Geoffrey Scott Treloar and Secretary, Department of Social Services

[2013] AATA 916

[2013] AATA 916 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2012/0258
Re	Geoffrey Scott Treloar
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Deputy President K Bean
Date	19 December 2013
Place	Adelaide

The decision under review is set aside and in substitution for that decision it is decided that:

(a)the lump sums received by Mr Treloar on 22 December 2010 and 22 August 2011 are to be treated as “compensation” for the purposes of the Social Security Act 1991; and

(b)the matter is remitted to the respondent for redetermination and recalculation of Mr Treloar’s entitlements accordingly.

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Deputy President K Bean

CATCHWORDS

SOCIAL SECURITY - Disability support pension - Whether lump sums received by applicant "compensation" or "ordinary income" - Whether lump sums amounted to payments under a scheme of insurance under a State law and therefore compensation for the purposes of the Social Security Act 1991 - Decision under review set aside.

LEGISLATION

Social Security Act 1991, ss 17(2), 17(2A), 1072 and 1073

Southern State Superannuation Act 2009 (SA)

Southern State Superannuation Regulations 2009 (SA), reg 36

CASES

Re Oprea and Secretary, Department of Family and Community Services (2005) 87 ALD 696

Re Macri and Secretary, Department of Family and Community Services (2005) 83 ALD 301

SECONDARY MATERIALS

Department of Social Services, Guide to Social Security Law (Version 1.200, released 11 November 2013)

REASONS FOR DECISION

Deputy President K Bean

19 December 2013

INTRODUCTION

1. The applicant, Mr Treloar, was receiving disability support pension (DSP) until this was cancelled on 23 August 2011.  Mr Treloar’s DSP was cancelled following receipt by him of two lump sum payments from the Super SA Income Protection Scheme as follows:

   ·$15,930.86 on 22 December 2010;[1] and

   ·$37,313.00 on 22 August 2011.[2]

   [1] T9/55.

   [2] T9/54.

2. Following Mr Treloar’s receipt of the first lump sum and notification to Centrelink of this, Centrelink treated the lump sum as “ordinary income” within the meaning of the Social Security Act 1991 (the Act).  In accordance with the Act, the amount was accordingly apportioned over a 12 month period from the date of receipt, and Mr Treloar’s rate of DSP was reduced accordingly. 

3. Following receipt and notification of the second payment, this was again treated as ordinary income apportioned over a 12 month period from the date of receipt.  This had the result that, when Mr Treloar’s deemed fortnightly income was calculated having regard to the apportioned fortnightly amounts derived from both the first and second lump sum payments, Mr Treloar’s income exceeded the limit for DSP and for that reason his pension was cancelled with effect from 23 August 2011. 

4. The original decision to characterise both lump sum amounts as ordinary income and apportion them over a 12 month period was affirmed by an Authorised Review Officer on 27 October 2011.  Mr Treloar subsequently sought review of that decision by the Social Security Appeals Tribunal (SSAT).  However, the SSAT also concluded that the lump sum payments were properly regarded as ordinary income and had been correctly apportioned over 12 months from the receipt of the first and second payments respectively.  Accordingly, the SSAT affirmed the decision to cancel Mr Treloar’s DSP, together with his associated pensioner education supplement and rent assistance.[3]

   [3] T2/3.

5. Mr Treloar subsequently sought review of the decision of the SSAT by this Tribunal, giving rise to these proceedings.  He contends that rather than being treated as ordinary income, the lump sum amounts he received should have been treated as “compensation” within the meaning of the Act.  He also contends that even if DSP was not payable to him from 23 August 2011, his DSP should have been suspended rather than cancelled.

   ISSUES

6. It follows that the issues for my consideration are as follows:

   (a)What is the correct characterisation of the lump sum payments received by Mr Treloar, and in particular, are they correctly regarded as “ordinary income” or “compensation” within the meaning of the Act?; and

   (b)Was Mr Treloar’s DSP correctly cancelled from 23 August 2011?

7. I propose to address each of these issues in turn.

   WERE THE LUMP SUMS RECEIVED BY MR TRELOAR “ORDINARY INCOME” OR “COMPENSATION”?

8. I will first set out the applicable statutory framework before outlining and addressing the parties’ contentions in relation to this issue.

   The statutory framework

9. Section 1072 of the Act provides for the general meaning of the phrase “ordinary income” as follows:

   General 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.

10. Section 1073 also provides that certain lump sum amounts are taken to have been received over 12 months.  Section 1073 relevantly provides as follows:

    “Certain 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, whether before or after the commencement of this section, 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.

11. Subsection 17(2) also provides for the meaning of the term “compensation” for the purposes of the Act as follows:

    Subject to subsection (2B), for the purposes of this Act, compensation means:

    (a)   a payment of damages; or

    (b)   a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

    (c)   a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

    (d)   any other compensation or damages payment;

    (whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

    …

12. Subsection 17(2A) also relevantly provides as follows:

    Paragraph (2)(d) does not apply to a compensation payment if:

    (a)   the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and

    (b)   either:

    (i)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or

    (ii)the agreement does so provide but the compensation payment has been calculated without reference to the provision.

    Contentions

13. As I have alluded to above, Mr Treloar contends that the lump sum payments he received were payments under a scheme of insurance under a State law within the meaning of s 17(2)(b), and therefore “compensation” within the meaning of the Act.

14. Mr Visser, who appeared as advocate for the respondent, did not dispute that, having been made with respect to periods when Mr Treloar was unable to work due to illness, the lump sums received by Mr Treloar were made “in respect of lost earnings or lost capacity to earn resulting from personal injury”.  He also did not dispute that the payments were made pursuant to the Southern State Superannuation Regulations 2009 (SA) made under the Southern State Superannuation Act 2009 (SA).[4]  Specifically, he contended that the payments were made under regulation 36 of the Southern State Superannuation Regulations, as reflected in correspondence from Super SA to Mr Treloar in December 2010.[5]  Mr Visser sought to contend that the payments received by Mr Treloar had been made pursuant to a “contract of insurance for personal injury” rather than a “general ‘scheme of insurance’”.  However, I note that s 17(2)(b) relates to “a payment under a scheme of insurance … including a payment under a contract entered into under such a scheme”.

    [4] Respondent’s further submissions dated 8 October 2013.

    [5] At T10/57.

    Consideration

15. Having carefully considered the contentions of the parties and the authorities to which my attention has been directed, I have concluded that, as the lump sums received by Mr Treloar were paid pursuant to a contract or arrangement entered into under a State law, they must therefore be regarded as compensation within the meaning of s 17(2)(b) of the Act. That conclusion also follows from the fact that I am satisfied that the payments were made in respect of lost earnings “resulting from personal injury”, which conclusion is consistent with previous decisions of the Tribunal,[6] and the policy of the respondent.[7]

    [6] ReOprea and Secretary, Department of Family and Community Services (2005) 87 ALD 696 and ReMacri and Secretary, Department of Family and Community Services (2005) 83 ALD 301.

    [7] See Department of Social Services, Guide to Social Security Law (Version 1.200, released 11 November 2013) at 4.13.1.10.

16. Mr Visser submitted that it would be an “unsatisfactory interpretation of the Act” for the payments to be regarded as “compensation” under s 17(2)(b) when they might be excluded from the operation of s 17(2)(d), for example because Mr Treloar had made contributions to the payments.[8]  However, on my analysis, the payments fall squarely within the description contained in s 17(2)(b) and it does not appear to be the intention of the Act that a payment which is expressly excluded from s 17(2)(d) by s 17(2A) is also excluded from s 17(2)(b).  It is trite to observe that, if that had been the intention of the legislature, it could readily have been carried into effect.  Accordingly, on my analysis, even if Mr Treloar made contributions towards the payments for the purposes of s 17(2A), that does not prevent the payments from being “compensation” within the meaning of s 17(2)(b).

    [8] Respondent’s submissions dated 2 July 2013.

17. I also note that this conclusion is consistent with the policy reflected in the respondent’s Guide to Social Security Law, insofar as it provides that:

    Periodic and/or lump sum payments made under an income protection or sickness and accident policy … ARE compensation for the purposes of the SSAct if they are made in respect of lost earnings or lost capacity to earn.”[9]

    [9] At 4.3.9.30.

18. I have accordingly concluded that the lump sums received by Mr Treloar should have been treated as “compensation” within the meaning of the Act rather than “ordinary income”.  The matter will therefore need to be remitted to the respondent for determination of the implications for Mr Treloar’s entitlement to DSP of the relevant lump sums being treated as compensation rather than ordinary income.

    SHOULD MR TRELOAR’S DSP HAVE BEEN SUSPENDED RATHER THAN CANCELLED?

19. Although I received detailed submissions from the parties in relation to this issue, as I have concluded that the lump sums received by Mr Treloar were “compensation” rather than “ordinary income”, I have also concluded that I am not in a position to determine this question.  It will first be necessary for the respondent to determine, by reference to the compensation provisions of the Act, whether Mr Treloar’s receipt of the relevant lump sums had the consequence that DSP was not payable to him and, if so, during what periods.  If treatment of the lump sums as compensation still has the consequence that DSP was not payable to Mr Treloar from a particular date or during a certain period, the respondent will also need to determine afresh, by reference to the applicable provisions, whether Mr Treloar’s DSP should have been cancelled or suspended, or is taken to have been automatically cancelled or suspended under the Act.

    DECISION

20. The decision under review is set aside and in substitution for that decision it is decided that:

    (a)the lump sums received by Mr Treloar on 22 December 2010 and 22 August 2011 are to be treated as “compensation” for the purposes of the Social Security Act 1991; and

    (b)the matter is remitted to the respondent for redetermination and recalculation of Mr Treloar’s entitlements accordingly.

I certify that the preceding 20 (twenty) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean.

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Associate

Dated 19 December 2013

Date of hearing	11 October 2012
Date final submissions received	21 October 2013
Applicant	In person
Advocate for the Respondent	Mr C Visser
Solicitors for the Respondent	Program Litigation and Review Branch Department of Human Services