Gillett and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 1029

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 1029

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/2416

GENERAL ADMINISTRATIVE DIVISION		)
Re		ARTHUR GILLETT

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Senior Member Bernard J McCabe

Date17 November 2008

PlaceBrisbane (heard in Malanda)

Decision The Tribunal affirms the decision under review.

......................[Sgd]........................

Senior Member

CATCHWORDS

SOCIAL SECURITY – Age pension – Rate of pension – Income test – Income on bank account interest – Income less than deeming threshold – Whether the deemed or actual interest on bank account used when calculating rate of pension – Deemed interest used – Actual interest expressly excluded by Act – Decision affirmed

Social Security Act 1991 (Cth), ss 9, 1064, 1076, 1081, 1082

REASONS FOR DECISION

17 November 2008 Senior Member Bernard J McCabe         

1.      Mr Arthur Gillett, the applicant, spent his working life doing jobs that demand close attention to detail. He was initially a watch-maker. In due course, he came to work for Rolls-Royce, the aircraft engine manufacturer in the United Kingdom. He was involved in the testing and manufacture of the jet engines used by the Concorde. He is now 99 years of age, but – as officers at Centrelink have come to know – he still has an eye for detail.

2.      Mr Gillett receives the age pension. He says Centrelink’s decision on 29 December 2006 to recalculate his pension was flawed because the Centrelink decision-maker used inaccurate information about his income during the relevant period. It appears the dispute revolves around the way in which interest from Mr Gillett’s retirement savings account should be treated for the purposes of the income test required under the Social Security Act 1991 (“the Act”). If Mr Gillett is right, he was underpaid in the December 2006-January 2008 period around $0.70 per fortnight.

The figures

3.      Mr Gillett remains keenly aware of the details of his finances. He has written to Centrelink on a number of occasions seeking clarification of the way in which his entitlements were calculated. He was not satisfied with the explanations provided by the Authorised Review Officer and the Social Security Appeals Tribunal. His arguments are set out in a letter to this Tribunal dated 15 August 2008. He enlarged on those views in the course of his oral submissions at the hearing. I was also referred in particular to his letter of 30 December 2006, which is reproduced in Exhibit 1 at folios 76-77. That letter sets out the detailed calculations that Mr Gillett says Centrelink has mishandled. The Secretary of the department on whose behalf Centrelink acts accepts the calculation is correct save for one detail: the Secretary disagrees with the amount of interest.

4.      Mr Gillett argues that Centrelink should use the amount of interest that the bank pays on his account to calculate his entitlements. He is concerned that he did not earn as much interest as Centrelink appears to assume in the period under review. Specifically, he says he earned $11.18 each fortnight in interest, while Centrelink says he earned $14.91 each fortnight. If Centrelink’s figures are correct, Mr Gillett is entitled to a slightly smaller payment each fortnight.

5.      The applicant has provided evidence of the amount of interest paid by the bank. There does not appear to be any dispute that his figures are right. Mr Gillett says that should be the end of it. He is mystified as to why Centrelink would use any other figure than the amount he was paid by the bank.

The legislation     

6. Mr Guthrie, the Centrelink advocate, explained that the answer lies in the Act. Section 1064 provides for a person’s assets and income to be taken into account when determining his or her entitlement to an age pension. Income in the form of interest on a bank account is taken into account for the purposes of the income test. A deposit in a bank account is a “financial asset” within the meaning s 9 of the Act.

7. The income generated by financial assets is treated as “ordinary income” for the purposes of the income test: s 1076 of the Act. On its face, s 1076 suggests Centrelink should use the interest Mr Gillett actually earns from his bank as the starting point for the calculations. But the legislation goes on to create special rules regulating the way in which “ordinary income” from “financial assets” is determined. The legislation expressly excludes the amount of interest that is actually paid from being taken into account for the purposes of this exercise. The amount of interest referred to in the bank statement is effectively ignored: s 1083(1) of the Act. The only figure which counts as “ordinary income” must be identified in the following way.

8. Mr Gillett’s assets are worth less than $38,400. That figure is important because it is the amount specified in s 1081 as a single person’s “deeming threshold”. Section 1076(3) says a person with assets worth less than the “deeming threshold” is deemed (ie, assumed) to receive an amount of ordinary income that is determined by multiplying the value of the asset by the “below threshold rate” referred to in s 1082(1). The rate is actually set (and may be changed from to time) by a legislative instrument. At the relevant time, the “below threshold rate” was 3%. In effect, s 1076(3) says a person in Mr Gillett’s position is deemed (ie, assumed) to earn an interest rate on his deposit equal to 3%.

9.      Most bank accounts pay more than 3% interest. It follows that most pensioners with a modest amount of money in the bank are actually advantaged by the process envisaged under ss 1076-1083. It seems Mr Gillett was one of the few individuals who were not better off during the period under review. It appears his bank was paying less than the below threshold rate of 3%, which means he was deemed (ie, assumed) to be earning a little more than he was actually paid.

10.     It seems part of the confusion has arisen because of use of the words “deemed” and “actual”. Mr Gillett was critical of the meanings that Centrelink attaches to these words. I am satisfied Centrelink is using the words as the parliament intended they should be used. A pensioner’s “deemed” interest is the amount he or she is assumed by the legislation to receive. That is the amount which is used in the calculation of the pensioner’s “ordinary income”. His or her “actual” interest (the amount the bank actually pays) is irrelevant.

11.     Mr Gillett thinks this approach is silly, but the admittedly complex legislation creates a system that is easier to administer and advantageous for most pensioners. Centrelink simply asks people to disclose the amount of their deposits and a simple calculation can be made in most cases. Not all of those individuals have Mr Gillett’s command of, or concern for, the details of their finances.

12.     Some of the confusion in this case may have arisen after Mr Gillett read a Centrelink publication titled “News for Seniors”. That publication sets out the deeming rates and thresholds. Mr Gillett pointed out the publication said the below threshold rate was actually 4%. Mr Guthrie suggested the rates may have changed recently. That may be so, but it is irrelevant in any event since there is no doubt as to the prevailing below threshold rate in December 2006. 

Other matters

13.     Mr Gillett raised several other matters at the hearing. He wanted to know why consecutive fortnightly payments made within the same month, and calculated on the basis of the same information, would be in different amounts. Mr Guthrie pointed out that a number of factors were taken into account when determining a person’s entitlement but agreed that, other things being equal, consecutive fortnightly payments within the same month should be equal. This issue falls outside the scope of the decision review. I mention it only because Mr Gillett asked for the information.

14.     He also asked about the fate of some submissions that had been prepared on his behalf in connection with earlier proceedings. Not surprisingly, Mr Guthrie was unaware of the submissions in question. Mr Gillett wrote to the Tribunal after the hearing and suggested a copy of the submissions could be found in papers lodged with the Social Security Appeals Tribunal. I was not provided with a copy of the submissions. Mr Gillett’s remarks at the hearing suggest those submissions were not relevant to the issues in the case before me.

Conclusion

15.     Centrelink has correctly applied the legislation. There has been no misinterpretation. The decision under review must therefore be affirmed.

I certify that these 15 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

Signed:................................[Sgd]..............................................
  Michael Buckingham, Associate

Date of Hearing  3 November 2008
Date of Decision  17 November 2008
Applicant was self-represented
Advocate for the respondent     Mr J Guthrie, Centrelink