FTXB; Secretary, Department of Social Services and (Social services second review)
[2024] AATA 3021
•28 August 2024
FTXB; Secretary, Department of Social Services and (Social services second review) [2024] AATA 3021 (28 August 2024)
Division:General Division
File Number:2024/0774
Re:SECRETARY, DEPARTMENT OF SOCIAL SERVICES
APPLICANT
AndFTXB
RESPONDENT
DECISION
Tribunal:Justice Kyrou, President, Senior Member Kennedy, Senior Member Trotter
Date:28 August 2024
Place:Melbourne
Pursuant to section 43(1)(c) of the Administrative Appeals Tribunal Act 1975, the decision of the authorised review officer dated 28 April 2020 and the decision of the Administrative Appeals Tribunal dated 8 January 2024 are set aside, and the following decision is substituted: a debt in the amount of $806.16 is due to the Commonwealth by the respondent.
.........................[sgd]...............................................
Tribunal
Catchwords
SOCIAL SECURITY – youth allowance – rate of a person’s youth allowance – rate calculator –income test in method statement in module A, point 1067G-A1 of Social Security Act 1991 (‘Act’) – determination of reduction in youth allowance in accordance with method statement in module H, point 1067G-H1 of Act – requirement in point 1067G-H23 of Act that ‘ordinary income is to be taken into account in the fortnight it is first earned, derived or received’.
SOCIAL SECURITY – meaning of ‘ordinary income’, ‘first’, ‘earned’, ‘derived’ and ‘received’ in point 1067G-H23 of Act – proper construction of point 1067G-H23 read as a whole.
SOCIAL SECURITY – respondent received youth allowance in fortnightly instalments while studying and working irregular shifts as casual employee – respondent paid according to hourly rate every Thursday for work performed in previous week from Monday to Sunday – respondent mistakenly underreported his gross income from wages for some fortnightly instalment periods – records available about amounts paid and dates of payment of wages for each instalment fortnight but no specific records of days worked in each instalment fortnight – common ground that respondent earned gross income from wages before receiving the income – how point 1067G-H23 of Act to be applied to take into account respondent’s gross income from wages in determining his rate of youth allowance – whether respondent’s underreporting of gross income has given rise to a debt to Commonwealth.
SOCIAL SECURITY – in present case, respondent first earned income each week on a Sunday and that is the relevant date for purposes of point 1067G-H23 of Act – respondent did not earn income every hour – respondent overpaid youth allowance and owes debt of $806.16 to Commonwealth.
STATUTORY INTERPRETATION – general principles of statutory interpretation – relevance of taxation and employment cases to construction of point 1067G-H23 of Act – relevance of beneficial nature of Act to construction of point 1067G-H23 of Act – relevance of terms of contract of employment for purposes of point 1067G-H23 of Act – relevance of practical consequences of competing interpretations in construing point 1067G-H23 of Act.
Legislation
Acts Interpretation Act 1901
Social Security Act 1991
Social Security (Administration) Act 1999
Cases
Brent v Federal Commissioner of Taxation (1971) 125 CLR 418
Federal Commissioner of Taxation v Australian Guarantee Corporation Ltd (1984) 2 FCR 483
Henderson v Federal Commissioner of Taxation (1970) 119 CLR 612
Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307
Rose v Secretary, Department of Social Security (1990) 21 FCR 241
Secretary, Department of Employment and Workplace Relations v Richards (2007) 98 ALD 310; [2007] FCA 1710
Secretary, Department of Employment and Workplace Relations v Richards (2008) 168 FCR 438
Taylor v Owners – Strata Plan No 11564 (2014) 253 CLR 531
Waterside Workers Awards (1957) 1 FLR 119
Secondary Materials
Explanatory Memorandum, Student Assistance (Youth Training Allowance) Amendment Bill 1994
Contents
DECISION
REASONS FOR DECISION
INTRODUCTION AND SUMMARY
RELEVANT LEGISLATIVE PROVISIONS
Social Security Act 1991
Social Security (Administration) Act 1999
FACTS
FIRST ISSUE: CORRECT INTERPRETATION OF POINT H23
Principles of statutory interpretation
Judicial decisions that bear upon the interpretation of point H23
Parties’ submissions on application of principles of statutory interpretation to point H23
Decision on interpretation of point H23
SECOND & THIRD ISSUES: OUTCOME OF APPLYING POINT H23 IN THIS CASE
SUMMARY OF KEY CONCLUSIONS
ADDITIONAL OBSERVATIONS ABOUT PRO BONO ASSISTANCE
DECISION
REASONS FOR DECISION
INTRODUCTION AND SUMMARY
Between 10 July 2014 and 24 June 2015 (‘Period’), the respondent received fortnightly youth allowance payments totalling $2,804.02.[1] Under the applicable legislation as in force during the Period,[2] youth allowance was means-tested by reference to a recipient’s assets and income. Accordingly, any other income the respondent ‘first earned, derived or received’[3] during a fortnight for which he was paid youth allowance (‘instalment period’) could affect the amount of youth allowance to which he was entitled for that fortnight. The legislation also required him to inform the Secretary of the Department of Social Services (‘Department’) of such other income falling within each instalment period.
[1] See Table 7 at [185] below.
[2] The relevant statutory provisions, as in force during the Period, are discussed below. For convenience, we will refer to the legislation in the present tense.
[3] See [5] and [24] below.
During the Period, the respondent worked as a casual employee, without any fixed working days or hours, at a grocery store (‘Employer’). He was paid weekly, but his weekly pay periods did not align with his youth allowance instalment periods. That is because a particular weekly pay period could fall wholly within one instalment period, while another weekly pay period could fall across two instalment periods. This lack of alignment is discussed in detail later in these reasons. The respondent was required to report his gross income from the Employer, but he mistakenly reported his net income for most of the instalment periods.
In April 2019, the Secretary of the Department received information from the Australian Taxation Office which showed that the respondent’s gross income for the Period was higher than the income he had reported. On 2 October 2019, the respondent was advised that a delegate of the Secretary had decided (‘Delegate’s Decision’) that the respondent: had failed to report the correct amount of earnings during the Period; had been overpaid youth allowance in the amount of $911.98; and owed a debt for that amount (‘Original Alleged Debt’).
On 28 April 2020, following an internal review conducted at the respondent’s request, an authorised review officer (‘ARO’) of the Department affirmed the Delegate’s Decision that the respondent owed the Original Alleged Debt (‘ARO Decision’). Shortly prior to the commencement of the hearing before us, the applicant revised the alleged debt to the amount of $850.86 (‘Revised Alleged Debt’).[4] On the last day of the hearing, the alleged debt was further revised to the amount of $806.16 (‘Current Alleged Debt’).
[4] The applicant originally submitted evidence which alleged that the debt was $850.92. However, on the first day of the hearing, the applicant identified that this figure contained a calculation error of 6 cents and the debt was revised to $850.86 accordingly.
A critical step in determining whether the respondent owes a debt to the Commonwealth is the ‘income test’ in point 1067G-H1 of Module H in s 1067G of the Social Security Act 1991 (‘Act’), which refers to point 1067G-H23 in s 1067G (‘point H23’). Point H23 relevantly states that ‘ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received’.[5]
[5] See [24] below.
At the time of calculation of each of the Original Alleged Debt, the Revised Alleged Debt and the Current Alleged Debt, neither the applicant nor the respondent had information about which days in particular instalment periods the respondent had worked. As both parties had then proceeded on the basis that income was earned by the respondent on each day he worked, they considered that they could not determine in which instalment periods the respondent had earned employment income for the entire Period. However, information has at all relevant times been available about the days in each instalment period in which the respondent received wages.
In calculating the Original Alleged Debt, the Revised Alleged Debt and the Current Alleged Debt, the applicant used a ‘hybrid’ methodology as follows:
(a)when the days of a week for which the respondent received wages fell wholly within one instalment period, the applicant took that income into account in that instalment period on the basis that the income had been earned in that instalment period; and
(b)when the days of a week for which the respondent received wages straddled an instalment period and the applicant was not able to discern which days in that week the respondent had worked, the applicant took that income into account in the instalment period in which the respondent received the income on the basis that, in such a case, the date of receipt was the relevant date for the purposes of point H23.
The respondent sought review of the ARO Decision by the Administrative Appeals Tribunal (‘Tribunal’ or ‘AAT’). On 8 January 2024, the AAT on first review set aside the ARO Decision and remitted the matter to the Chief Executive of the Department’s agent (Centrelink) for reconsideration in accordance with the AAT’s reasons for decision (‘AAT First Review Decision’).[6]
[6] [FTXB] and Chief Executive Centrelink (AAT, Member Byers, 8 January 2024). The respondent was not assigned a pseudonym for the first review before the AAT. To ensure that the respondent cannot be identified, on 18 March 2024 a Deputy President of the AAT made a confidentiality order in respect of the respondent’s identity and assigned the pseudonym FTXB to the respondent in respect of the application for second review before the AAT.
The applicant applied to the Tribunal for a second review.[7]
[7] On 18 March 2024, a Deputy President of the AAT granted a stay of the AAT First Review Decision.
The issues that we are required to determine are:
(a)what is the correct interpretation of point H23?
(b)what is the effect of point H23 in the present case?; and
(c)does the respondent owe a debt to the Commonwealth and, if so, the amount of the debt?
Initially, this case also involved the questions of whether, in the event that any debt was owed by the respondent to the Commonwealth, that debt should be written off or waived. However, at the hearing, senior counsel for the respondent (who appeared pro bono with two junior counsel) advised the Tribunal that those questions would not be pursued.
As the issue at [10(a)] above has arisen in many other cases governed by the terms of point H23 prior to its amendment on 7 December 2020,[8] the Tribunal has been constituted by a panel of three. As a result of the potential assistance that our decision may provide for other similar cases governed by the terms of point H23 prior to the abovementioned amendment, these reasons are more detailed than would ordinarily be required. A summary of our key conclusions is set out at [188] below.
[8] The Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Act 2020 amended point H23 so that it now reads: ‘Subject to points 1067G‑H23A, 1067‑H23B, 1067G‑H24 and 1067G‑H25 and sections 1072A and 1073, ordinary income (except employment income) is to be taken into account in the fortnight in which it is first earned, derived or received.’ Related amendments were made to sub-ss 8(1A) and 8(1B) of the Act, deleting reference to ‘earned, derived, or received’. The manner in which employment income affects the income test in Module H is dealt with separately in Div 1AA of Pt 3.10 of the Act. The effect of these amendments is that, for the purposes of the income test, it is not necessary to determine when employment income was first earned, derived or received under point H23.
For the reasons set out below, the ARO Decision and the AAT First Review Decision will be set aside and a decision will be substituted that the respondent owes a youth allowance debt to the Commonwealth in the amount of $806.16 for the Period. Although that amount is the same as the Current Alleged Debt, it has been calculated by us based upon a construction of point H23 that differs from that of the applicant.
For convenience, unless the context requires that another name be used, in these reasons we will use:
(a)the expression ‘Department’ to refer to the Department of Social Security and its predecessors, as well as its agent Services Australia (previously known as Centrelink); and
(b)the expressions ‘Secretary’ or ‘applicant’ to refer to the Secretary of the Department.
RELEVANT LEGISLATIVE PROVISIONS
Social Security Act 1991
In order to decide whether the respondent was overpaid youth allowance, it is necessary to have regard to the income test applicable for determining a person’s rate of entitlement to youth allowance, as set out in the Act.
Section 556 of the Act relevantly states that ‘the rate of a person’s youth allowance is to be worked out in accordance with the Youth Allowance Rate Calculator in section 1067G’. Section 1067G states that ‘[t]he rate of youth allowance of a person referred to in section 556 is to be calculated in accordance with the Rate Calculator in this section’. The Youth Allowance Rate Calculator then follows as ‘Module A’.
Point 1067G-A1 of Module A states that the allowance is a daily rate, which is worked out by dividing the fortnightly rate calculated according to the Rate Calculator by 14. It then contains a ‘method statement’, an 11-step process which is used to determine the fortnightly rate payable to a recipient. The Module A, point 1067G-A1 method statement prescribes the following steps:
Step 1. Work out the person’s maximum basic rate using Module B below.
Step 1A. Work out the clean energy supplement (if any) using Module BA below.
Step 2. Work out the amount a fortnight (if any) of pharmaceutical allowance using Module C below.
Step 2A. Work out the amount per fortnight (if any) for youth disability supplement using Module D below.
Step 3.Work out the applicable amount per fortnight (if any) for rent assistance in accordance with paragraph 1070A(a).
Step 4.Add up the amounts obtained in Steps 1 to 3: the result is the maximum payment rate.
Step 8.If the person is not independent and the parental income test applies to the person (see points 1067G‑F2 and 1067G‑F3 in Module F below), work out the reduction for parental income using that Module.
Step 10. If the person is not independent and the family actual means test applies to the person (see Module G below), work out the person’s reduction for actual means using that Module.
Step 12. Apply the income test using Module H below to work out the person’s income reduction.
Step 13. Take away from the maximum payment rate the greatest of the following that apply:
(a)the person’s reduction for parental income;
(b)the person’s reduction for actual means;
(c)the person’s income reduction.
(If a reduction described in paragraph (a) or (b) applies, and is not less than any other reduction that applies, take away from the maximum payment rate the first‑mentioned reduction.) The result is the provisional fortnightly payment rate. If that rate is nil because of the taking away of a reduction described in paragraph (a) or (b) then youth allowance is not payable to the person.
Note:If a person’s maximum payment rate is reduced under this step, section 1210 sets the order in which the components of that rate are to be reduced.
Step 14. The rate of allowance is the amount obtained by [adding or subtracting certain amounts which are not presently relevant].[9]
[9] The method statement does not contain steps numbered 5, 6, 7, 9 or 11.
Omitting step 14, which is not presently relevant, the process basically involves determining the maximum possible rate payable to a recipient (steps 1 to 4) and reducing that rate having regard to the income of people upon whom the recipient is dependent (steps 8 and 10, where relevant), and the recipient’s other income (step 12).
The resolution of this proceeding requires consideration of the ‘income test’ referred to in step 12 of the Module A, point 1067G-A1 method statement. The income test is contained in Module H. Point 1067G-H1 sets out a method statement for working out ‘the effect of a person’s ordinary income, and the ordinary income of a partner of the person, on the person’s maximum payment rate’. The Module H, point 1067G-H1 method statement prescribes the following steps:
Step 1.Work out the amount of the person’s ordinary income on a fortnightly basis (where appropriate, taking into account the matters provided for in points 1067G‑H2 to 1067G‑H25).
Step 2.If the person is a member of a couple, work out the partner income free area using point 1067G‑H26.
Note: The partner income free area is the maximum amount of ordinary income the person’s partner can have without affecting the person’s benefit.
Step 3. Use point 1067G‑H27 to work out the person’s partner income excess. (If there is no partner income excess under that point, the person’s partner income excess is taken to be nil.)
Step 4. Use the person’s partner income excess to work out the person’s partner income reduction using point 1067G‑H28.
Step 5. Use point 1067G‑H30 to work out the person’s ordinary income excess. (If there is no ordinary income excess under that point, the person’s ordinary income excess is taken to be nil.)
Step 6. Use the person’s ordinary income excess to work out the person’s ordinary income reduction using points 1067G‑H31, 1067G‑H32 and 1067G‑H33.
Step 7. Add the person’s partner income reduction and ordinary income reduction: the result is the person’s income reduction referred to in Step 12 of the Method statement in point 1067G‑A1
Note 1: For ordinary income see subsection 8(1).
Note 2: The application of the income test is affected by provisions concerning:
(a) the general concept of ordinary income (sections 1072 and 1073);
(b) business income (sections 1074 and 1075);
(c) deemed income from financial assets (sections 1076 to 1084A);
(d) income streams (sections 1095 to 1099DAA);
(e) disposal of income (sections 1106 to 1112).
Section 8(1) of the Act contains the following relevant definitions:
employment income, in relation to a person, means ordinary income of the person that comprises employment income under subsection (1A) and includes ordinary income that is characterised as employment income of the person because of the operation of subsection (1B).
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
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include [certain amounts which are not presently relevant].
Note 1:See also sections 1074 and 1075 (business income), sections 1076-1084 (deemed income from financial assets), sections 1095 to 1099DAA (income from income streams), section 1099F (exempt bond amount does not count as income) and section 1099K (refunded amount does not count as income).
…
Note 3:Income is equivalent to ordinary income plus maintenance income.
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.[10]
[10] The three notes to the definition of ‘ordinary income’ have been omitted because they are not presently relevant.
Section 8(1A) of the Act relevantly states:
(1A)A reference in this Act to employment income, in relation to a person, is a reference to ordinary income of the person:
(a)that is earned, derived or received, or that is taken to have been earned, derived or received, by the person from remunerative work undertaken by the person as an employee in an employer/employee relationship; and
(b) that includes, but is not limited to:
(i) salary, wages, commissions and employment-related fringe benefits that are so earned, derived or received or taken to have been so earned, derived or received; and
(ii) if the person is engaged on a continuing basis in that employer/employee relationship—a leave payment to the person;
but does not include [certain payments which are not presently relevant].
Section 8(2) of the Act states:
Earned, derived or received
(2)A reference in this Act to an income amount earned, derived or received is a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).
The definition of ‘ordinary income’ is also affected by s 1072 of the Act, which states:
1072General meaning of ordinary income
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 1A.
Note 1: For ordinary income see subsection 8(1).
Note 2: For other provisions affecting the amount of a person’s ordinary income see section 1073AA (work bonus), sections 1074 and 1075 (business income), sections 1076 to 1084 (deemed income from financial assets) and sections 1095 to 1099DAA (income from income streams).
For the purposes of this proceeding, the relevant part of Module H is point H23, which states:
Ordinary income generally taken into account when first earned, derived or received
Subject to points 1067G-H23A, 1067G-H23B, 1067G-H24 and 1067G-H25 and section 1073, ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received.
Point H23 is expressed to be subject to points 1067G-H23A, H23B, H24 and H25. Those points do not apply to the respondent but they are of important contextual relevance in circumstances where point H23 is but one part of a statutory calculation methodology. They provide as follows:
Claimant or recipient receives lump sum amount for remunerative work
1067G-H23A If a person whose claim for youth allowance has been granted receives, after the claim was made, a lump sum amount that:
(a) is paid to him or her in relation to remunerative work; and
(b) is not a payment to which point 1067G-H24 applies; and
(c) is not an exempt lump sum;
the person is, for the purposes of this Module, taken to receive one fifty-second of that amount as ordinary income during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
Partner of claimant or recipient receives lump sum amount for remunerative work
1067G-H23B If:
(a)a person whose claim for youth allowance has been granted is a member of a couple; and
(b)after the person had made the claim, the person’s partner receives a lump sum amount that:
(i) is paid to him or her in relation to remunerative work; and
(ii) is not a payment to which point 1067G-H24 applies; and
(iii) is not an exempt lump sum;
the partner is, for the purposes of this Module, taken to receive one fifty-second of that amount as ordinary income during each week in the 12 months commencing on the day on which the partner becomes entitled to receive that amount.
Ordinary income received at intervals longer than one fortnight
1067G-H24 Subject to points 1067G-H10 to 1067G-H20 (inclusive), if:
(a) a person receives a number of ordinary income payments; and
(b)each payment is in respect of a period (work period) that is greater than a fortnight; and
(c) there is reasonable predictability or regularity as to the timing of the payments; and
(d) there is reasonable predictability as to the quantum of the payments;
the person is taken to receive in a fortnight falling within, or overlapping with, a work period an amount calculated by:
(e) dividing the amount received by the number of days in the work period (daily rate); and
(f) multiplying the daily rate by the number of days in the fortnight that are also within the work period.
Payment of arrears of periodic compensation payments
1067G-H25 If:
(a) at the time of an event that gives rise to an entitlement of a person to compensation, the person is receiving youth allowance; and
(b)in relation to that entitlement, the person receives a payment of arrears of periodic compensation;
the person is taken to receive, in a fortnight falling within, or overlapping with, the periodic payments period, an amount calculated by:
(c) dividing the amount received by the number of days in the periodic payments period (daily rate); and
(d) multiplying the daily rate by the number of days in the fortnight that are also within the periodic payments period.
Note: For periodic payments period see section 17.
Section 1073, which deals with the way certain income is to be taken into account over the course of a year, is also of contextual relevance because it is a key part of the overall statutory calculation methodology. It states:
1073Certain amounts taken to be received over 12 months
(1)Subject to points 1067G‑H5 to 1067G‑H20 (inclusive), 1067L‑D4 to 1067L‑D16 (inclusive), 1068‑G7AA to 1068‑G7AR (inclusive), 1068A‑E2 to 1068A‑E12 (inclusive) and 1068B‑D7 to 1068B‑D18 (inclusive), if a person receives … an amount that:
(a)is not income within the meaning of Division 1B or 1C of this Part; and
(b)is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty‑second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
(2)Subsection (1) applies to a person who has claimed one of the following:
…
(c)youth allowance; …
…
Section 1073B was inserted into the Act by the Family and Community Services Legislation Amendment (Australians Working Together and other 2001 Budget Measures) Act 2003. Section 1073B(1) relevantly provides as follows:
1073BDaily attribution of employment income
(1)If:
(a)a person is receiving a social security pension or a social security benefit; and
(b)the person’s rate of payment of the pension or benefit is worked out with regard to the income test module of a rate calculator in this Chapter; and
(d)the person earns, derives or receives, or is taken, either by virtue of the operation of section 1073A or any other provision of this Act, to earn, derive or receive, employment income during the whole or a part of a particular instalment period of the person;
the person is taken to earn, derive or receive, on each day in that instalment period, an amount of employment income worked out by dividing the total amount of the employment income referred to in paragraph (d) by the number of days in the period.
Section 1223 of the Act sets out the circumstances in which a debt due to the Commonwealth arises. It relevantly states as follows:
1223Debts arising from lack of qualification, overpayment etc.
(1)Subject to this section, if:
(a) a social security payment is made; and
(b) a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
…
(1AB)Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:
…
(c) the payment was not payable;
(d) the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation; …
…
(9)In this section, unless the contrary intention appears, a reference to a social security payment includes a reference to a part of a social security payment.
Social Security (Administration) Act 1999
Some provisions of the Social Security (Administration) Act 1999 (‘Administration Act’) are also relevant.
Section 8 of the Administration Act relevantly states as follows:
8Principles of administration
In administering the social security law, the Secretary is to have regard to:
(a)the desirability of achieving the following results:
…
(iii) the delivery of services under the law in a fair, courteous, prompt and cost‑efficient manner;
…
(v) the establishment of procedures to ensure that abuses of the social security system are minimised; and
(b)the special needs of disadvantaged groups in the community; and
…
(f)the need to apply government policy in accordance with the law and with due regard to relevant decisions of the Administrative Appeals Tribunal ….
Section 43(1) of the Administration Act permits the Secretary to determine the period in which a recipient is to be paid social security benefits. It relevantly states:
43Payment by instalments
Payment in arrears in relation to periods
(1)A social security periodic payment is to be paid:
(a)in arrears; and
(b)by instalments relating to such periods (not exceeding 14 days) as the Secretary determines.
Sections 68 and 192 of the Administration Act empower the Secretary to require a person to provide information. They relevantly provide:
68Person receiving social security payment or holding concession card
(1) Subsection (2) applies to a person to whom a social security payment … is being paid.
(2) The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:
(a) inform the Department if:
(i) a specified event or change of circumstances occurs; or
(ii) the person becomes aware that a specified event or change of circumstances is likely to occur;
(b) give the Department one or more statements about a matter that might affect the payment to the person of the social security payment; …
…
(5) An event or change of circumstances is not to be specified in a notice under this section unless the occurrence of the event or change of circumstances might:
(a) affect the payment of the social security payment … .
…
192General power to obtain information
The Secretary may require a person to give information, or produce a document that is in the person’s custody or under the person’s control, to the Department if the Secretary considers that the information or document may be relevant to one or more of the following:
(a)the question whether a person who has made a claim for a social security payment is or was qualified for the payment;
(b)the question whether a social security payment is payable to a person who is receiving the payment;
(c)the question whether a social security payment was payable to a person who has received the payment;
(d)the rate of social security payment that is or was applicable to a person; …
FACTS
The facts giving rise to this proceeding are largely not in dispute. Much of the evidence is sourced from contemporaneous material, such as correspondence between the parties and payslips, and other documents upon which the parties relied. The documentary evidence will be referred to below where appropriate.
Each party relied upon the written and oral evidence of a single witness. Daniel Blackmore, the National Manager of the Income Apportionment Response Branch of the Department, gave evidence by way of a statement dated 18 June 2024 and orally by video link on the first day of the hearing. The respondent gave evidence by way of a statement dated 5 June 2024 and in person on the first day of the hearing. Both witnesses were cross-examined. Neither party sought to impugn the credibility of either witness.
The summary of the facts at [36] to [60] below is based upon the non-contentious documentary and oral evidence of the parties and concessions made by them, which we consider were properly made.
The respondent received youth allowance between 2011 and 2016 while he was studying. His youth allowance was cancelled in March 2014 because he ceased studying. He later resumed studying and was granted youth allowance on Friday 1 August 2014, with effect from Thursday 10 July 2014. There is no evidence that, during the Period, he had a partner or that his circumstances required parental income to be taken into account.
In his statement, Mr Blackmore gave the following evidence. The Department uses instalment periods to calculate a customer’s entitlement to social security payments. They are usually fortnightly periods which commence from the day on which the claim for a social security payment is lodged. Commencing instalment periods on that day results in greater uniformity of payments and results in the demands on the Department’s IT and payments infrastructure being spread more evenly. On occasion, the Department will change the reporting period, such as when a customer is partnered and the partner also receives social security benefits. In those circumstances, the Department will change one of the customer’s instalment periods so that the two reporting periods are aligned.
Mr Blackmore gave the following further evidence. The Department generally relies on self-reported income information unless there is some reason to question its accuracy. Because of the large number of customers who receive social security payments, it would not be feasible for the Department to take steps to obtain documents from customers and/or their employers to independently verify the income reported by every customer for each instalment period. If the Department were to manually verify all amounts of reported income by reference to payroll and timesheet documentation, a substantial amount of the Department’s resources would have to be dedicated to that task.
Upon resumption of the respondent’s youth allowance with effect from 10 July 2024, his fortnightly instalment periods were as follows for the Period:
Table 1: Respondent’s fortnightly instalment periods
Fortnightly instalment period
10 July 2014
23 July 2014
24 July 2014
6 August 2014
7 August 2014
20 August 2014
21 August 2014
3 September 2014
4 September 2014
17 September 2014
18 September 2014
1 October 2014
2 October 2014
15 October 2014
16 October 2014
29 October 2014
30 October 2014
12 November 2014
13 November 2014
26 November 2014
27 November 2014
10 December 2014
11 December 2014
24 December 2014
25 December 2015
7 January 2015
8 January 2015
21 January 2015
22 January 2015
4 February 2015
5 February 2015
18 February 2015
19 February 2015
4 March 2015
5 March 2015
18 March 2015
19 March 2015
1 April 2015
2 April 2015
15 April 2015
16 April 2015
29 April 2015
30 April 2015
13 May 2015
14 May 2015
27 May 2015
28 May 2015
10 June 2015
11 June 2015
24 June 2015
During the Period, the respondent usually worked for the Employer on Mondays, Wednesdays and Fridays. However, as a casual employee, he did not have fixed working days or hours, and the days he worked changed depending upon the Employer’s requirements and his own study schedule. He often worked on Sunday mornings. He received a 25% loading as a causal employee, a 35% loading for working on Saturdays, double time pay for working on Sundays and double time and a half pay for working on public holidays. He also received additional allowances, such as when he acted in the role of duty manager. After he had worked on a particular day, he would manually fill in a timesheet and leave it at the store for the store manager. He did not keep his own records of the hours or days he worked, and was not provided with copies of his timesheets by the Employer.
The respondent was paid on a weekly basis for the days he worked in accordance with an hourly rate. He was paid on Thursdays for the period from Monday until Sunday of the previous week, and his payslips were usually available for him to collect on Tuesdays. The payslips recorded his gross and net pay, the total number of hours worked and the rate of pay for the previous week. However, they did not record the specific days on which he worked. As discussed below, the Employer continued to retain payslips for the Period.
Based upon the respondent’s payslips, it is not in dispute that, during the Period, he was paid the following gross pay on each Thursday for the preceding Monday to Sunday pay periods:
Table 2: Respondent’s gross wages during his pay periods
Pay date – Thursday
Pay period – Monday to Sunday
Gross pay
10 July 2014
30 June 2014
6 July 2014
$688.15
17 July 2014
7 July 2014
13 July 2014
$524.95[11]
24 July 2014
14 July 2014
20 July 2014
$641.00
31 July 2014
21 July 2014
27 July 2014
$538.56
7 August 2014
28 July 2014
3 August 2014
$1,104.87
14 August 2014
4 August 2014
10 August 2014
$473.55
21 August 2014
11 August 2014
17 August 2014
$586.54
28 August 2014
18 August 2014
24 August 2014
$364.72[12]
4 September 2014
25 August 2014
31 August 2014
$357.96
11 September 2014
1 September 2014
7 September 2014
$434.19
18 September 2014
8 September 2014
14 September 2014
$600.06
25 September 2014
15 September 2014
21 September 2014
$439.56
2 October 2014
22 September 2014
28 September 2014
$396.40
9 October 2014
29 September 2014
5 October 2014
$653.37
16 October 2014
6 October 2014
12 October 2014
$571.11
23 October 2014
13 October 2014
19 October 2014
$564.08
30 October 2014
20 October 2014
26 October 2014
$663.42
6 November 2014
27 October 2014
2 November 2014
$981.65
13 November 2014
3 November 2014
9 November 2014
$688.84
20 November 2014
10 November 2014
16 November 2014
$520.27
27 November 2014
17 November 2014
23 November 2014
$1,193.14
4 December 2014
24 November 2014
30 November 2014
$1,346.14
11 December 2014
1 December 2014
7 December 2014
$1,536.97
18 December 2014
8 December 2014
14 December 2014
$1,200.62
25 December 2014[13]
15 December 2014
21 December 2014
$1,521.97
1 January 2015[14]
22 December 2014
28 December 2014
$1,001.34
8 January 2015
29 December 2014
4 January 2015
$1,315.25
15 January 2015
5 January 2015
11 January 2015
$1,595.24
22 January 2015
12 January 2015
18 January 2015
$1,294.87
29 January 2015
19 January 2015
25 January 2015
$1,164.64
5 February 2015
26 January 2015
1 February 2015
$753.95
12 February 2015
2 February 2015
8 February 2015
$379.63
19 February 2015
9 February 2015
15 February 2015
$1,207.84
26 February 2015
16 February 2015
22 February 2015
$661.52
5 March 2015
23 February 2015
1 March 2015
$539.96
12 March 2015
2 March 2015
8 March 2015
$684.82
19 March 2015
9 March 2015
15 March 2015
$851.89
26 March 2015
16 March 2015
22 March 2015
$935.91
2 April 2015
23 March 2015
29 March 2015
$793.04
9 April 2015
30 March 2015
5 April 2015
$733.54
16 April 2015
6 April 2015
12 April 2015
$1,074.37
23 April 2015
13 April 2015
19 April 2015
$473.13
30 April 2015
20 April 2015
26 April 2015
$326.84
7 May 2015
27 April 2015
3 May 2015
$313.74
14 May 2015
4 May 2015
10 May 2015
$451.83
21 May 2015
11 May 2015
17 May 2015
$344.63
28 May 2015
18 May 2015
24 May 2015
$92.62
4 June 2015
25 May 2015
31 May 2015
$323.42
11 June 2015
1 June 2015
7 June 2015
$643.65
18 June 2015
8 June 2015
14 June 2015
$395.48
25 June 2015
15 June 2015
21 June 2015
$588.66
[11] The applicant had previously used the erroneous amount of $524.96.
[12] The applicant had previously used the erroneous amount of $364.73.
[13] The respondent may not actually have been paid on this date as it was a public holiday. However, nothing turns on this.
[14] See n 13 above.
As can be seen from Tables 1 and 2 at [39] and [42] above, the respondent’s weekly pay periods and youth allowance fortnightly instalment periods do not align. Each fortnightly instalment period includes one whole week’s pay period that falls wholly within that fortnight and 4 days at the beginning from the previous week’s pay period and 3 days at the end from the following week’s pay period.
The letter dated Friday 1 August 2014 by which the Department notified the respondent of the grant of a youth allowance with effect from Thursday 10 July 2014, stated that he was required to report every two weeks on reporting periods that ended on a Wednesday. As can be seen from Table 1 at [39] above, the first reporting period ran from Thursday 10 July 2014 until Wednesday 23 July 2014. The letter also contained the following statement:
What you must report for each Centrelink Reporting Period
•If any circumstances have changed (see the list on the back of this page for details)
•If you were employed:
•The business where you worked.
•The amount you earned for work done in the Centrelink Reporting Period that relates to the day you need to report. The amount reported must be the amount earned before tax and other deductions such as salary sacrifice. You must report even if you have not received some or all of the pay yet.
In his written evidence, the respondent said that he did not recall ever being asked by an officer of the Department which specific days he had worked in any reporting period.
It is not in dispute that, during the Period, the respondent mistakenly reported his net income, rather than his gross income, for most of the instalment periods. Senior counsel for the applicant informed us that it was not being suggested that, in doing so, the respondent deliberately sought to mislead the Department. We are satisfied that there was never any such intention on the part of the respondent.
On 28 February 2024, the applicant issued a notice to the Employer requiring it to provide the following information about the respondent’s employment during the Period: his payslips, the dates worked, the hours worked on each day and his hourly rate of pay. The Employer provided pay information for the respondent – including the number of hours worked in each pay period – and confirmed that the pay period ran from Monday to Sunday. The Employer stated that it no longer held any records that showed the specific dates the respondent worked during each pay period.
Mr Blackmore gave evidence in relation to the calculation of the Revised Alleged Debt. He did not give evidence about the Current Alleged Debt because the applicant relied upon the Revised Alleged Debt during the first two days of the hearing and did not rely upon the Current Alleged Debt until the final day of the hearing, well after the completion of the parties’ evidence. We will discuss the differences between the Revised Alleged Debt and the Current Alleged Debt later in these reasons.
Mr Blackmore gave evidence that the quantum of the Revised Alleged Debt was calculated using a hybrid model, pursuant to which:
(a)income for any week worked which fell wholly within an instalment period was treated as earned during that instalment period and taken into account within that instalment period; and
(b)income for any week worked that straddled two instalment periods was assessed within the instalment period in which the respondent was paid.[15]
[15] See [7] above.
Using this hybrid model, for each fortnightly instalment period, the applicant calculated as follows the respondent’s income from the Employer (which the applicant contends the respondent should have declared) for the purposes of determining any reduction to his youth allowance entitlement:
Table 3: Applicant’s allocation of respondent’s income based upon hybrid model, used as basis for calculating the Revised Alleged Debt
Fortnightly instalment period
Amount
10 July 2014
23 July 2014
$1,854.11
24 July 2014
6 August 2014
$1,643.43
7 August 2014
20 August 2014
$1,060.09
21 August 2014
3 September 2014
$722.69
4 September 2014
17 September 2014
$1,034.25
18 September 2014
1 October 2014
$835.96
2 October 2014
15 October 2014
$1,224.48
16 October 2014
29 October 2014
$1,227.50
30 October 2014
12 November 2014
$1,670.49
13 November 2014
26 November 2014
$1,713.41
27 November 2014
10 December 2014
$2,883.11
11 December 2014
24 December 2014
$2,722.59
25 December 2014
7 January 2015
$2,316.59
8 January 2015
21 January 2015
$2,890.11
22 January 2015
4 February 2015
$1,918.59
5 February 2015
18 February 2015
$1,587.47
19 February 2015
4 March 2015
$1,201.48
5 March 2015
18 March 2015
$1,536.71
19 March 2015
1 April 2015
$1,728.95
2 April 2015
15 April 2015
$1,807.91
16 April 2015
29 April 2015
$800.07
30 April 2015
13 May 2015
$765.57
14 May 2015
27 May 2015
$437.25
28 May 2015
10 June 2015
$967.07
11 June 2015
24 June 2015
$984.14
In cross-examination, Mr Blackmore agreed that the amount of $1,854.11, which the Department calculated the respondent should have declared for the first instalment period from Thursday 10 July 2014 until Wednesday 23 July 2014, comprised sums that the respondent had received over three pay periods:
(a)$688.15, which was paid on Thursday 10 July 2014 in respect of work performed from Monday 30 June 2014 until Sunday 6 July 2014;
(b)$524.95,[16] which was paid on Thursday 17 July 2014 in respect of work performed from Monday 7 July 2014 until Sunday 13 July 2014; and
(c)$641.00, which was paid on Thursday 24 July 2014 in respect of work performed from Monday 14 July 2014 until Sunday 20 July 2014.
[16] The amount referred to by Mr Blackmore was $524.96. However, as discussed at n 11 above, the correct amount is $524.95.
In cross-examination, Mr Blackmore stated that, for the purpose of calculating the alleged overpayment: the amount referred to at [51(a)] was taken into account on the day it was received (being Thursday 10 July 2014); the amount referred to at [51(b)] was taken into account on the day it was received (being Thursday 17 July 2014); and the amount referred to at [51(c)] was taken into account for the 10 to 23 July 2014 instalment period on the basis that it was all ‘earned’ in that period.
In cross-examination, Mr Blackmore accepted that in the first instalment period from 10 to 23 July 2014, the Secretary assessed the respondent as being entitled to receive no youth allowance, which meant that the amount of youth allowance of $110.70 that he was paid was an overpayment and, accordingly, a debt. He agreed that there was a real chance that the figure of $1,854.11 that the Secretary had allocated to the period from 10 until 23 July 2014 was in fact earned over a three-week period from 30 June 2014 to 23 July 2014, and that the figure of $1,854.11 exceeded the amount the respondent actually earned between 10 and 23 July 2014. He did not accept that, if the Secretary had asked the respondent when the income was earned, no debt amount would have been raised for the period from 10 until 23 July 2014. He said that this was because if the actual date earned had been known, there was still every chance that the amount of income earned would have exceeded the income cut-off amount for that period.
In cross-examination, Mr Blackmore accepted that there was a possibility that the respondent’s statements about the days he received penalty rates may have allowed the Secretary to discern when income was first earned for the days to which those rates were applied. He stated that, usually, the Secretary would have regard to what the individual had told the Department but, in this case, the Secretary had calculated the potential debt by refence to the payslips alone.
In cross-examination, Mr Blackmore was asked if he accepted that, where a ‘hybrid’ method is used, there is a very good chance that a person will have a debt raised against them, even when they do not owe any debt. He stated that he accepted that only insofar as the hybrid method may move income from a fortnight which is well above the income cut off limit to another fortnight, as every dollar that is earned above the income cut-off limit does not affect the recipient’s entitlement to youth allowance. He added that, in some applications, the recipient may also gain a benefit to which they would otherwise not be entitled.
In re-examination, Mr Blackmore stated that, in the light of the further evidence from the respondent’s statement about the days for which he was paid penalty rates, the Secretary had recalculated the debt on 21 June 2024 and the quantum of the debt had remained unchanged.
In response to a question from the Tribunal, Mr Blackmore stated that he did not think that there was any specific reason why the Department could not ask employers for rosters or timesheets pursuant to s 192 of the Administration Act.
In closing submissions, the applicant acknowledged that, in some cases, it was possible to infer upon which days the respondent had worked by reference to his evidence about his usual days of work and the extra loadings that he received for working on Saturdays, Sundays or public holidays.[17]
[17] See [40] above.
The applicant accepted that the evidence established that the first of the wages the respondent received on 10 July 2014 for the pay period from 30 June 2014 until 6 July 2014 could be allocated to the fortnight prior to the Period, on the basis that that amount was earned prior to 10 July 2014. By the final day of the hearing, the applicant had prepared a revised calculation which excluded wages received for the pay period ending on 6 July 2014 and consequently allocated a lesser amount of income to the first fortnightly instalment period. This calculation produced a debt of $806.16, which is the Current Alleged Debt for which the applicant contends. The applicant’s allocation of the respondent’s income in calculating the Current Alleged Debt is contained in Table 4 below.
Table 4: Applicant’s allocation of respondent’s income in accordance with hybrid model, used as basis for calculating the Current Alleged Debt
Fortnightly instalment period
Ordinary income
10 July 2014
23 July 2014
$1,165.95
24 July 2014
6 August 2014
$1,643.43
7 August 2014
20 August 2014
$1,060.09
21 August 2014
3 September 2014
$722.68
4 September 2014
17 September 2014
$1,034.25
18 September 2014
1 October 2014
$835.96
2 October 2014
15 October 2014
$1,224.48
16 October 2014
29 October 2014
$1,227.50
30 October 2014
12 November 2014
$1,670.49
13 November 2014
26 November 2014
$1,713.41
27 November 2014
10 December 2014
$2,833.11
11 December 2014
24 December 2014
$2,722.59
25 December 2014
7 January 2015
$2,316.59
8 January 2015
21 January 2015
$2,890.11
22 January 2015
4 February 2015
$1,918.59
5 February 2015
18 February 2015
$1,587.47
19 February 2015
4 March 2015
$1,201.48
5 March 2015
18 March 2015
$1,536.71
19 March 2015
1 April 2015
$1,728.95
2 April 2015
15 April 2015
$1,807.91
16 April 2015
29 April 2015
$799.97
30 April 2015
13 May 2015
$765.57
14 May 2015
27 May 2015
$437.25
28 May 2015
10 June 2015
$967.07
11 June 2015
24 June 2015
$984.14
At the Tribunal’s request, the applicant prepared further calculations on the basis that income was ‘earned’ at the end of the respondent’s pay cycle, being a Sunday. Those calculations were exactly the same as the calculations in Table 4.
FIRST ISSUE: CORRECT INTERPRETATION OF POINT H23
Principles of statutory interpretation
The meaning of the individual words and the combined phrase ‘ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received’ in point H23 has not been the subject of direct judicial consideration. Accordingly, point H23 is to be construed by reference to the general principles of statutory construction, which are well established. Both parties broadly agreed with the elements of those general principles but, in their submissions which are summarised later in these reasons, they placed emphasis on different elements.
The starting point in construing a statutory provision is its text, considered in the light of its context and purpose.[18] It is necessary to strive to give meaning to every word of the provision.[19]
[18] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 46–7 [47] (‘Alcan’); SAS Trustee Corporation v Miles (2018) 265 CLR 137, 149 [20] (‘SAS Trustee’).
[19] Commissioner of State Revenue v EHL Burgess Properties Pty Ltd (2015) 209 LGERA 314, 328 [50]; [2015] VSCA 269 (‘EHL Burgess Properties’), citing Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 382 [71] (‘Project Blue Sky’).
Context includes the surrounding statutory provisions because the meaning of a statutory provision must be determined by reference to the language of the statute viewed as a whole. It is necessary to construe the provision so that it is consistent with the language and purpose of all the provisions of the statute.[20] This principle is particularly apt where the provision in question forms a constituent part of a larger calculation methodology prescribed by statute.
[20] EHL Burgess Properties (2015) 209 LGERA 314, 328 [47]; [2015] VSCA 269, citing Project Blue Sky (1998) 194 CLR 355, 381 [69].
In some circumstances – such as where a statute is part of a wider legislative scheme – context may include reading a statute together with other statutes so that, together, those statutes are construed as a combined statement of the will of the legislature.[21]
[21] Port of Newcastle Operations Pty Ltd v Glencore Coal Assets Australia Pty Ltd (2021) 274 CLR 565, 594 [86].
Section 15AA of the Acts Interpretation Act 1901 provides that, in interpreting a provision of an Act, ‘the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.’
With regard to the purpose of a statutory provision, purpose resides in the text and structure of the statute. The search for purpose does not permit or require some search for what those who promoted or passed the legislation had in mind when the statute was enacted.[22] ‘Purpose’ encompasses the existing state of the law and the mischief which one can discern that the statute was intended to remedy.[23]
[22] Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378, 389 [25].
[23] EHL Burgess Properties (2015) 209 LGERA 314, 328–9 [51]; [2015] VSCA 269, citing CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408 (‘CIC’).
A very general purpose may not detract from the meaning of the words which are being construed. Much depends upon the terms of a particular statute and what may be drawn from the context for and purpose of the provision.[24]
[24] R v A2 (2019) 269 CLR 507, 522 [36].
When the text, read in context, permits more than one potential meaning, the choice between those meanings may ultimately turn on an evaluation of the relative coherence of each constructional choice with the scheme of the statute and its objects or policies.[25] The history of a provision and of a wider legislative scheme may assist in determining the purpose of particular provisions within the scheme.[26]
[25] SAS Trustee (2018) 265 CLR 137, 149 [20].
[26] EHL Burgess Properties (2015) 209 LGERA 314, 328–9 [51]; [2015] VSCA 269.
An interpretation which departs too far from the statutory text in order to achieve the perceived purpose of a provision may involve a court or a tribunal violating the separation of powers in the Constitution.[27]
[27] Taylor v Owners – Strata Plan No 11564 (2014) 253 CLR 531, 549 [40] (‘Taylor’); EHL Burgess Properties (2015) 209 LGERA 314, 332–3 [68]; [2015] VSCA 269.
In cases of ambiguity, it may be permissible to have regard to extrinsic materials, such as explanatory memoranda, the second reading speech of a Minister and other matters within the matrix of facts that were in the knowledge or contemplation of the legislature. However, historical considerations and extrinsic materials cannot be relied upon to displace the clear meaning of the text.[28] This principle has been given statutory recognition in s 15AB(1) of the Acts Interpretation Act. Section 15AB(1), which permits material that does not form part of a statute to be considered in interpreting a provision of that statute if the material is capable of assisting in the ascertainment of the meaning of the provision.
[28] Alcan (2009) 239 CLR 27, 46–7 [47].
In the present case, it was common ground that there is no extrinsic material that is directly relevant to point H23 which can assist in its construction. However, the respondent referred to the explanatory memorandum to the Student Assistance (Youth Training Allowance) Amendment Bill 1994 (‘1994 Bill’). The 1994 Bill amended the Student Assistance Act 1973, including by adding a Module G which contained an ordinary income test. Point G9 of Module G included the heading ‘Ordinary income generally taken into account when first earned, derived or received’ followed by the words ‘Subject to points G10 and G11, ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received’. The explanatory memorandum stated: ‘Point G9 provides that, in general, ordinary income is income-tested in the fortnight when the person becomes entitled to it, regardless of when he or she receives it (although for gifts, it will be receipt of the payment that creates the entitlement)’.
Where, in construing a statutory provision, it appears that words are missing, it is permissible to read words into the provision only in very limited circumstances. In Taylor v Owners – Strata Plan No 11564,[29] a majority of the High Court held that whether a statute could be read as though it contained additional words involved a judgement of matters of degree. It is more likely to be permissible to read a statute as if it contained or omitted words which would correct simple, grammatical drafting errors which if uncorrected would defeat the object of the provision. However, it is not permissible to make an insertion which is too much at variance with the language actually used by the legislature.[30]
[29] (2014) 253 CLR 531.
[30] Taylor (2014) 253 CLR 531, 548 [38]. See also EHL Burgess Properties (2015) 209 LGERA 314, 332–3 [68] [2015] VSCA 269.
A literal approach to construction, which requires one to obey the ordinary meaning or usage of words of a provision, even if the result is improbable, should not be followed. Even words which have an apparently clear ordinary or grammatical meaning may be ascribed a different legal meaning after the process of statutory construction is complete.[31]
[31] R v A2 (2019) 269 CLR 507, 520–1 [32].
Where there are competing interpretations of a statutory provision, in determining which interpretation ought be adopted, it is permissible to have regard to the consequences of each interpretation.[32] That is because it is assumed that Parliament could not have intended for a construction of a statute which would result in absurd results.[33] However, even if a court or tribunal thinks that a particular interpretation is ‘uncommonly silly’, ‘unwise’ or ‘asinine’, that consideration cannot prevail over the clear legislative language.[34] A court or tribunal should be cautious in relying upon an ‘absurd’ result in rejecting a construction of a statute that otherwise appears correct. Arguments based on the anomalous or incongruous results of a particular construction of a statute must not be permitted to obscure the real intention, and choice, of Parliament.[35]
[32] Project Blue Sky (1998) 194 CLR 355, 384 [78]; CIC (1997) 187 CLR 384, 408.
[33] EHL Burgess Properties (2015) 209 LGERA 314, 333 [70]; [2015] VSCA 269.
[34] CTM v The Queen (2008) 236 CLR 440, 509 [237].
[35] EHL Burgess (2015) 209 LGERA 314, 333–4 [72]; [2015] VSCA 269.
Judicial decisions that bear upon the interpretation of point H23
The parties referred to some cases which they contended may be of assistance in resolving the construction issues relating to point H23 that arise in the present case.
A number of Federal Court decisions have commented upon the definition of ‘income’, which incorporates the words ‘earned, derived or received’, in both the Act and its predecessor, the Social Security Act 1947 (‘1947 Act’). Those decisions have emphasised that the definition has been ‘framed to cast a very wide net’.[36] In Rose v Secretary, Department of Social Security, the Full Federal Court stated that the definition of ‘income’ in the 1947 Act encompasses ‘as wide a range of categories and sources of income as possible’.[37]
[36] Marsh v Secretary, Department of Social Security (1986) 12 FCR 100, 102. See also Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307, 310 (‘Inguanti’); Secretary, Department of Employment and Workplace Relations v Richards (2007) 98 ALD 310, 319–20 [32]; [2007] FCA 1710 (‘Richards (Collier J)’).
[37] (1990) 21 FCR 241, 243 (‘Rose’).
Inguanti v Secretary, Department of Social Security[38] involved two questions relating to Mr Inguanti’s invalid pension. The first question was whether the amount of his Italian pension constituted ‘moneys … earned derived or received’ (within the definition of ‘income’ in the 1947 Act) which should be taken into account in calculating the rate of payment of his invalid pension. The second question – which only arose if the first question was answered in the affirmative – was whether the Secretary had a discretion to exclude the Italian pension from the calculation of that rate. Mr Inguanti had been entitled to be paid the pension but had never received payment of any pension amount in Australia. In relation to the first question, Sheppard J stated that the nouns in the definition of ‘income’ in the 1947 Act which relate to the verb ‘earned’ are ‘personal earnings’ and ‘profits’, and that the Italian pension did not comprise ‘moneys earned’.[39] In relation to the second question, Sheppard J held that the verbs ‘earned’, ‘derived’ and ‘received’ did not vest a discretion in the Secretary not to regard income as relevant to be taken into account until it was actually received.[40]
[38] (1988) 80 ALR 307.
[39] Inguanti (1988) 80 ALR 307, 310. At 312, Sheppard J found that the Italian pension had been ‘derived’.
[40] Inguanti (1988) 80 ALR 307, 313.
Sheppard J made the following additional observations that are presently relevant.[41] The use of the verbs ‘earned’ ‘derived’ and ‘received’ in juxtaposition in the definition of ‘income’ in the 1947 Act strongly suggests that each was intended to have a different meaning. Sometimes money will be earned, derived and received simultaneously, while at other times money will be earned and derived but not received until a later time. The verb ‘derived’ was not necessarily equivalent in meaning to ‘earned’.[42] Money is derived when a person is entitled to it. However, if the prospect of the money ever being received is remote, it may be correct to conclude that the money has not been ‘derived’. If income is derived and later received, it is to be taken into account once and for all when it is derived, and is not to be taken into account again when it was received.
[41] Inguanti (1988) 80 ALR 307, 311–12.
[42] Sheppard J relied upon Brent v Federal Commissioner of Taxation (1971) 125 CLR 418, 427–8 (‘Brent’).
In Secretary, Department of Employment and Workplace Relations v Richards,[43] the issue was whether the income of an employee whose daily pay was adjusted by a contractual requirement that she repay any shortfalls in the day’s till takings was the amount net of the adjustment. Collier J held, in the context of s 8(1) of the Act, that Ms Richards’ earnings were net of the adjustment because till shortfalls did not represent ‘an income amount earned, derived or received’ by her for her ‘own use or benefit’.[44] Collier J relevantly stated:
[I]t is important to note that the concept of ‘income’ under the Act is not to be equated with ‘income’ under income tax legislation. …
In relation to the concept of income being ‘earned, derived or received’, it is clear that:
·the use of the verbs ‘earned’, ‘derived’ and ‘received’ in juxtaposition in the definition of ‘income’ in the Act suggests that each was intended to have a different meaning;
·income cannot be ‘earned, derived or received’ unless it is also realised;
·income can be realised — and hence received — even if temporarily it is not accessible;
·income can be ‘derived’ within the meaning of s 8(1) [of the Act] even if it is not at that time received; and
·‘earned’ relates to personal earnings and profits.[45]
[43] (2007) 98 ALD 310; [2007] FCA 1710.
[44] Richards (Collier J) (2007) 98 ALD 310, 321 [38]; [2007] FCA 1710.
[45] Richards (Collier J) (2007) 98 ALD 310, 320 [33], [34]; [2007] FCA 1710 (citations omitted).
An appeal to the Full Federal Court was dismissed. The Full Court stated that the answer to the question of what was the gross ordinary income earned, derived or received by Ms Richards for her own use or benefit ‘is to be found in the terms of her employment contract’.[46]
[46] (2008) 168 FCR 438, 448 [40] (‘Richards (Full Court)’).
Several cases have considered the verb ‘earn’ in the context of interest payable upon savings and loans.
In the Income Tax Acts case,[47] the Full Court of the Victorian Supreme Court considered s 14(3) of the Income Tax Act 1895 (Vic) which relevantly provided that: ‘[r]eturns of income shall be based upon the amount of income which was earned derived or received by the taxpayer during the year ending on the thirty-first day of the month of December immediately preceding the commencement of the year of assessment.’ The Court held that interest upon deposit receipts in a bank ‘is earned on only the last or due date of the receipt’.[48] The Court added that ‘the obligation of the bank to pay only at the end of the term disposes of the matter’.[49]
[47] (1897) 23 VLR 312.
[48] Income Tax Acts case (1897) 23 VLR 312, 316.
[49] Income Tax Acts case (1897) 23 VLR 312, 317.
Federal Commissioner of Taxation v Australian Guarantee Corporation Ltd[50] involved the question of when interest on debentures was ‘incurred’ by a finance company for the purpose of claiming a tax deduction. The Full Federal Court held that the finance company incurred the liability to pay interest to debenture holders in the income year in which the liability accrued notwithstanding that payment to the debenture holders was not due until the debentures matured or were redeemed. Beaumont J stated that the verb ‘earn’ is not a word of universal application in the same sense in all circumstances, and that it is temporally equivocal. He said that ‘earn’ describes the fact of gaining a return without necessarily indicating the period to which it is referable. He held that interest could be described as being earned on each day that it accrued even if it was not payable until a later date.[51] Referring to the Income Tax Acts case, he said that ‘the case should be seen in the statutory context that income was brought to account when it was “earned, derived or received” and can perhaps be distinguished for that reason.’[52]
[50] (1984) 2 FCR 483 (‘AGC’).
[51] AGC (1984) 2 FCR 483, 505.
[52] AGC (1984) 2 FCR 483, 506.
A number of employment cases have considered the question of whether an employee was entitled to be paid a wage in particular circumstances.
In the 1907 case of Parkin v South Hetton Coal Company Ltd,[53] the Court of Appeal of England and Wales considered whether a worker who declined to work on a rostered day was entitled to be paid for work performed on four previous days in the relevant fortnight. The worker was paid fortnightly for days worked during the fortnight, with each day’s pay being calculated by reference to the number of tubs of coal drawn from the relevant mine. A County Court judge found that, under the employment contract, wages became due as they were earned upon completion of each daily shift even though they were not payable until the end of each fortnight, and therefore the worker was entitled to be paid for the four days he had worked. The Court of Appeal upheld this decision on the basis that the outcome of the case depended entirely on the terms of the employment contract as found by the County Court judge.
[53] (1907) 98 LT 162 (‘Parkin’).
In the 1957 Waterside Workers Awards case,[54] the Commonwealth Industrial Court dealt with the question whether casual workers who had completed some hours of their shift but refused to continue to complete their duties for that shift were entitled to payment for the hours of work that they had completed. In resolving this question, the Court was required to construe industrial awards applicable to the workers which provided for the calculation of their remuneration on an hourly rate. The awards did not specify the intervals at which wages were payable, but the practice was to pay the workers weekly. The Court held that, on the proper construction of those awards, as the workers’ rates ‘were computed hourly’, their entitlement to be paid ‘accrued as earned’ and therefore they were entitled to payment for the completed hours of duty.[55] The Court stated that the fact that the workers breached their contract by refusing to complete their duties ‘did not disentitle them to payment for wages that accrued’.[56] However, the workers were not entitled to any payment for fractions of an hour because their wages ‘did not accrue until the end of each hour of duty’.[57]
[54] (1957) 1 FLR 119.
[55] Waterside Workers Awards case (1957) 1 FLR 119, 127.
[56] Waterside Workers Awards case (1957) 1 FLR 119, 127.
[57] Waterside Workers Awards case (1957) 1 FLR 119, 129.
More recently, in the 4 Yearly Review of Modern Awards – Payment of wages case,[58] the Full Bench of the Fair Work Commission conducted a review of ‘modern awards’, as defined in the Fair Work Act 2009. The Full Bench stated:
Academic commentary suggests that, absent express provision for accrual in an award, if wages are required to be paid periodically under the award (for example, weekly, fortnightly or monthly) then they will be taken to accrue with at least the same frequency.
…
The period over which wages accrue is of significance because the employee only earns wages for completing each such period. Absent express provision for accrual, there may be a question as to whether an employee whose employment ends part way through a pay period is entitled to wages for the incomplete period. For example, if an employee is paid weekly and the employee’s employment ends after three and a half days of a weekly pay period, there may be a question as to whether the employee is entitled to any wages for those three and a half days. If the employee’s wages accrue for working a week, the employee will not be entitled to wages for the three and a half days (although the employee may have a basis to claim some other form of compensation). If the employee’s wages accrue on a daily basis, the employee will be entitled to wages for the three complete days that were worked in the pay period, but not for the half day. If the employee’s wages accrue on an hourly basis, the employee will also be entitled to wages for complete hours worked on the half day.[59]
[58] [2016] FCWFC 8463 (‘4 Yearly Review case’).
[59] 4 Yearly Review case [2016] FCWFC 8463, [126], [129] (citations omitted).
A number of taxation cases have considered the question of which accounting method (the accruals or earnings basis or the cash or receipts basis) is appropriate in determining when particular forms of income were ‘derived’ for the purposes of certain provisions of the Income Tax Assessment Act 1936 (‘ITAA’).
In Henderson v Federal Commissioner of Taxation,[60] an accounting partnership prepared its financial accounts for Year 1 on the receipts basis and for Year 2 on an earnings basis, with the result that certain income earned in Year 1 but received in Year 2 was not included in the assessable income for the partners in either Year 1 or Year 2. The Commissioner assessed the income of a partner for Year 2 on the receipts basis. Barwick CJ (with whom McTiernan and Menzies JJ agreed) held that the earnings basis yielded the correct figure of the partner’s assessable income for Years 1 and 2. His Honour relevantly stated:
[T]here cannot be any warrant in a scheme of annual taxation upon the income derived in each year of taxation for combining the results of more than one year in order to obtain the assessable income for a particular year of tax.
…
When the service is so far performed that according to the agreement of the parties or in default thereof, according to the general law, a fee or fees have been earned and it or they will be income derived in the period of time in which it or they have become recoverable. But until that time has arrived, there is, in my opinion, no basis when determining the income derived in a period for estimating the value of the services so far performed but for which payment cannot properly be demanded and treating that value as part of the earnings of the professional practice up to that time and as part of the income derived in that period. … Consequently, in determining the income of the partnership in either of the years in question for the purposes of assessment of tax, only accrued fees may be included in that income. I have used the word ‘recoverable’ to describe the point at which income is derived by the performance of services. I ought to add that fees would be relevantly recoverable though by reason of special arrangements between the partnership and the client, time to pay was afforded.[61]
[60] (1970) 119 CLR 612 (‘Henderson’).
[61] Henderson (1970) 119 CLR 612, 649–52.
In Brent v Federal Commissioner of Taxation, Gibbs J stated that the word ‘derived’ is not necessarily equivalent in meaning to ‘earned’.[62] He added that ‘the amount of income derived is to be determined by the application of ordinary business and commercial principles and that the method of accounting to be adopted is that which “is calculated to give a substantially correct reflex of the taxpayer’s true income”’.[63]
[62] (1971) 125 CLR 418, 427.
[63] Brent (1971) 125 CLR 418, 428, citing Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd (1938) 63 CLR 108, 152–4 (‘Carden’s case’).
In News Australia Holdings Pty Ltd v Federal Commissioner of Taxation,[64] the issue for determination was: in what year should income tax be assessed upon interest that had accrued in one year but was paid in a subsequent year? Pagone J considered the decision of Gibbs J in Brent and made the following observations. Under the accruals basis of accounting, income will be derived when money has become due to the taxpayer, but under the receipts basis it will only be derived when it has been received.[65] The decision on which accounting method to apply was not an arbitrary or discretionary one but required consideration of the nature of the source of the income in question by reference to the activities of the taxpayer and the nature of that income to determine which accounting method best reflected the income.[66] An item of ordinary income is derived when it ‘can be said to have come home to the taxpayer in a realised or immediately realisable form’.[67]
[64] (2017) 105 ATR 874; [2017] FCA 645 (‘News’).
[65] (2017) 105 ATR 874, 877 [3]; [2017] FCA 645.
[66] (2017) 105 ATR 874, 877 [3]; [2017] FCA 645.
[67] (2017) 105 ATR 874, 878 [6]; [2017] FCA 645, citing Carden’s case (1938) 63 CLR 108, 155.
Parties’ submissions on application of principles of statutory interpretation to point H23
In their submissions, both parties contended that:
(a)The word ‘first’ in point H23 had a temporal meaning which required ordinary income to be taken into account in the fortnight in which it was either first earned, first derived or first received.
(b)The verbs ‘earned’, ‘derived’ and ‘received’ each has a separate meaning, but they are not mutually exclusive.
(c)The verb ‘earned’ in the context of point H23:
(i)can be understood as meaning ‘an amount a person is entitled to get for their income producing activities’;
(ii)does not have a fixed temporal meaning; and
(iii)may give rise to questions of fact as to when, or over what period, an amount of income is earned.
(d)In relation to income, the verb ‘derived’ describes when a person has a present legal entitlement to the income.
(e)In relation to income, the verb ‘received’ describes when a person obtains beneficial ownership of the income.
(f)Employment income may be ‘earned’, ‘derived’ as well as ‘received’.
(g)Income other than employment income may also be ‘earned’, ‘derived’ or ‘received’.
Despite this common ground in the parties’ submissions, the parties disagreed upon the proper construction of point H23. In broad terms:
(a)The respondent submitted that the effect of point H23 is that a person’s ordinary income can only be taken into account in the fortnight in which it was first earned or first derived or first received. Accordingly, if income is first earned and later derived and received but the evidence does not permit a finding as to the fortnight in which it was earned, the income cannot be taken into account even if the evidence permits a finding as to the fortnight in which it was derived or received.
(b)The applicant submitted that the effect of point H23 is that a person’s ordinary income must be taken into account in the fortnight in which it can be established on the evidence that the income was first earned, derived or received. Accordingly, if there is evidence that a person has earned, derived and received income but the evidence permits only a finding as to the fortnight in which it was received, the income must be taken into account in the fortnight of receipt. That is so even if it is known that the income was not earned in the fortnight of receipt.
We will now summarise in some detail the parties’ submissions in support of their preferred constructions of point H23. It is convenient to commence with the respondent’s submissions.
The respondent submitted that his preferred construction of point H23 is consistent with the express words of the provision, the structure of the Act and the beneficial purpose of the Act. That construction was said to define with certainty the exact factual issues that delimit with precision a person’s entitlement to a social security benefit. On the other hand, so it was said, the Secretary’s preferred construction would have the effect of vesting in the Secretary implied and undefined discretions which the Act does not confer.
The respondent contended that his preferred construction of the phrase ‘fortnight in which it is’ in point H23 reads that phrase sensibly and in accordance with its only open and grammatical meaning. He argued that the Secretary’s construction ignores that phrase by severing the connection between a fortnight and the word ‘first’. According to the respondent, his preferred construction of point H23 gives proper work to the word ‘first’ whereas the Secretary’s construction gives that word no sensible work to do, or gives it work to do only when the evidence before the Secretary permits it to do any work. The respondent submitted that his preferred construction gives the word ‘first’ its natural work, which is to measure temporally when income is relevantly earned, derived or received and prescribes that the only method of accounting that can be used to take ordinary income into account is the one that occurs first.
Nevertheless, for completeness, we add the following observation on the respondent’s submissions in support of his preferred construction of point H23. That construction, if adopted, would in some cases deprive of effective operation one of the elements of a mechanism in the Act of income means-testing youth allowance. What is especially startling is that this consequence would arise particularly in cases where a person dishonestly fails to disclose income and takes steps to ensure that no records are retained which provide evidence of when they earned income. On the respondent’s preferred construction, the Secretary would not be able to pursue a debt against such a person because the Secretary would not have any evidence of when the income was earned and therefore could not prove there was overpayment. The effect would be that the person would benefit from their own wrongdoing. It would be surprising if this consequence were intended by Parliament.
We also add the following observations on the applicant’s submissions in support of his preferred construction of point H23. First, that construction departs from the text of point H23 by giving work to do to the word ‘first’ only in some cases, depending upon the state of the evidence. Our preferred interpretation gives the word ‘first’ work to do in all cases. Secondly, consistent with the evidence of Mr Blackmore, the applicant’s preferred construction carries a risk that recipients of social security benefits will receive less than the amount to which they are entitled or will be pursued for debts that are either not owed or are for amounts that exceed what is owed.[95]
[95] See [53]–[55] above.
SECOND & THIRD ISSUES: OUTCOME OF APPLYING POINT H23 IN THIS CASE
The applicant submitted that the Tribunal should adopt his preferred construction of point H23 for the reasons advanced by him that we have previously summarised. The applicant contended that his preferred construction meant that the following findings should be made in the present case:
(a)Income was earned by the respondent on the days that he worked at the Employer.
(b)When the evidence established that income was for work undertaken wholly within a fortnightly instalment period, the Tribunal should allocate that income to the that fortnight.
(c)When the evidence does not enable the Tribunal to establish precisely on what days the respondent had worked, and the respondent’s pay period straddled two benefit fortnights, the Tribunal should allocate that income to the fortnight in which the income was received.
Accordingly, the applicant contended that the Tribunal should find that the respondent owes the Current Alleged Debt, as set out in Table 5 below:
Table 5: Current Alleged Debt the applicant contends the respondent owes
Fortnightly instalment period
Entitlement
Youth allowance received
Overpayment
10 July 2014
23 July 2014
$44.70
$110.70
$66.00
24 July 2014
6 August 2014
$0.00
$0.00
$0.00
7 August 2014
20 August 2014
$108.22
$159.87
$51.65
21 August 2014
3 September 2014
$310.66
$312.46
$1.80
4 September 2014
17 September 2014
$123.72
$170.52
$46.80
18 September 2014
1 October 2014
$241.93
$259.31
$17.38
2 October 2014
15 October 2014
$8.68
$82.48
$73.80
16 October 2014
29 October 2014
$6.87
$80.67
$73.80
30 October 2014
12 November 2014
$0.00
$0.00
$0.00
13 November 2014
26 November 2014
$0.00
$0.00
$0.00
27 November 2014
10 December 2014
$0.00
$0.00
$0.00
11 December 2014
24 December 2014
$0.00
$0.00
$0.00
25 December 2014
7 January 2015
$0.00
$0.00
$0.00
8 January 2015
21 January 2015
$0.00
$0.00
$0.00
22 January 2015
4 February 2015
$0.00
$168.43
$168.43
5 February 2015
18 February 2015
$0.00
$62.72
$62.72
19 February 2015
4 March 2015
$42.28
$161.09
$118.81
5 March 2015
18 March 2015
$0.00
$13.34
$13.34
19 March 2015
1 April 2015
$0.00
$0.00
$0.00
2 April 2015
15 April 2015
$0.00
$0.00
$0.00
16 April 2015
29 April 2015
$218.14
$236.14
$18.00
30 April 2015
13 May 2015
$238.78
$253.18
$14.40
14 May 2015
27 May 2015
$428.36
$428.39
$0.03
28 May 2015
10 June 2015
$117.88
$158.68
$40.80
11 June 2015
24 June 2015
$107.64
$146.04
$38.40
Totals
$1,997.86
$2,804.02
$806.16
The respondent submitted that the Tribunal should adopt his preferred construction of point H23 for the reasons advanced by him that we have previously summarised. The respondent contended that his preferred construction meant that the following findings should be made in the present case:
(a)Income was earned by the respondent upon completion of each hour that he worked at the Employer.
(b)The respondent earned his income before he received it.
(c)Whilst it was known in which fortnight the respondent received his income, there was insufficient evidence for the Tribunal to determine in which fortnight he had earned the income.
(d)There was therefore insufficient evidence for the Tribunal to conclude that the amount of youth allowance the respondent had received was higher than the amount to which he was entitled. Accordingly, there was no lawful basis for a conclusion that a debt has arisen in accordance with s 1223 of the Act.
For the reasons set out under the heading ‘First Issue: Correct Interpretation of Point H23’, we are of the opinion that our preferred construction of point H23 should be adopted and the parties’ respective preferred constructions should be rejected.
According to the evidence, the respondent was paid every Thursday for work he performed during the period commencing on the Monday of the previous week and ending on the Sunday of the previous week. Based upon our preferred construction of point H23, he became legally entitled to his wages for working for each Monday to Sunday period on each Sunday. Accordingly, we find as a fact that he earned his weekly wages for the purposes of point H23 every Sunday.
Applying the above analysis, we find that the respondent’s ordinary income constituted by the wages he received from the Employer during the Period is to be taken into account in the fortnightly instalment periods set out in Table 6 below:
Table 6: Allocation of respondent’s income to instalment periods based upon on our preferred construction of point H23
Fortnightly instalment period
Ordinary income
10 July 2014
23 July 2014
$1,165.95
24 July 2014
6 August 2014
$1,643.43
7 August 2014
20 August 2014
$1,060.09
21 August 2014
3 September 2014
$722.68
4 September 2014
17 September 2014
$1,034.25
18 September 2014
1 October 2014
$835.96
2 October 2014
15 October 2014
$1,224.48
16 October 2014
29 October 2014
$1,227.50
30 October 2014
12 November 2014
$1,670.49
13 November 2014
26 November 2014
$1,713.41
27 November 2014
10 December 2014
$2,883.11
11 December 2014
24 December 2014
$2,722.59
25 December 2014
7 January 2015
$2,316.59
8 January 2015
21 January 2015
$2,890.11
22 January 2015
4 February 2015
$1,918.59
5 February 2015
18 February 2015
$1,587.47
19 February 2015
4 March 2015
$1,201.48
5 March 2015
18 March 2015
$1,536.71
19 March 2015
1 April 2015
$1,728.95
2 April 2015
15 April 2015
$1,807.91
16 April 2015
29 April 2015
$799.97[96]
30 April 2015
13 May 2015
$765.57
14 May 2015
27 May 2015
$437.25
28 May 2015
10 June 2015
$967.07
11 June 2015
24 June 2015
$984.14
[96] This figure differs from the figure of $800.07 in Table 3 at [50] above. The correct figure is $799.97.
Utilising the gross income earned in each fortnightly instalment period as found by us results in the following calculation of the respondent’s entitlement during the relevant period compared with the youth allowance he received:
Table 7: Calculation of respondent’s entitlement to youth allowance compared to amounts received in each fortnightly instalment period
Fortnightly instalment period
Entitlement
Youth allowance received
Overpayment
10 July 2014
23 July 2014
$44.70
$110.70
$66.00
24 July 2014
6 August 2014
$0.00
$0.00
$0.00
7 August 2014
20 August 2014
$108.22
$159.87
$51.65
21 August 2014
3 September 2014
$310.66
$312.46
$1.80
4 September 2014
17 September 2014
$123.72
$170.52
$46.80
18 September 2014
1 October 2014
$241.93
$259.31
$17.38
2 October 2014
15 October 2014
$8.68
$82.48
$73.80
16 October 2014
29 October 2014
$6.87
$80.67
$73.80
30 October 2014
12 November 2014
$0.00
$0.00
$0.00
13 November 2014
26 November 2014
$0.00
$0.00
$0.00
27 November 2014
10 December 2014
$0.00
$0.00
$0.00
11 December 2014
24 December 2014
$0.00
$0.00
$0.00
25 December 2014
7 January 2015
$0.00
$0.00
$0.00
8 January 2015
21 January 2015
$0.00
$0.00
$0.00
22 January 2015
4 February 2015
$0.00
$168.43
$168.43
5 February 2015
18 February 2015
$0.00
$62.72
$62.72
19 February 2015
4 March 2015
$42.28
$161.09
$118.81
5 March 2015
18 March 2015
$0.00
$13.34
$13.34
19 March 2015
1 April 2015
$0.00
$0.00
$0.00
2 April 2015
15 April 2015
$0.00
$0.00
$0.00
16 April 2015
29 April 2015
$218.14
$236.14
$18.00
30 April 2015
13 May 2015
$238.78
$253.18
$14.40
14 May 2015
27 May 2015
$428.36
$428.39
$0.03
28 May 2015
10 June 2015
$117.88
$158.68
$40.80
11 June 2015
24 June 2015
$107.64
$146.04
$38.40
Totals
$1,997.86
$2,804.02
$806.16
It follows that, for the Period, the respondent obtained the benefit of payments totalling $806.16 in youth allowance to which he was not entitled. It also follows that a debt in the amount of $806.16 is due to the Commonwealth by the respondent pursuant to s 1223 of the Act.
SUMMARY OF KEY CONCLUSIONS
For the above reasons, both the ARO’s decision and the AAT First Review Decision will be set aside. In their place, we will substitute a decision that a debt in the amount of $806.16 is due to the Commonwealth by the respondent.
It may assist future cases in which similar issues to those in the present case arise for us to summarise our key conclusions. We do so below, noting that point H23 was amended from 7 December 2020 in relation to employment income.[97] For ease of reference, we will set out expressions in full rather than relying upon definitions used earlier in our reasons.
[97] See n 8 above.
(1)Point 1067G-H23 in s 1067G of the Social Security Act 1991 (‘Act’) provides as follows:
Ordinary income generally taken into account when first earned, derived or received
Subject to points 1067G-H23A, 1067G-H23B, 1067G-H24 and 1067G-H25 and section 1073, ordinary income is to be taken into account in the fortnight in which it is first earned, derived or received.
(2)The respondent was paid wages by his employer which were for his own use or benefit and represented personal earnings. The wages therefore constituted ordinary income for the purposes of point 1067G-H23 in s 1067G of the Act (‘point H23’).
(3)For the purposes of point H23, the word ‘first’ has a temporal connotation in the sense that, if ordinary income is ‘earned’, ‘derived’ or ‘received’ in different fortnights, it must be taken into account in the fortnight in which the first of those events occurs.
(4)For the purposes of point H23, a person earns ordinary income when that person becomes legally entitled to the income. The time that a person earns income may precede the time at which the person receives income or the timing of both events may coincide. In the context of employment income, the time at which an employee becomes legally entitled to wages will depend upon the legal arrangements that apply to the employment relationship. The fact that a person’s wages are calculated by reference to an hourly rate does not necessarily mean that they earn their wages every hour that they have worked. Where an employee is paid weekly, wages may be said to be ‘accruing’ each day that is worked during the week, but this does not necessarily mean that the employee earns wages at the end of each day they work. Subject to the specific terms of particular employment arrangements, an employee who is paid weekly in arrears for work performed during the previous pay period will earn the weekly wages on the last day of that pay period. In such a case, the employee’s payslips will usually provide reliable evidence of the day in which wages are earned.
(5)In the present case, it is not necessary for us to finally determine when a person derives income for the purposes of point H23. Had it been necessary for us to do so, we would have determined that a person derives ordinary income for the purposes of point H23 when the person becomes legally entitled to it. There is thus overlap between the meanings of ‘earned’ and ‘derived’ for the purposes of point H23. That overlap may possibly be explained because some forms of ordinary income (such as gifts) are not usually characterised as being ‘earned’.
(6)For the purposes of point H23, a person receives ordinary income when they obtain beneficial ownership of the income, such as when the income is made available to them or to a third party at their direction and for their benefit.
(7)The word ‘it’ in point H23 indicates that point H23 is dealing with a particular amount of ordinary income that is earned, derived, or received, and engages the definition of ‘income amount’ in s 8(1) of the Act.
(8)Applying the meanings we have assigned to the words in point H23, the analysis required by point H23 in respect of each income amount of a person may be framed as follows: in which of the fortnights in which a person is paid youth allowance (‘instalment periods’) did they first:
(a)become legally entitled to the income amount, where the income amount is of a kind that can be described as being earned; or
(b)become legally entitled to the income amount, where the income amount is not of a kind that can be described as being earned but can be described as being derived; or
(c)receive the income amount.
(9)The following examples are illustrative:
(a)Jane Smith works casual hours Monday to Friday and is paid on Friday evening. In the absence of any other evidence, it may be inferred that the legal arrangement between her and her employer is that she becomes legally entitled to be paid every Friday for any work she performed in the previous five days. Jane is not entitled to be paid on any day other than Friday for any work she performed on any such other day and therefore, for the purposes of point H23, she does not earn a wage prior to the Friday. Jane may be accruing days for which she will be paid, but these accruals do not crystalise into a legal entitlement until each Friday.
(b)John Brown works casual hours Monday to Sunday and is paid on the Thursday of the following week. In the absence of any other evidence, it may be inferred that the legal arrangement between him and his employer is that he becomes legally entitled to wages every Sunday for any work he performed during the period Monday to Sunday. For the purposes of point H23, John earns income for each Monday to Sunday period (in the sense of becoming legally entitled to the income) on the Sunday and that income is paid (and thus received) on the following Thursday.
(c)Joyce Barry works whenever her employer is short staffed and is paid for each day that she is called in to work at the end of that day. In the absence of any other evidence, it may be inferred that the legal arrangement between her and her employer is that she becomes legally entitled to be paid for every day that she works at the end of that day. For the purposes of point H23, Joyce earns and receives her wage at the same time.
(d)James White works full time Monday to Friday and is paid fortnightly one week in arrears and one week in advance every second Friday for that Friday and the preceding four days, and for the five working days of the following week. For example, on Friday 12 July 2024, James was paid a gross amount of $3,000 for the week ending Friday 12 July 2024 and the following week ending Friday 19 July 2024. For the purposes of point H23, James earns his wages (in the sense of becoming legally entitled to the wages) for each fortnight to which they relate on the Friday upon which he is paid, and those wages are to be taken into account in his instalment period for social security benefits in which that Friday falls.
(e)Jasmine Winters worked full time Monday to Friday and was paid every Friday evening. After finishing work on a particular Monday, Jasmine resigned abruptly. Whether Jasmine has earned her wages for that Monday and is entitled to be paid for that day depends on the proper construction of her employment contract. Based upon her employment contract and general principles of employment law, upon cessation of her employment, Jasmine may be entitled to be paid all accrued salary, leave and other entitlements. It is likely that Jasmine will be paid any accrued salary, leave and other entitlement on a future day rather than on the day of cessation of her employment because the employer will need to calculate those entitlements. However, the timing of actual payment should not be confused with the time wages are earned in the sense of when a legal entitlement to them arises in accordance with applicable principles of employment law.
(f)As a result of income matching, the Secretary of the Department of Social Services has reason to believe that Jerry Summers underreported his employment income 10 years earlier. Jerry informs the Secretary that he worked as a casual employee for a company for three months during a university vacation, and recalls that he never worked on weekends. The Secretary ascertains that the company has since been deregistered and none of its employment records are available. The Secretary obtained Jerry’s bank statements which showed that, for the three-month period, the same amount was deposited in Jerry’s account by the company every Monday at 9:00 am, except for weeks which contained a public holiday. For the latter weeks, the amount deposited was 80% of the usual amount. In the absence of any other evidence, it may be inferred that Jerry worked 5 days per week except for public holidays and that he was paid on Mondays for the work performed in the period Monday to Friday of the previous week. For the purposes of point H23, Jerry earned his income from the company every Friday.
(10)It is unlikely that there will be any cases where a conclusion could be drawn as to when an income amount was received but not as to when it was earned or derived. A conclusion about when income was earned or derived may be reached by drawing inferences from the available evidence. Patterns of payments may support the drawing of inferences for the purposes of point H23. Oral evidence from an employee (or other person with whom they worked) about a workplace’s practices and arrangements concerning rostering, timesheets and pay cycles may corroborate documentary records, or indeed be sufficient on its own to identify when an income amount was earned.
ADDITIONAL OBSERVATIONS ABOUT PRO BONO ASSISTANCE
As stated at [11] above, the respondent was represented by three counsel who appeared on a pro bono basis. They were Kateena O’Gorman SC, Laura Hilly and Tim Farhall. Their appearance was in accordance with the Victorian Bar Pro Bono Scheme. They were instructed by Arnold Bloch Leibler who also represented the respondent on a pro bono basis. Pro bono representation for the respondent was facilitated by Justice Connect. The Tribunal is grateful for the assistance provided by the abovementioned lawyers who upheld the finest traditions of the legal profession in acting pro bono. Pro bono representation of litigants who are otherwise unable to secure legal representation facilitates equal access to justice and advances the administration of justice more generally.
DECISION
For the reasons set out above, the decision of the authorised review officer dated 28 April 2020 and the decision of the Administrative Appeals Tribunal dated 8 January 2024 are set aside, and the following decision is substituted: a debt in the amount of $806.16 is due to the Commonwealth by the respondent.
I certify that the preceding 190 paragraphs are a true copy of the written reasons for the decision of Justice Kyrou, President, Senior Member Kennedy and Senior Member Trotter
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Associate:
Dated: 28 August 2024
Dates of hearing: 24, 25 June 2024, 9 July 2024
Counsel for the Applicant: Mr S Lloyd SC with Mr M Sherman
Solicitors for the Applicant: Sparke Helmore
Counsel for the Respondent: Ms K A O’Gorman SC with Dr L Hilly and Mr T Farhall
Solicitors for the Respondent: Arnold Bloch Leibler
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