secretary advised that at the relevant time, this amount for Ms Elzey was $956.40.[6] I accept the Secretary’s advice.
[6] Secretary’s Statement of Facts and Contentions dated 25 August 2016, para 4.8.
‘Unavoidable or reasonable expenditure’ is defined in s 19C(4) of the Act and includes, but is not limited to, the following expenditure:
(a) the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:
(i) if the person is serving a liquid assets test waiting period—that part of the period that the person has served; or
(ii) if the person is subject to a seasonal work preclusion period—that part of the period that has expired; or
(iii) if an income maintenance period applies to the person—that part of the period that has already applied to the person;
(b) the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;
(c) school expenses;
(d) funeral expenses;
(e) essential expenses arising on the birth of the person's child or the adoption of a child by the person;
(f) expenditure to buy replacement essential household goods because of loss of those goods through theft or natural disaster when the cost of replacement is not the subject of an insurance policy;
(g) the costs of essential repairs to the person's car or home;
(h) premiums in respect of vehicle or home insurance;
(i) expenses in respect of vehicle registration;
(j) essential medical expenses;
(k) any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.
At the Tribunal hearing, Ms Elzey said that she had separated from her husband on 1 December 2013 when she moved out of the family home. Her ex-husband subsequently returned to the United States of America (USA) on 6 January 2014 where he is a citizen. As a result of this separation and her ex-husband’s departure from Australia, Ms Elzey stated that she was left with ‘marital debts’ of approximately $127,171. These debts included a personal loan (approx. $59,763), a flexi-loan ($28,000), two credit cards (combined $15,500) and finance for a car ($20,908); all of which were in Ms Elzey’s name.
There is no evidence before me to find that these debts constitute unavoidable or reasonable expenditure. I therefore am not satisfied that the income maintenance period should be reduced because of severe financial hardship arising from reasonable and unavoidable expenditure.
I also note that subsequent events, including the compensation payment made to Ms Elzey on 16 December 2014 and the imposition of a compensation preclusion period from 11 February 2012 to 27 January 2017, mean that this decision is immaterial.
Does a compensation preclusion period from 11 February 2012 to 27 January 2017 apply to Ms Elzey?
Section 1169 of the Act requires that a preclusion period applies when a person receives a lump sum compensation payment. As set out in the Guide:
The compensation provisions of Part 3.14 [of the Act] reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the:
·social security system, AND
·compensation systems [emphasis in original].[7]
[7] Guide to Social Security Law, section 4.13.2.60.
‘Compensation’ is defined in ss 17(2) and 17(3) of the Act. Relevantly, s 17(2) defines compensation as:
(a) a payment of damages; or
(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d) any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
Ms Elzey’s settlement for the injury she sustained in the accident was settled by consent. I am satisfied that the settlement of $485,000 paid to Ms Elzey on 16 December 2014 is a compensation payment as defined in the Act. I find that a preclusion period should apply to Ms Elzey.
The lump sum preclusion period is calculated in accordance with s 1170 of the Act, which identifies the start date and end date of the preclusion period.
The Secretary submitted that, because Ms Elzey’s capacity to earn was diminished from the date of the accident, the start date of her preclusion period is 11 February 2012 (the date of the accident).[8] This submission is beneficial to Ms Elzey and I concur with the Secretary’s view.
[8] Secretary’s Statement of Facts and Contentions dated 25 August 2016, para 4.15.
The length of the total preclusion period (and therefore the end date for a preclusion period) is derived according to ss 1170(4) and (5) of the Act, which provide:
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
compensation part of lump sum
___________________________income cut-out amount
(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
Section 17(3)(a) of the Act defines the ‘compensation part of a lump sum compensation payment’ as ‘50% of the payment’. The Guide states that ‘[t]he 50% rule is applied to the gross lump sum’.[9] A gross lump sum payment of $485,000 was made to Ms Elzey on 16 December 2014. I find that the compensation part of the lump sum compensation payment is $242,500 (50% of $485,000).
[9] Guide to Social Security Law, section 4.13.2.30.
In accordance with the formula set out in s 1170(4) of the Act, Ms Elzey’s preclusion period is calculated as $242,500/$934.30 ($934.30 being the income cut-out amount at the time she received her compensation payment). This equates to 259 weeks when rounded down as required by s 1170(5).
I am satisfied that a compensation preclusion period of 259 weeks applies to Ms Elzey. This period commenced on 11 February 2012 and ends on 27 January 2017.
Are there any special circumstances that exist under which part or all of the compensation preclusion period can be waived?
Ms Elzey received newstart allowance payments that totaled $1,092.45 during the period she was subjected to a compensation preclusion period.
Section 1184K of the Act provides that the Secretary may disregard some payments:
(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a)not having been made; or
(b)not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
(2) If:
(a)a person … receives or claims a compensation affected payment;[10] and
(b)the person receives compensation; and
(c)the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s … receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).
[10] Section 17(1)(a) of the Act defines a ‘compensation affected payment’ as including a social security benefit. A social security benefit includes newstart allowance, as per s 23 of the Act.
In Groth v Secretary Department of Social Security[11] the Federal Court said:
… The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss… it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied... [emphasis added].
[11] [1995] FCA 1708, [12].
The Guide also sets out that the decision to apply the special circumstances provisions should be based on a holistic view of an individual’s circumstances and should ‘ONLY be applied in unusual, unforeseen or exceptional circumstances’ [emphasis in original].[12] The Guide relevantly determines that factors to consider when determining special circumstances include straitened financial circumstances.[13]
[12] Guide to Social Security Law, section 4.13.4.10.
[13] Guide to Social Security Law, section 4.13.4.20.
At the Tribunal hearing, Ms Elzey said that she is currently suffering financial hardship. She said that the net amount of $330,000 compensation that she received in January 2015 had been mostly spent and as at September 2016, she had $4,000 remaining in her bank account.
Ms Elzey confirmed that her biggest expense had been the marital debt of approximately $127,000, which has been summarised at paragraph 25. She told the Tribunal that she also had expenses related to her children. She has two children that still reside at home; her 27 year old son, who receives the disability support pension, and her 11 year old son, who is the child from her marriage to her ex-husband. Ms Elzey said that she also assists her 20 year old daughter with her medical expenses.
Ms Elzey confirmed that she had purchased a car valued at $47,000, which cost her approximately $35,000 after she traded in her ex-husband’s car.
Ms Elzey also used the compensation settlement to acquire a ‘day spa’ business in December 2015 for $30,000; and she estimated that she had spent a further $60,000 in associated legal fees and procuring assets for the business such as make-up, towels, curtains etc. Ms Elzey said that, despite the financial outlay, she had received no income to date from the business.
Ms Elzey stated her ex-husband did not pay any child support for their 11 year old son. However, her bank account statements show monthly deposits of approximately $1,500 and Ms Elzey confirmed that this was a monthly social security disability payment (SSDI) that the USA government made to their son.
Based on the evidence before me, I am not satisfied that Ms Elzey is in a position of financial hardship. While she may perceive that her financial situation is severe, her financial circumstances are not worse than the majority of social security recipients and she has access to cash through monthly payments from the USA government, and realisable assets in her business and car.
There are no circumstances for Ms Elzey that are ‘unusual, unforeseen or exceptional’. I am satisfied that there are no special circumstances that warrant any of the compensation payment being excluded in the calculation of the compensation preclusion period. I find that the decision to recover the amount of $1,092.45 was correct.
DECISION
The Tribunal decides to:
·set aside the decision on 14 January 2015 in Application No. 2015/3672 and, in substitution, apply an income maintenance period of 16 August 2014 to 4 December 2014 to Ms Elzey; and
·affirm the decision on 12 January 2016 in Application No. 2016/2505 to impose a compensation preclusion period from 11 February 2012 to 27 January 2017 on Ms Elzey.
I certify that the preceding 48 (forty -eight) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member ...................................[sgd].....................................
Associate
Dated 18 October 2016
Date(s) of hearing 13 September 2016 Applicant By telephone Solicitors for the Respondent T Hillyard, Department of Human Services
Key Legal Topics
Areas of Law
-
Administrative Law
-
Employment Law
Legal Concepts
-
Judicial Review
-
Procedural Fairness
-
Statutory Construction
-
Remedies
0
0
0