Finch and Secretary, Department of Education, Employment and Workplace Relations
[2009] AATA 745
•29 September 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 745
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/0581
GENERAL ADMINISTRATIVE DIVISION ) Re SARA FINCH Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President D G Jarvis Date29 September 2009
PlaceAdelaide
Decision The decision under review is remitted to the respondent for reconsideration in accordance with these reasons, pursuant to s 42D of the Administrative Appeals Tribunal Act 1975 (Cth).
D G Jarvis
(Signed)
Deputy President
CATCHWORDS
SOCIAL SECURITY – Parenting payment single – income maintenance period – redundancy payment – payment in lieu of notice – termination payment used to pay off car loan – meaning of “reasonable expenditure” – meaning of “termination payment” – held that payment in lieu of notice was not a termination or redundancy payment – policy guide not followed – decision under review remitted to respondent for reconsideration.
Social Security Act 1991 (Cth), ss 19C(4) and 1068A-E9
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Re Bailey and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 173
Re Bazzi and Secretary, Department of Family and Community Services [2000] AATA 794
Re Goldfinch and Secretary, Department of Family and Community Services [2000] AATA 837
Re Nicola and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 134
Re a Solicitor [1945] KB 368
Re Thorpe and Secretary, Department of Workplace Relations [2007] AATA 2013
Re Vaszolyi and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 268
REASONS FOR DECISION
29 September 2009 Deputy President D G Jarvis 1. The applicant, Sara Finch, was made redundant on 8 September 2008. She told Centrelink that day that she had been made redundant, and was advised to provide her separation certificate to Centrelink when she received it.
2. She later received a final payment from her employer, and next day used the majority of the payment to pay off her car loan, and she also used some of the remaining money to pay bills, her credit card and rent.
3. After that she supplied her separation certificate to Centrelink, and Centrelink then decided to impose an income maintenance period (IMP).
4. Ms Finch applied for review of that decision. It was subsequently affirmed by an Authorised Review Officer (ARO) and by the Social Security Appeals Tribunal (SSAT). Ms Finch has now applied to this Tribunal for review of the SSAT decision.
Issues Before the Tribunal
5. The issues before the Tribunal are:
(a)whether the IMP applied to Ms Finch was correctly calculated;
(b)whether Ms Finch was in severe financial hardship during the IMP;
(c)whether her expenditure was unavoidable or reasonable; and
(d)whether the Tribunal should exercise its discretion under s 1068A-E9 to determine that the whole or part of the IMP does not apply to Ms Finch.
Background
6. Ms Finch is a single parent with a six year old son. She was employed by Perilya Broken Hill Limited to undertake clerical support duties for 30 hours a week from 3 March 2005. During the time that she worked for the company she received a part payment of parenting allowance.
7. On 1 September 2008 she learned that she was to be made redundant from 8 September 2008. She rang Centrelink on 8 September 2008 to advise them of this.
8. Ms Finch received her final payment of $13,332.91 on 1 October 2008. This amount was made up of a redundancy payment of $9,278.84, payment in lieu of notice of $3,191.92 and an amount for annual leave of $862.15. On 2 October 2008 she used $10,696.06 of her final payment to repay her car loan.
9. On being made redundant Ms Finch was initially paid the full amount of parenting payment. She provided her separation certificate to Centrelink on 23 October 2008, and after that, her parenting payment was reduced to about $33 a fortnight, and a decision was made by a Centrelink officer that an IMP applied to her parenting payment. The IMP was calculated to be 88 days, from 7 October 2008 to 5 February 2009. A debt was also raised of $439 for the one full instalment of parenting payment paid before 27 October 2008, being the date when the IMP was imposed.
10. Ms Finch requested a review of the decision to impose an IMP, on the grounds that she did not know about the preclusion period, and had already spent her termination payment by the time that she learned that an IMP would be applied. She reiterated these matters in her evidence in the present proceedings.
11. She also said that she had worked for the Broken Hill office of Centrelink for 10 years until 1997, and that her duties were varied, but included working at the counter and out in the field. She said that part of her duties was to advise people claiming pensions, but that she did not have much to do with this area, and spent more time working with people on unemployment benefits.
12. Ms Finch gave evidence that she spoke to three people at Centrelink about her redundancy, and none of them advised her that there would be a preclusion period. When cross-examined as to whether she would have known about such preclusion periods from her time working at Centrelink she said that in her experience there was no waiting period for parenting payments, although waiting periods of up to five weeks existed for other payments. She added that she had thought that there would probably be a five week waiting period but did not attempt to confirm this with Centrelink staff because she knew they would not be able to calculate her preclusion period without seeing her separation certificate.
13. Ms Finch was also cross-examined in relation to a clause about IMPs on the back of the standard letters sent to her by Centrelink regarding her fortnightly payments. She said that she did not recall reading this clause, that nobody reads all the information on the back of those letters, and that they are normally all the same. She said that before this situation arose she did not even know what an IMP was, and that even if she had read and understood the clause she still would have assumed that the maximum waiting period would be five weeks. She pointed out that the clause does not refer to a “payment in lieu of notice”, and so she still might not have realised that the clause was relevant her termination payment.
14. There is evidence that Ms Finch’s employer provided seminars to assist employees who had been made redundant. I infer that these seminars would have assisted those employees to understand their entitlement to Centrelink benefits, but I accept that Ms Finch had a reasonable excuse for not attending those seminars. The Secretary also questioned the apparent delay before Ms Finch provided her separation certificate to Centrelink, but I accept her evidence that she provided the certificate to Centrelink within a day or two after she received it.
15. Ms Finch was also asked about the way in which she spent the termination payment, and she gave the following evidence.
(a)She repaid her car loan because she was worried that she would not be able to meet the fortnightly repayments. The amount she repaid was $10,696.06. She needed the car because she had a young son and it was her means of transport in Broken Hill, and she needed to be able to travel to Adelaide for medical appointments in relation to a heart condition from which she was suffering.
(b)She also bought two new tyres for her car because her heart surgeon told her that she would need to have surgery in the school holidays, and this would mean driving to Adelaide from Broken Hill and back again.
(c)Much of the remainder of the termination payment was spent on bills and rent.
16. When asked why she did not wait to receive her separation certificate before she spent her termination payment, Ms Finch said that she needed the money to pay off debts and to pay her bills and her rent. She said that she was paying $150 a week in rent and $220 a fortnight on car repayments, as well as other expenses such as power, water, phone bills and the cost of supporting her son. She said she had thought that if she paid out her car loan then at least she would not have to worry about meeting those repayments; she was panicking about whether she would survive her redundancy financially, and was not thinking “normally”. She also said that she tried to redraw money from her car loan once she realised that an IMP was to be imposed on her Centrelink benefit, but was subsequently informed that she was not able to do this.
17. Ms Finch said she worked for one month in January in Broken Hill and that this paid the bills for that month. The Secretary also tendered evidence which showed that she received regular family tax benefit payments of varying amounts, as well as $1,000 lump sum payment as part of the Government’s stimulus package (exhibit R2).
Legislation
18. Chapter 3 of the Social Security Act 1991 (Cth) (the Act) provides for the rate calculation process applicable to various categories of pensions and allowances, and refers to various Modules that apply to calculations for different purposes. Module E relates to the “ordinary income test”, and provides for how to work out the effect of a person’s ordinary income on his or her minimum payment rate. It provides for an IMP in certain circumstances.
19. Section 1068A-E9 sets out when an IMP may be reduced, and provides as follows:
“1068A‑E9 If the Secretary is satisfied that a person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure while an income maintenance period applies to the person, the Secretary may determine that the whole, or any part, of the period does not apply to the person.
Note 1: For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple).
Note 2: For unavoidable or reasonable expenditure see subsection 19C(4).
Note 3: If an income maintenance period applies to a person, then, during that period:
(a) the pension PP (single) claimed may not be payable to the person; or
(b) the amount of the pension PP (single) payable to the person may be reduced.”
20. Section 19C(2) of the Act provides relevantly as follows:
“Meaning of in severe financial hardship: person who is not a member of a couple
(2) A person who is not a member of a couple and who makes a claim for parenting payment … is in severe financial hardship if the value of the person’s liquid assets (within the meaning of subsection 14A(1)) is less than the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person:
(f) if the person’s claim were granted; and
(g)in the case of a person to whom an income maintenance period applies, if that period did not apply.
Note: For maximum payment rate see subsection (8).”
21. The meaning of “liquid assets” is defined in s 14A(1) of the Act relevantly as follows:
“14A(1) For the purposes of Parts 2.11, 2.11A, 2.12, 2.14 and 2.23A and Division 3A of Part 3 of the Administration Act:
liquid assets, in relation to a person, means the person’s cash and readily realisable assets, and includes:
(a)the person’s shares and debentures in a public company within the meaning of the Corporations Act 2001; and …”
22. The expression “unavoidable or reasonable expenditure” is defined in s 19C(4) as follows:
“(4) Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period or is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies, 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.
However, unavoidable or reasonable expenditure does not include any reasonable costs of living other than those referred to in paragraph (a).”
Consideration
Was the IMP correctly calculated?
23. Prior to the hearing Ms Finch filed submissions to the Tribunal which were prepared on her behalf by a legal practitioner, Ms Richardson. In paragraph 9 of those submissions it is asserted that Centrelink mischaracterised a portion of the payment as long service leave when it was, in fact, a payment in lieu of notice, and that the IMP was therefore incorrectly calculated.
24. The advocate for the Secretary, Mr Visser, agreed that there was a payment in lieu of notice, but submitted that this does not affect the calculation of the IMP, since it was still a termination or redundancy payment pursuant to the Act.
25. Section 1068A-E4 deems a person who has received a “termination payment” to have received ordinary income for a period equal to the period to which the payment relates. It provides as follows:
1068A-E4 If:
(a) a person’s employment has been terminated; and
(b)the person receives a termination payment (whether as a lump sum payment, as a payment that is one of a series of regular payments or otherwise);
the person is taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates.”
26. The term “termination payment” is defined by s 1068A-E12 to mean:
“(a)a leave payment relating to a person’s employment that has been terminated; or
(b) a redundancy payment.”
27. The expression “redundancy payment” is also defined (unhelpfully for present purposes) in s 1068A-E12 as follows:
“… redundancy payment does not include a directed termination payment within the meaning of section 82-10F of the Income Tax (Transitional Provisions) Act 1997.”
It is common ground that the payment received by Ms Finch was not a “directed termination payment” within the meaning of the section referred in that definition.
28. In ordinary parlance, it could be said that a payment in lieu of notice would be a termination payment, since such a payment is made at the time of, or as a consequence of, the termination of employment. However, the expression “termination payment” is defined in the Act, and in my opinion a payment in lieu of notice is not a “termination payment” within the meaning of the statutory definition. It was not a leave payment. It was a lump sum payment which Ms Finch’s employer chose to make instead of giving her one month’s notice requiring her to undertake her normal duties during the one month notice period specified in her contract of employment, a copy of which is included as T4 in exhibit R1. This provides in effect that either party may terminate employment on one month’s notice to the other, but there is also provision for summary dismissal in the event of gross misconduct, and for the employer, in its discretion, to be able to terminate by making a payment in lieu of notice.
29. The definition of “termination payment” in s 1068A-E12 also includes a redundancy payment. In my view, a payment in lieu of notice could not be said to be a redundancy payment, but is an entitlement arising under her contract of employment when her employment is terminated, for any reason, with less than the agreed prior notice. However, a redundancy payment is a payment made by an employer in consequence of the redundancy of an employee, calculated by reference to a formula that is customarily dependent on the number of years of service of the employee who is being made redundant.
30. Whilst other paragraphs of Module E of s 1068A of the Act deem certain payments, such as leave payments, to be treated as income of the person receiving the payment for the period to which the payment relates (see for example s 1068A-E3), no such provision applies to payments in lieu of notice. As mentioned above, s 1068A-E4, which deems certain payments to be income for the period to which the payment relates, only applies where a person has received a “termination payment”. I consider that in the absence of any such deeming provision, a payment in lieu of notice should be treated as a payment of income paid to the person concerned on the day on which it was received. In my opinion, Ms Finch’s IMP should not have included the period to which the payment in lieu of notice related.
31. Mr Visser referred to Re Thorpe and Secretary, Department of Workplace Relations [2007] AATA 2013, in support of his argument for the contrary. I agree with respect with the Tribunal’s decision in that case that the removal on medical grounds of an employee constituted a termination of employment. However, the payment in question in that case was for accrued annual leave and long service leave; such payments are expressly included in the definition of “termination payment”. The case did not relate to a payment in lieu of notice.
32. Centrelink’s internal policy guide states that:
“Leave and redundancy payments can include:
…·Payment in lieu of notice.”
While the tribunal is not required to adhere to a policy guide, it should do so unless there is a cogent reason to do otherwise (Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60), but for the above reasons I consider that the Centrelink guide does not reflect the correct legal effect of the relevant sections of the Act, and I decline to follow it.
Severe financial hardship
33. As set out above, the Act provides that an IMP may be reduced when a person is in severe financial hardship. “Severe financial hardship” arises where the person’s liquid assets amount to less than the maximum fortnightly rate of the relevant payment. In Ms Finch’s case this is the maximum fortnightly rate of Parenting Payment Single, which as I understand it was previously $567.90.
34. From the evidence before me, there were some periods during the IMP and after Ms Finch paid out her car loan when her liquid assets were less than the above amount, and so she was then in severe financial hardship. However, the discretion under s 1069A-E9 to reduce the IMP only arises when severe financial hardship has arisen because the person has incurred “unavoidable” or “reasonable” expenditure during the IMP.
Was the repayment of the car loan an unavoidable or reasonable expense?
35. The terms “unavoidable” and “reasonable” are not defined under the Act, although some guidance as to their intended meaning can be gathered from the sorts of expenses included in s 19C. I agree with respect with SM Kenny’s comment in Re Vaszolyi and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 268 at [32] that the expenses referred to in s 19C(4) can be characterised as having a “high degree of necessity”. Nevertheless, these two terms should not be conflated. Both are used and must therefore be intended to have separate meanings. While I do not think it can be said that the car loan repayment was an unavoidable expense, since it was open to Ms Finch to continue repayments at $220 per fortnight, I must also consider whether the repayment falls within the meaning of “reasonable”, which is a wider term.
36. In Re a Solicitor [1945] KB 368 at 371, Scott, Lawrence and Morton LJJ said:
“The word ‘reasonable’ has in law the prima facie meaning of reasonable in regard to those existing circumstances of which the actor, called on to act reasonably, knows or ought to know.”
37. During the hearing Ms Finch submitted that the car loan repayment was reasonable because she was not aware that an IMP would be imposed and it was very important that she did not lose the car through being unable to meet the fortnightly repayments, and she had not been warned that an IMP would be imposed. I referred further to her evidence as to these matters in paragraph 16 above.
38. I have taken these matters into account. However, I am also mindful that Ms Finch had worked for Centrelink some years earlier, and was aware that at least in some circumstances, preclusion periods could be imposed. Further, whatever difficulties might sometimes arise from the inclusion of the relevant standard printed information on the reverse side of communications from Centrelink, I think that Ms Finch, as a former Centrelink employee, should have reviewed that information after she had received her final payout from her employer, especially as she had not attended the seminars that had been provided to assist people to understand their position following the termination of their employment. Further, Ms Finch paid out the loan on the day after she received her termination payment, and there was no evidence that she had at that stage arranged to obtain other employment. By paying out such a large proportion of her termination payment, she left herself very short of liquid funds.
39. My above conclusions are consistent with decisions in similar circumstances made by this tribunal. I refer for example to Re Bazzi and Secretary, Department of Family and Community Services [2000] AATA 794, where it was said that the early full repayment of debts which could be repaid gradually over a period of time was not unavoidable or reasonable; Re Nicola and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 134 and Re Bailey and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 173, where an IMP was imposed notwithstanding a complaint of a failure to warn the persons concerned of the existence of IMPs; and Re Goldfinch and Secretary, Department of Family and Community Services [2000] AATA 837, where it was observed that it was reasonable to expect that a person should check with Centrelink before spending a large sum of money.
40. The written submissions prepared on Ms Finch’s behalf by Ms Richardson point out that according to Centrelink’s policy guide, voluntary payment is disregarded when calculating a person’s liquid assets waiting period. However, the guide also expressly states that this is not applicable to IMPs. In any event, I think that the correct approach is to examine all of the relevant facts in each case. In all of the circumstances of the present matter, the voluntary payment should not in my view be disregarded.
41. For the above reasons I find that the repayment of the car loan was not “reasonable” expenditure within the meaning of s 19C(4) of the Act. If Ms Finch had not repaid the loan, but had merely kept up the fortnightly payments until she knew what her financial position would be, she would have had access to the remainder of the balance of the payment she had received on the termination of her employment. I am not therefore satisfied that she was in financial hardship as a result of unavoidable or reasonable expenditure while an IMP applied to her. The discretion in s 1068A-E9 to determine that the whole or part of the IMP does not apply to Ms Finch cannot therefore be exercised, since the condition precedent to the discretion is not met.
Decision
42. The decision under review is remitted to the respondent for reconsideration in accordance with these reasons, pursuant to s 42D of the Administrative Appeals Tribunal Act 1975 (Cth).
I certify that the 42 preceding paragraphs are a
true copy of the reasons for the decision
herein of Deputy President D G JarvisSigned: .....................................................................................
B. Bills Admin AssistantDate/s of Hearing 1 September 2009
Date of receipt of
final submissions 9 September 2009
Date of Decision 29 September 2009
Applicant In person by telephoneAdvocate for the Respondent Mr C Visser
Centrelink Legal Services Branch
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