Garvey v Secretary, Department of Social Security

The applicant, Robert Joseph Barry Garvey, sought special leave to appeal to the High Court of Australia against a decision of the Full Federal Court. The dispute concerned the interpretation of the term "income" as defined in the *Social Security Act*. The Department of Social Security, the respondent, had adopted a method of calculating income that the applicant argued led to a distorted and incorrect result, particularly for individuals with multiple income sources, some of which incurred losses.

The central legal issue before the High Court was how to correctly calculate a person's "income" for the purposes of the means test under the *Social Security Act*. Specifically, the court had to determine whether expenditure incurred in earning income, including losses from particular income-producing activities, should be deducted from each discrete source of income before aggregating the net amounts, or whether losses from one source should be disregarded if they resulted in a negative figure for that source. The applicant contended that the respondent's method, which ignored losses from individual sources, did not accurately reflect a person's true net income available to meet commitments.

The High Court considered the definition of "income" in section 3(1) of the Act, which referred to "personal earnings, moneys, valuable consideration or profits". While the Act did not explicitly state whether net or gross income was intended, it had been accepted that net income was the relevant consideration. The respondent's approach involved calculating the net income from each discrete source and disregarding any source that resulted in a loss. The Full Federal Court had endorsed this approach, reasoning that the Act was concerned with the net returns available to a pensioner after drawing together the returns from various sources, and not with amounts left after applying income to commitments or losses from unprofitable activities. The Full Court suggested an underlying expectation that applicants would correct or relinquish loss-making activities. However, the applicant argued that this reasoning was flawed, particularly due to the difficulty in logically defining "discrete sources" of income, which could lead to different mathematical outcomes depending on how sources were categorised.