Graeme Byrnes and Secretary, Department of Social Services
[2014] AATA 197
[2014] AATA 197
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/0812
Re
Graeme Byrnes
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr S. Webb, Member
Date 4 April 2014 Place Perth The decision under review is set aside, in place thereof the Tribunal decides that part of the lump sum compensation Mr Byrnes obtained is treated as not having been made, such that the preclusion period ends on the date of this decision.
The matter is remitted to the Secretary to determine Mr Byrnes’ claim for Disability Support Pension.
....(Sgd) Mr S Webb...............
Mr S. Webb, Member
CATCHWORDS
SOCIAL SECURITY – Disability Support Pension – lump sum compensation - compensation preclusion period – change in circumstances – reduced financial capacity to provide for future needs -
LEGISLATION
Social Security Act 1991, s 17, 1169, 1170, 1184K
CASES
Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615
Secretary, Department of Social Security v Cunneen [1997] FCA 1033
REASONS FOR DECISION
Mr S. Webb, Member
4 April 2014
Graeme Byrnes suffered serious injuries in an accident while working underground in a mine in January 1997. He lost much of the musculature of his left forearm, and he lost his sight. He claimed and was paid compensation. After more than 10 years, he applied for a Disability Support Pension (DSP). His claim was rejected as he is subject to a compensation preclusion period. This decision was affirmed by the Social Security Appeals Tribunal. Mr Byrnes is not satisfied with this decision and applied for review.
The central issue is determination of Mr Byrnes’ claim for a DSP. When deciding whether a preclusion period applies, preventing payment of DSP under s 1169 of the Social Security Act 1991 (the Social Security Act), the issues to be decided are –
(a)the ‘compensation part of a lump sum compensation payment’ for the purposes of s 17 of that Act);
(b)the duration of the applicable compensation preclusion period calculated under s 1170; and
(c)whether there are special circumstances for the purposes of s 1184K that render it appropriate to treat all or part of the compensation lump sum as not having been made.
Compensation part of a lump sum compensation payment
On 25 October 2001, consent orders were made in settlement of Mr Byrnes’ compensation claim against Wirralie Gold Mines Pty Ltd in the amount of $1,565,000 plus provisions for costs of $70,000 and disbursements up to $15,000. Even though the provision for legal costs and disbursements is not, itself, compensation for injury, these amounts are specified in the terms of settlement, and they are to be included when calculating the lump sum for the purposes of s 17 and 1170 of the Social Security Act[1].
[1] Secretary, Department of Social Security v Cunneen [1997] FCA 1033; Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615.
It follows that the lump sum in Mr Byrnes’ case is $1,650,000. Under s 17(3) the ‘compensation part’ of this amount is 50 percent of the lump sum - $825,000. That is so irrespective of Mr Byrnes’ evidence that the economic loss component of his compensation lump sum was $850,000.
Preclusion period
The applicable preclusion period is to be worked out under s 1170.
Mr Byrnes was paid periodic compensation after his injury in January 1997 until 19 October 2000. This is significant because, under s 1170(1), the preclusion period commences on the day following the last day on which he was paid weekly compensation for lost earnings. Hence, the preclusion period starts on 20 October 2000.
The duration of the preclusion period is calculated in weeks using the formula, ‘compensation part of lump sum ÷ income cut out amount’.
The compensation part of the lump sum is $825,000, and the income cut out amount as of 25 October 2001 is $576.38. Applying the formula, the duration of the preclusion period is 1431 weeks. This means the preclusion period ends on 23 March 2028.
Mr Byrnes argued that the preclusion period is too long, but accepted that the period must be worked out under the legislation.
In consequence of s 1169, and subject only to the discretion conferred by s 1184K, Mr Byrnes is not entitled to payment of a ‘compensation affected payment’, which includes a DSP, during the preclusion period commencing on 20 October 2000 and ending on 23 March 2028.
Special circumstances
The duration of the preclusion period may be reduced if there are special circumstances that render it appropriate to do so.
Mr Byrnes says that his circumstances have changed quite significantly over the period following settlement of his claim for compensation in October 2001. His health has declined. Not only does he suffer daily from the serious injuries he suffered in 1997, in which he lost his sight and a substantial part of the musculature of his left forearm, he suffers from debilitating mental illnesses that affect his judgement and his capacity to engage in training, employment or social activities. He was badly affected by the global financial crisis and made some poor decisions. The value of the compensation he invested to cover his future requirements declined markedly. His family circumstances changed with the breakdown of two important relationships. He has been forced to sell his home and presently resides in rental accommodation with his two sons, who are unable to contribute financially to the household as both are on income support payments.
Furthermore, his sister, on whom he has relied as a carer from time to time, is now unwell and she is not able to provide him with care and practical support. Since the departure of his former partner in 2010, from time to time, he has also relied on his younger son for care and practical support. But both his sons have their own lives and the younger son is a full-time student, with only limited capacity to provide care and practical support. Mr Byrnes told me that in these circumstances it is necessary for him to pay for such services. And he can ill-afford to do so.
Mr Byrnes told me that his financial situation is not sustainable. The remaining part of his compensation payment is dwindling, as the returns do not cover his expenses. He has engaged a new financial planner, Mr Macgregor, to assist him.
During the hearing and without notice, Mr Byrnes asked for Mr Macgregor to give evidence about his financial affairs. I allowed this request over the Secretary’s objection, on the basis that the Secretary may seek further time to prepare a response, and to file additional materials, if necessary. In the result, no such application was made.
Mr McGregor’s evidence is that Mr Byrnes’ financial resources are not sufficient to cover his necessary costs in a sustainable manner. Even with sound financial management and sensible investments, if he continues to draw down his remaining capital to cover unavoidable living costs this will reduce the period in which he can support himself financially – the higher the rate of capital expenditure, the lower the return on investment and the shorter the period in which Mr Byrnes will be able to support himself. Furthermore, Mr McGregor pointed out that, ultimately, whether sooner or later, Mr Byrnes will need to obtain income support and assistance with medical treatment and care costs from the public purse. As I understand Mr McGregor’s evidence, the prudent course he recommends involves Mr Byrnes investing his remaining capital in a superannuation fund to cover his essential costs and supplementing this with income support in the form of a DSP.
In Mr Byrnes’ submission, he should not be forced onto the street and be rendered homeless by the operation of a preclusion period that takes no account of factors which have affected him that are beyond his ability to control – such a rigid approach is both unfair and unjust. These factors amount to special circumstances, such that the preclusion period should be reduced.
The Secretary does not agree. In the Secretary’s submission, Mr Byrnes’ circumstances, while unfortunate, are not sufficient to justify departing from the policy underlying the preclusion period provisions, to prevent ‘double dipping’. Mr Byrnes was paid compensation for his injuries that included a substantial amount for economic loss, and his decisions to expend a substantial part of the compensation on holidays, luxury cars and building a luxury house stand contrary to granting him relief from the operation of the preclusion period. He took these decisions in full knowledge of the preclusion period. Any resulting difficulties are of his own making, and they do not constitute special circumstances that make it appropriate to reduce the preclusion period.
The Secretary maintains that Mr Byrnes’ mental health issues, his familial and relationship difficulties and the effects of the global financial crisis on his investments are not unusual or uncommon – these are unfortunately common circumstances, affecting many people.
These matters are to be decided under s 1184K of the Social Security Act. The purposes of that section must be considered. It provides some flexibility in the legislation by conferring discretion on the Secretary (and presently this Tribunal) to take account of the wide array of circumstances that may arise in particular cases involving unfairness, injustice or other consequences of the legislation that were not foreseen or intended, or that may be excessively harsh.
The term ‘special circumstances’ in this context has not been defined. It has been judicially considered in many cases, but the courts have adhered to the principle that the term does not require judicial gloss to be properly understood according to its ordinary meaning in common usage. It is on this basis that words such as unusual, uncommon and exceptional have been used in reference to the kinds of circumstances that may be within its scope. The legal principles are well understood and it is not necessary to review the established authorities on this point.
The totality of Mr Byrnes’ circumstances when he made the claim for DSP, and presently, must be considered when determining whether special circumstances exist. And this should be undertaken with an eye to any unfairness to others that may flow from a favourable determination, including those seeking access to social security payments following injury, and taxpayers more broadly.
The discretion to depart from the general policy underlying the compensation preclusion provisions against ‘double dipping’, not permitting a person who has been injured to receive income support payments from two sources at the same time, should not be exercised too lightly or in circumstances where a person has sufficient funds to meet their expenses.
This is a difficult and unfortunate case.
Mr Byrnes’ health has declined since he settled his compensation claim in October 2001. He has recently undergone surgery for removal of a kidney. Previously, he underwent surgery for removal of a facial tumour. It is not clear on the present evidence whether these are causally related to his injuries, although that is likely, and if so whether any provision was made in the compensation settlement for medical treatments of this kind.
As regards his mental health, Mr Byrnes has been diagnosed with Bipolar Affective Disorder, Post Traumatic Stress Disorder, Anxiety and Depression, for which he is obtaining treatment. These diagnoses were made after he settled his compensation claim in October 2001. Even if some or all of these conditions were present when he settled his compensation claim, he is adamant that no provision was made for any effect of the injuries on his mental health. Whatever is to be made of Mr Byrnes evidence on this point, it is quite clear to me that the effects of the mental health conditions he suffers are more severe than in October 2001 and these are compounded by his loss of sight. He told me that he struggles with this every day, and it preys upon his mind continually. This, he says, is the most difficult issue for him. It causes him to be isolated and dependent upon others for support and care, and it has caused him to suffer mental breakdowns and to become suicidal from time to time. He told me that he has been hospitalised on several occasions following breakdowns of this kind.
Mr Byrnes suffers unremitting pain in various part of his body. And this, too, adds to his mental distress.
The evidence of Dr Wearne,[2] his treating psychiatrist, is that Bipolar Affective Disorder has adversely affected his ability to manage money and his affairs – when florid, he is unable to control impulses to purchase items that he does not need. Mr Byrnes told me that this explains, at least in part, his periodic profligacy.
[2] Exhibit 6.
I accept that this is correct, but note that the evidence establishes that Mr Byrnes engaged in spending behaviours in order to please his former partner, building and fitting out a luxury house, buying a new car and taking holidays, in New Zealand and Bali for example. In explanation of these behaviours, he told me that he is frightened of ending up alone with his disabilities, with no one to care for him. I accept his assertion that this is a strong motivating factor in some of the decisions he has made.
That notwithstanding, it appears that Mr Byrnes exercised a degree of restraint with regard to financial matters in some regards, and that he was exposed to costs that were not of his choosing. On payment of the lump sum compensation, he engaged a financial adviser to establish a superannuation fund that would provide him with regular sustainable income sufficient to meet his future requirements. He placed most of his compensation (approximately, $1.1 million) into a superannuation fund and purchased a modest house in St James, costing $215,000. He renovated the house, but not in an unreasonable or excessive manner, spending less than $75,000. He gave his sister $15,000 toward the cost of a new vehicle when her existing vehicle broke down. This was in the context of his sister being his carer over an extended period, without charge, on whom he relied for transport and other support at that time.
Mr Byrnes’ marriage broke down and he incurred significant legal costs, $40,000, when obtaining custody of his two children by court order in or about 2001. His marital breakdown was not a matter of his choosing.
To my mind these actions were reasonable in the circumstances and they do not detract from the prudent arrangements Mr Byrnes made to provide for his future income support, medical treatment, care and support needs.
Subsequently, in or about 2003, Mr Byrnes formed another relationship. He took his children on a holiday to New Zealand for two weeks with the woman who later became his partner, as carer and driver. Later, when his new partner’s car needed replacing (it was an old car), and the family required a car, he purchased a new car for $41,000. His new partner had two children and Mr Byrnes’ house at St James was too small to accommodate the expanded family, with only three bedrooms. Mr Byrnes told me that his partner wanted him to acquire a larger house for them all to live in, and threatened to leave him if he refused. So that is what he did. As I have said, I accept that his fear of being alone was a powerful factor in his mind at the time. He sold the house in St James for $290,000, recouping funds he had expended on renovations. The extended family moved into rental accommodation, pending the acquisition of a new home.
Mr Byrnes purchased a five acre block of land at Bedfordale in a semi-rural location and built a luxury house with five bedrooms and three bathrooms, and a swimming pool. The cost of doing so was $542,000. The property was mortgaged. On his evidence, he considered this to be a sound investment as the area was growing and values were increasing rapidly. It was also consistent with his partner’s desire – she was raised in the country outside Perth and she knew the Bedfordale area.
By his own account, at his former partner’s insistence, almost everything in the house was new – all but some furniture he retained from the St James house. He accepts that this may have been extravagant, but he attributes a large portion of the responsibility to his then partner. There is no evidence from his former partner, who was not called.
Things did not go well for Mr Byrnes. He lost a significant proportion of his investments in the global financial crisis and the related downturn in 2008; he says at least $300,000.
At this point it is important to observe that the present evidence is not sufficient to determine precisely what happened to the $1.1 million Mr Byrnes invested in his superannuation fund in 2002. He told me that he withdrew the money he required to build the house at Bedfordale - $542,000. But this property was mortgaged (although the initial amount of the mortgage has not been established – the mortgage balance on sale of the property in 2013 was $171,000) and Mr Byrnes received $290,000 from the sale of his house at St James. By his own account there was only $500,000 remaining in the fund by late 2006, when the family moved into the house at Bedfordale.
Mr Byrnes told me that he and his former partner drew $72,000 per year from the fund to cover living expenses. But this does not appear to be correct. Once the sale of the St James property and the mortgage over the Bedfordale house are taken into account (assuming a mortgage of $200,000 in 2005) against the cost of that property, it is probable that Mr Byrnes and his former partner withdrew $600,000 from the fund over four years to late 2006. This equates to spending of $150,000 per year. If this is correct, it was certainly profligate and extravagant.
Mr Byrnes told me that his superannuation fund was reduced to approximately $200,000 by 2008, following the global financial crisis. He could not survive on the dividends and he invested the remaining funds in shares through Astute Capital Management. The dividends this produced declined to such an extent that he was unable to cover his living costs – he was advised to reduce his costs to $38,000 each year but struggled to do so. His former partner returned to work. He closed the superannuation fund and invested the money in share portfolios through Astute Capital Management. The motor vehicle he previously purchased developed a serious mechanical fault and he traded it for a new vehicle at a cost of $25,000.
The relationship between Mr Byrnes and his former partner soured and broke down. In what appears to be a last ditch effort to salvage this relationship, Mr Byrnes took his former partner and their four children on a holiday to Bali in 2010. He told me that this cost at least $20,000, which he could not afford. His efforts were not successful and his former partner moved out of the Bedfordale property sometime later that year. Mr Byrnes’ eldest son moved out as well. Mr Byrnes and his younger son, who was still at school in Year 11 continued to reside in the house until April 2013. During this period, Mr Byrnes relied on his younger son, his sister, a niece and the Silver Chain organisation for care.
By 2012 Mr Byrnes was in a parlous financial position, with no remaining liquid capital. His only asset were the house and remaining contents at Bedfordale. His superannuation fund and financial investments were gone. He survived by selling furniture and other possessions and drawing heavily on credit cards. He placed the Bedfordale property with a real estate agent, for sale. In April 2013, the property was sold for $790,000. From this, Mr Byrnes paid $50,000 to his former partner in settlement and she retained most of the furniture and the motor vehicle. He paid out the remaining mortgage balance of $171,000, paid all his outstanding bills and balanced his credit cards. He told me that this left him with $500,000.
In April 2013, Mr Byrnes moved into rental premises and, for a time, lived alone. This was undoubtedly a dark time for him. But his younger son returned to care for him, and his elder son has recently returned. Without a car, Mr Byrnes is forced to rely on taxi services for his transport. He also relies on paid carers to assist with shopping and reviewing documents. He has been drawing against his remaining capital to live. He has $445,000 remaining. He has engaged the services of Mr McGregor, a registered financial planner. Mr McGregor is establishing a superannuation fund in which Mr Byrnes intends to place $400,000. The remaining $45,000 Mr Byrnes has in a bank account to cover his living and health treatment costs.
Mr Byrnes told me that he spent $5,000 on surgery to remove a kidney in December 2013 (from which he is still recovering), but he does not know how much he will be able to recover under his insurance. He said that he requires dental treatment, but cannot afford to obtain this, although he is on a public waiting list for an appointment. He has not consulted his psychiatrist since September 2013, as he cannot afford to do so even though the gap he must cover is only $30. He told me that he consults his GP and his psychologist, who bulk bill, but he delays making appointments with medical professionals as it is very expensive using taxis to attend such appointments. He told me that he requires appointments with specialists in relation to respiratory and gastric problems.
Mr McGregor’s evidence is that a $400,000 superannuation fund might return up to six percent annually and may provide Mr Byrnes with up to $3,000 per month ($700 per week) on which to live. But even if that result is obtained, and it is far from certain, there are two problems. Firstly, Mr Byrnes costs exceed $3,000 per month – he is paying $400 per week on rent and his remaining expenses for medical treatment (even with his Low Income Health Care Card), health insurance, taxis, utilities and consumables are well in excess of $300 per week. And secondly, even if the superannuation fund returns six percent, this would provide sustainable dividends of up to $2,000 per month. This means that Mr Byrnes would draw down $1,000 from capital each month. On Mr McGregor’s financial modelling, the fund might be sustainable for 10 to 15 years on this basis, but that is far from assured, especially in the out years, with reduced capital and increased capital drawings.
I accept Mr McGregor’s evidence. The proposition that Mr Byrnes might be able to draw upon his remaining capital investment in a superannuation fund for up to 15 years if he is able to reduce his costs to $3,000 is highly speculative and unlikely to be achieved.
As Mr McGregor said, annual returns of six percent over a 15 year period are highly speculative. If a return of five percent is obtained, this would mean that Mr Byrnes’ monthly income would drop to less than $1,700 per month, or $385 per week. This is less than his present rent. Furthermore, I struggle to see how Mr Byrnes might reduce his costs to a sustainable level that is within his means.
As regards his costs, Mr Byrnes told me that he does not know how much he spends on many items, as regular bills are deducted by direct debit from his bank account. He cannot easily check the bills he receives without someone to assist him. He estimated the following expenses:
·Rent - $400 per week
·Water rates - $40 bi-monthly
·Electricity - $80 per month
·Gas - $30 per month
·Telephone and data - $200 per month
·Taxis – $75 per week
·Health insurance - $3,200 per annum
·Groceries - $200 per week
·Recreation – Mr Byrnes spent $1,600 on a trip to Sydney last week in order to attend a ten pin bowling event. He told me that such events occur once every 2 years or so and this is his only pleasure.
I note Mr Byrnes completed a Statement of Financial Circumstances on 7 September 2012.[3] But his financial circumstances have changed since he did so.
[3] T13.
On the present figures, but excluding the ten pin bowling trip costs, Mr Byrnes expenses equate to $3,334 per month. This does not include any provision for out of pocket medical treatment expenses or costs associated with his on-going support needs. On what he has told me, it is reasonable to make such a provision and an amount of $400 per month ($100 per week) would not be unreasonable in the circumstances. On that basis, Mr Byrnes could reasonably be expected to need at least $3,700 per month on which to live. This exceeds Mr McGregor’s modelling assumption by a substantial measure. On these figures, if Mr Byrnes obtained a six percent return on his superannuation fund ($2,000 per month), he would need to draw $1,700 per month from capital. In all likelihood, this would exhaust his superannuation fund in a shorter period than that predicted by Mr McGregor’s model. Furthermore, as he pointed out, his condition can be expected to deteriorate and his treatment and care costs can be expected to increase as he ages.
In his submissions, Mr Byrnes asked for the preclusion period to be reduced, such that it ends in 2019. I struggle to understand the present point in this, although I understand that this is when Mr Byrnes estimates his capital will run out. A decision of this kind would mean that he is not presently able to receive DSP and he would have to make a fresh claim in 2019, which would be assessed on the merits, addressing his particular circumstances at that time. Without a capital base to generate income to cover part of his necessary expenses, it is difficult to see how he expects to live on a DSP, alone. It is possible that he may be able to obtain public housing, but he told me that this is not possible with his present assets. He complained that he is not presently treated like others who are blind, and that this is not fair.
He explained the confounding nature of his situation in the following way - if he continues to draw upon his remaining capital to live, this will be exhausted in a short period of years – he estimated by 2019, whereupon he will be forced to rely on a pension that will not cover his essential expenses. But if the preclusion period is shortened, his remaining capital, not being invested in a home, would preclude him from being paid a pension and from obtaining public housing and other support.
Clearly, Mr Byrnes is in an unusual and difficult situation.
The undoubted difficulties Mr Byrnes faces in consequence of his injuries, and particularly his loss of sight, do not, of themselves, constitute special circumstances for present purposes. He received a large lump sum in compensation for these injuries, including, by his account, $850,000 for lost future earnings. But, it appears that the mental illnesses from which Mr Byrnes presently suffers increase his isolation and render him without hope of obtaining employment that otherwise might be possible, and they affect his decision-making.
I am satisfied that the mental health problems and disorders that now afflict him, which may not have been foreseen, have affected him in ways that may not have been taken into account in the compensation settlement he entered into and, more importantly, have affected his ability to properly manage his money. I have no difficulty accepting Dr Wearne’s evidence on this point. Furthermore, having heard Mr Byrnes’ evidence, it appears probable that his fear of being forced into penury, blind and living alone without anyone to care for him, is a powerful factor in his mind that affects and is affected by his psychiatric conditions.
I am satisfied that these factors affected Mr Byrnes’ judgement when making decisions about real estate investments and discretionary expenditures following the initial establishment of a superannuation fund designed to provide for his future requirements. I accept that he formed the perception that his former partner would leave him if he did not build a house for them to live in, and that this was a powerful motivating factor in him deciding to withdraw funds for that purpose.
To my mind, while many people were affected by events such as the global financial crisis, and the breakdown of marital relationship is common, the effect of these events on Mr Byrnes is likely to be disproportionately greater, as a result of his disabilities and the mental illnesses and other ailments that afflict him, than the effect on a person without the same level of disability and poor mental health.
His situation is also unusual because of his relatively high living and other costs associated with his disabilities and his other ailments. It may be that this is a circumstance common to those with severe and permanent disabilities, who are not able to work and who rely on others for support, but this does not mean that it is not within the meaning of ‘special circumstances’. Mr Byrnes requires assistance and support to do things that he cannot do by himself. This affects many areas of his life, including reading mail, shopping, medical treatments and appointments, cleaning and other household chores. From time to time he is able to rely on family members to assist him, but otherwise, he pays for the assistance he requires, from people he pays to assist him and from the Silver Chain organisation for example.
I am reasonably satisfied that, even though presently Mr Byrnes has $450,000 remaining from his compensation lump sum which could fund his living expenses for some time, he does not have sufficient liquid assets to support himself for the duration of the preclusion period. The assets he purchased after commencement of the preclusion period, and in full knowledge of it, have been realised, leaving him with a substantially reduced capital sum to fund his expenses until the preclusion period expires in March 2028. It is quite clear, that if Mr Byrnes expends all of his capital and, ultimately, comes to rely upon a DSP for his sole income, he will have very great difficulty covering his living, treatment and support expenses. In this regard his circumstances are different from others who are able to survive, albeit perhaps in straitened circumstances, relying on a DSP for their sole source of income.
Considering all of the circumstances of this case, I am satisfied that they are within the meaning of ‘special circumstances’ for the purposes of s 1184K.
But the determining what is preferable in respect of the preclusion period is a difficult matter. If the preclusion period remains in place, or even if I accept Mr Byrnes’ proposal to reduce his preclusion period to 2019, his claim for DSP would be rejected and he would be required to run down his capital, thereby reducing his future capacity to cover some, if not all, of his expenses, leaving him, ultimately, to rely on a pension that cannot meet his needs. Alternatively, if the preclusion period is reduced to the present date, and Mr Byrnes qualified for DSP, as claimed, it is possible that he may not satisfy the income test or the assets test under the Social Security Act as his remaining capital, not being invested in his principal home, is not an exempt asset. If it is invested in a superannuation fund under the arrangements Mr McGregor is making, it will be an exempt asset, but no part of any income Mr Byrnes derives from the fund will be exempt from the income test.
This highlights a possible deficiency in the legislation. Provision is presently made in s 1118(1D) to exempt from the assets test an ‘NDIS amount’ and in s 8(8) to exclude ‘any return on a person’s NDIS amounts that the person earns, derives or receives’ from the meaning of income, but it is unlikely these provisions would assist a person in Mr Byrnes’ situation. The meaning of ‘NDIS amount’ under s 23 is the meaning of that term under s 9 of the National Disability Insurance Scheme Act 2013 - an amount paid under the National Disability Insurance Scheme in respect of reasonable and necessary supports funded under a participant’s plan. There is no evidence before me that Mr Byrnes has made an access request under s 18 of that Act to become a participant in the National Disability Insurance Scheme. To my mind the desirability of providing an exemption from the income test under the Social Security Act for income derived from a capital sum, in whole or in part, on which a person with a disability relies for their future medical treatment and support may warrant further consideration.
But Mr Byrnes’ case is to be assessed under the existing legislation.
Mr McGregor is in the process of establishing a superannuation fund for Mr Byrnes. It is desirable that this is done on a sustainable basis, for the long-term. For this to be achieved, it is quite clear that Mr Byrnes will need to restrain his spending and he will require some flexibility in respect of obtaining income support from the public purse before the end of the present preclusion period in March 2028.
Of course, there is no guarantee that Mr Byrnes will not simply expend his capital in a frivolous manner if the preclusion period is lifted, and there is no mechanism presently to ensure that his funds are properly managed to provide for his future security. This is a risk for him, and it is a risk for the taxpayer. Nonetheless, Mr Byrnes is obtaining professional assistance from Mr McGregor to properly manage his remaining funds and I accept that he is committed to using his remaining funds to provide for his future. There is no doubt that it is in his best interests, and the best interests of the taxpayer, that he should do so.
I am mindful that others with serious disabilities resulting from industrial accidents may face very extensive preclusion periods and, if people in such circumstances have managed their compensation well, they may not need to seek support from the public purse as Mr Byrnes presently does in his claim for DSP. Furthermore, there may be others in similar circumstances to Mr Byrnes who have not managed their compensation funds well, but who may not have succeeded in having a long preclusion period reduced. Matters of this kind must be weighed in the balance of the particular circumstances of each case.
On balance, I am reasonably satisfied that exercise of the discretion to treat part of Mr Byrnes’ lump sum compensation payment as not having been made is appropriate. It is no doubt unusual to reach this conclusion, when Mr Byrnes has a substantial sum of money remaining from his lump sum compensation payment. And it is not an easy conclusion to reach. But Mr Byrnes’ present financial circumstances are not the sole determinant – the future costs of the medical treatment and support he will inevitably require must be weighed up with his need for income support.
Mr Byrnes is in the difficult position of needing to preserve his capital to fund his future medical treatment and support needs. He has reduced his expenses to a modest level, but it appears that in so doing he is avoiding the cost of psychiatric and other treatment he presently requires. In all likelihood, this will lead to further deterioration in his health, particularly his mental health, and increased future costs. I accept the importance of Mr Byrnes obtaining psychiatric treatment that he cannot presently afford in order to effectively manage his mental illnesses, particularly insofar as they affect his ability to manage his finances.
To my mind, the most equitable thing to do in these circumstances is to act in a way that allows Mr Byrnes (with Mr McGregor’s assistance) to preserve as much of the capital remaining from his compensation to provide for his future medical treatment and support needs, and to minimise the extent to which he draws upon that remaining capital to meet his daily and weekly living expenses, while also minimising the extent to which Mr Byrnes may have cause to rely on the taxpayer in the long run.
Considering all of the circumstances, and weighing the competing interests, I am satisfied that the preclusion period should be reduced such that it ends on the present date. This will provide greatest flexibility in making appropriate arrangements for the management of Mr Byrnes’ financial affairs in order to provide for his future medical treatment and support costs.
This does not represent a windfall to Mr Byrnes. His claim for a DSP is to be assessed under the Social Security Act. The extent to which DSP may be payable, if at all, will depend upon the amount income he derives from time to time from the superannuation fund Mr McGregor is establishing. This will be treated as ‘ordinary income’ for the purposes of the income test.
It follows that Mr Byrnes is not precluded from claiming DSP. Whether he qualifies under his previous claim, or whether a fresh claim is required, and even if he qualifies, whether the Pension is payable, are matters that have not been properly raised or ventilated and considered in these proceedings. I will remit to the Secretary for consideration and determination.
Decision
The decision under review is set aside, in place thereof the Tribunal decides that part of the lump sum compensation Mr Byrnes obtained is treated as not having been made, such that the preclusion period ends on the date of this decision.
The matter is remitted to the Secretary to determine Mr Byrnes’ claim for Disability Support Pension.
I certify that the preceding 73 (seventy-three) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member
....(Sgd) T Freeman................
Associate
Dated 4 April 2014
Date of hearing 24 March 2014 Applicant In person Representative for the Respondent Ms L Gallagher Solicitors for the Respondent
Sparke Helmore
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