Guerriero and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2011] AATA 797
•11 November 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 797
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2011/2585
GENERAL ADMINISTRATIVE DIVISION ) Re ELISA GUERRIERO Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member K Bean Date11 November 2011
PlaceAdelaide
Decision The decision under review is affirmed.
..............................................
K BEAN
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – Disability Support Pension – Income Maintenance Period – Whether applicant in severe financial hardship – If so, whether severe financial hardship due to unavoidable or reasonable expenditure – Decision under review affirmed.
Social Security Act 1991 ss 14A, 19C, 1064
REASONS FOR DECISION
11 November 2011 Senior Member K Bean introduction
1. The applicant, Mrs Guerriero, has been married to Mr Gino Guerriero since March 1991. In 2009, after working for many years, Mr Guerriero decided to accept a voluntary redundancy from his employment with the Department of Families and Communities, and received a total termination payment of $133,474.91. Mr and Mrs Guerriero used a large part of those monies to purchase a block of land at Goodwood on which they built a new home, with the assistance of Mrs Guerriero’s two sons from her previous marriage.
2. Unfortunately however, Mr and Mrs Guerriero have had increasing financial difficulties in recent years as a result of the effect of the termination payment received by Mr Guerriero on their Centrelink payments. Mrs Guerriero has been in receipt of Disability Support Pension (DSP) since 5 May 2001 and had received DSP at the partnered rate since 20 April 2004[1]. However as a result of the termination payment, Centrelink determined that an “Income Maintenance Period” (IMP) applied to Mrs Guerriero’s DSP for the period 31 July 2009 to 20 July 2012[2]. This reduced the amount of DSP Mrs Guerriero was entitled to receive to approximately $240 per fortnight, and, unless the IMP is reduced, her entitlement to DSP will continue to be affected until the expiration of the IMP in July 2012.
[1] T1/4
[2] Exhibit 3
3. Mrs Guerriero contends that there are grounds upon which the IMP which has been applied to her should be reduced and has sought to challenge the imposition of the IMP. Thus far her challenges have been unsuccessful, with the Social Security Appeals Tribunal (SSAT) affirming the decision of an Authorised Review Officer that Mrs Guerriero was subject to an IMP for the period 31 July 2009 to 20 July 2012[3].
[3] T1/3
4. On 1 July 2011, Mrs Guerriero applied to this Tribunal for review of the decision of the SSAT[4], giving rise to these proceedings.
[4] T1
the legal framework
5. The relevant provisions are contained in s 1064 of the Social Security Act 1991 (the Act). That section relevantly provides that where a person’s employment has been terminated and the person receives a termination payment, they are taken to have received ordinary income for a period (described as the IMP) equal to the period to which the payment relates[5]. A person is taken to have received their lump sum payment on the date on which their employment was terminated, with a result that the IMP generally starts on the day on which the person’s employment was terminated[6]. The IMP affects Mrs Guerriero because her entitlement to DSP is calculated by reference to the ordinary income taken to be received by Mr Guerriero[7]. The provisions relating to imposition of an IMP also apply to both the person who receives a termination payment and their partner[8].
[5] s 1064-F5
[6] s 1064-F2
[7] s 1064-F2
[8] s 1064-F1
6. Section 1064 also provides for the IMP to be reduced in certain circumstances. Section 1064-F11 provides as follows:
“1064‑F11 If the Secretary is satisfied that a person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure while an income maintenance period applies to the person, the Secretary may determine that the whole, or any part, of the period does not apply to the person.
Note 1: For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple) and subsection 19C(3) (person who is a member of a couple).
Note 2: For unavoidable or reasonable expenditure see subsection 19C(4).
Note 3: If an income maintenance period applies to a person, then, during that period:
(a) the pension claimed may not be payable to the person; or
(b) the amount of the pension payable to the person may be reduced.”
7. The terms “severe financial hardship”, “reasonable costs of living” and “unavoidable or reasonable expenditure” are all defined in s 19C of the Act as follows:
“(3)A member of a couple who makes a claim for parenting payment, austudy payment, special benefit, disability support pension, carer payment or one of the following allowances:
(a) newstart allowance;
(b) partner allowance;
(c) mature age allowance;
(d) sickness allowance;
(e) youth allowance;
is in severe financial hardship if the value of the couple’s liquid assets (within the meaning of subsections 14A(1) and (2)) is less than twice the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person:
(f) if the person’s claim were granted; and
(g)in the case of a person to whom an income maintenance period applies, if that period did not apply.
(4)Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period or is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies, includes, but is not limited to, the following expenditure:
(a)the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:
(i)if the person is serving a liquid assets test waiting period—that part of the period that the person has served; or
(ii)if the person is subject to a seasonal work preclusion period—that part of the period that has expired; or
(iii)if an income maintenance period applies to the person—that part of the period that has already applied to the person;
(b)the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;
(c) school expenses;
(d) funeral expenses;
(e)essential expenses arising on the birth of the person’s child or the adoption of a child by the person;
(f)expenditure to buy replacement essential household goods because of loss of those goods through theft or natural disaster when the cost of replacement is not the subject of an insurance policy;
(g) the costs of essential repairs to the person’s car or home;
(h) premiums in respect of vehicle or home insurance;
(i) expenses in respect of vehicle registration;
(j) essential medical expenses;
(k) any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.
However, unavoidable or reasonable expenditure does not include any reasonable costs of living other than those referred to in paragraph (a).
(5)The reasonable costs of living of a person include, but are not limited to, the following costs:
(a) food costs;
(b) rent or mortgage payments;
(c) regular medical expenses;
(d) rates, water and sewerage payments;
(e) gas, electricity and telephone bills;
(f) costs of petrol for the person’s vehicle;
(g) public transport costs;
(h)any other cost that the Secretary determines is a reasonable cost of living in relation to a person.
(6)For the purposes of paragraph (4)(a), the amount of reasonable costs of living that a person who is not a member of a couple is taken to have incurred, may not exceed:
(a)in the case of a person who is serving a liquid assets test waiting period—the amount of allowance that would have been payable to the person during that part of the waiting period that the person has already served, if the person were not subject to the period; or
(b)in the case of a person who is subject to a seasonal work preclusion period—the amount of allowance that would have been payable to the person during that part of the person’s preclusion period that has already expired, if the person were not subject to the period; or
(c)in the case of a person to whom an income maintenance period applies—the amount of allowance or parenting payment (as the case may be) that would have been payable to the person during that part of the income maintenance period that has already applied to the person, if the period did not apply to the person.
(7)For the purposes of paragraph (4)(a), the amount of reasonable costs of living that a person who is a member of a couple is taken to have incurred, may not exceed:
(a)in the case of a person who is serving a liquid assets test waiting period—twice the amount of allowance that would have been payable to the person during that part of the waiting period that the person has already served, if the person were not subject to the period; or
(b)in the case of a person who is subject to a seasonal work preclusion period—twice the amount of allowance or parenting payment (as the case may be) that would have been payable to the person during that part of the person’s preclusion period that has already expired, if the person were not subject to the period; or
(c)in the case of a person to whom an income maintenance period applies—twice the amount of allowance or parenting payment (as the case may be) that would have been payable to the person during that part of the income maintenance period that has already applied to the person, if the period did not apply to the person.”
the issues
8. It follows that the issues to be determined by me are:
(a) whether an IMP applies to Mrs Guerriero’s DSP and if so, the length of the IMP;
(b) whether Mrs Guerriero is in “severe financial hardship”; and, if so
(c) whether she is in severe financial hardship because of incurring “unavoidable or reasonable expenditure” within the meaning of the Act.
9. I propose to address each of these issues in turn, having regard to the evidence before me and the contentions of the parties.
is mrs guerriero subject to an imp?
10. As I have noted above, there is no dispute that Mr Guerriero received a termination payment upon the ending of his employment with the Department of Families and Communities. According to the material before me, he received a gross amount of $133,474.91 comprised of a redundancy payment of $98,751.96, annual leave of $6,871.59 and long service leave of $27,851.36[9].
[9] Exhibit 8
11. Pursuant to the definition of “termination payment” in s 1064-F14 of the Act, all of these amounts comprise a termination payment within the meaning of the Act. Further, there is no dispute that Mr Guerriero’s termination payments were based on an average gross weekly wage of $851.31[10] and that the redundancy portion of the termination payment was in respect of 116 weeks of pay. Further, adding the annual leave and long service leave amounts together and dividing these by Mr Guerriero’s average gross weekly wage gives a total of 40.78 weeks. When this is added to the figure of 116 weeks relating to Mr Guerriero’s redundancy payment, this results in a total of 156.78 weeks. As Mr Guerriero’s employment ceased on 31 July 2009, the IMP is taken to start on that day[11] and the period of 156.78 weeks commencing on 31 July 2009 gives an end date for the IMP of 30 July 2012. As this is the IMP which has been imposed upon Mr and Mrs Guerriero, I am satisfied that the period has been correctly calculated and imposed.
[10] Exhibit 8
[11] s 1064-F8
12. The next issue is whether Mrs Guerriero is in “severe financial hardship” such that the IMP which is applicable to her can potentially be reduced.
is mrs guerriero in severe financial hardship?
13. As outlined above, s 19C(3) of the Act provides that a member of a couple is taken to be in severe financial hardship if the value of the couple’s liquid assets is less than twice the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person if the IMP did not apply. The current fortnightly amount at the maximum rate of DSP for a partnered person is $519.40, so twice that amount is $1,038.80. Accordingly Mrs Guerriero should be considered to be in severe financial hardship only if the value of her liquid assets and those of Mr Guerriero is less than $1,038.80. The term “liquid assets” is defined in s 14A of the Act and includes a person’s cash and other readily realisable assets.
14. Mrs Guerriero provided evidence that her bank balance of her Commonwealth Bank account as at 23 September 2011 was $212.11[12] and the balance of a joint account in the names of Mr and Mrs Guerriero was $791.54 as at 26 September 2011[13]. She also gave evidence to the effect that she and Mr Guerriero had no other liquid assets.
[12] Exhibit 16
[13] Exhibit 17
15. The hearing in this matter took place on 28 September 2011 and Mrs Guerriero’s evidence was also to the effect that the amounts recorded in these bank accounts remained current as at the date of the hearing.
16. As the total of the amounts contained in Mr and Mrs Guerriero’s bank accounts as at the date of the hearing was $1,003.65, it follows that on the evidence before me, Mrs Guerriero is currently in “severe financial hardship” within the meaning of the Act.
17. I must accordingly proceed to consider whether that severe financial hardship is attributable to unavoidable or reasonable expenditure during the application of the IMP.
is mrs guerriero in severe financial hardship because of unavoidable or reasonable expenditure during the currency of the imp?
18. As outlined above, the phrase “unavoidable or reasonable expenditure” is defined in the Act and defined relatively narrowly. A person’s “unavoidable or reasonable expenditure” is taken to include their reasonable costs of living, however that phrase is also defined with the result that the maximum amount which can be attributable to a person’s reasonable costs of living is twice the rate of pension which would have been payable to a person during that part of the IMP which has already expired. As outlined above, twice the amount of DSP to which Mrs Guerriero would be entitled is $1,038.80 per fortnight. Mrs Guerriero has already served 119 weeks of the IMP, with the result that she can claim a maximum of $61,808.60 for reasonable costs of living. However, that still leaves approximately $71,000 from Mr Guerriero’s termination payment to be accounted for by Mrs Guerriero. Unless the whole of that amount can be classified as “unavoidable or reasonable expenditure” within the meaning of the Act, the IMP applicable to Mrs Guerriero cannot be reduced.
19. As to what had happened to that money, Mrs Guerriero explained in her oral evidence that when her husband received his termination package, they decided to use most of this money to build a new house at Goodwood. Accordingly on 10 October 2008, she, Mr Guerriero and Mrs Guerriero’s two sons jointly purchased a property at Goodwood for the sum of $650,000[14]. At that time, Mr and Mrs Guerriero were living in a different property at Cheltenham, which was jointly owned at that time by Mrs Guerriero and her sons. However Mrs Guerriero explained that her husband wanted to have his own home and they both felt he deserved this after working for many years. They planned to demolish the existing property at Goodwood and build a new home, with help from Mrs Guerriero’s sons, one of whom is a builder, the other an architect.
[14] Exhibit 2
20. Mrs Guerriero explained in her evidence that a large part of Mr Guerriero’s termination payment had been spent on the cost of purchasing the Goodwood property, demolishing the old house and building the new one. She estimated that approximately $70,000 to $80,000 from Mr Guerriero’s termination payment was spent on the new house. She also explained that by the time she and her husband realised that they would be left with little to live on as a result of the IMP, they were effectively committed and it was “too late” for them to decide not to proceed with building the Goodwood house. She also explained that when the Goodwood house was completed and the Cheltenham house was sold, in September 2010, the proceeds were put towards the cost of the Goodwood property. She said that all of the profits from this sale had ultimately been paid to the bank in respect of mortgages on the two properties and there was nothing left over.
21. As to other expenditure during the relevant period, Mrs Guerriero said that she and her husband had bought a new fridge for approximately $1,300 and spent approximately $300 on repairs to one of their cars. She also said that together they spent approximately $300 per fortnight on essential medications. Mrs Guerriero also provided written documentation to the effect that she paid approximately $704 for dental expenses in December 2009.
22. It is clear on the evidence however that the bulk of Mr Guerriero’s termination payment, and certainly the component which was left over after allowing for reasonable living expenses, was spent on the purchase and construction of Mr and Mrs Guerriero’s new home at Goodwood. The critical question which arises therefore is whether this expenditure constituted “unavoidable or reasonable expenditure” within the meaning of the Act.
23. The Act defines “unavoidable or reasonable expenditure” to include “the cost of essential repairs to the person’s car or home”, however it is not defined to include the cost of purchase or construction of a new home. The items which are listed as falling within “unavoidable or reasonable expenditure” are not exhaustive and “unavoidable or reasonable expenditure” includes any other costs that the decision-maker determines are “unavoidable or reasonable expenditure in the circumstances in relation to a person”.
24. On the basis of the evidence before me however, I am not satisfied that the purchase and construction of a new home was an “unavoidable or reasonable expenditure” in relation to Mr or Mrs Guerriero. It is clear on the evidence before me that at the time they made the decision to purchase the land at Goodwood and construct a new home, they were living in a home which was partly owned by Mrs Guerriero and there is nothing before me to suggest they could not have continued to do so. Whilst their preference to construct their own home is understandable, in all the circumstances I do not consider the expense resulting from their decision to do this to have been “reasonable” or “unavoidable” in the sense intended by s 19C(4).
25. Mrs Guerriero contends that once they were committed, they had no choice but to proceed with this project. However, whilst she may have felt that was the case in a practical sense, I am not satisfied that this was true in reality. It was of course open to Mr and Mrs Guerriero at any time to decide not to proceed with the construction of their new home and/or to sell the property in order to rationalise their financial situation.
26. That being the case, the further difficulty for Mrs Guerriero’s application is that, on her own evidence, her severe financial hardship is due to the decision she and her husband made to spend the bulk of Mr Guerriero’s termination payment on the purchase and construction of their new home at Goodwood.
27. Mrs Guerriero made reference to some other expenditures which could potentially be regarded as “unavoidable or reasonable”, however apart from medication expenses, these do not come close to accounting for the approximately $71,000 which remained available to Mr and Mrs Guerriero from the termination payment after their reasonable living expenses were deducted. Even accepting Mrs Guerriero’s evidence as to medication expenses, that would only account for a further $18,000. Even in combination with the other expenditures potentially capable of amounting to unavoidable or reasonable expenditure referred to by Mrs Guerriero, these expenses do not bring the total of her potentially unavoidable or reasonable expenditure anywhere near the approximately $71,000 which would need to be accounted for as unavoidable or reasonable expenditure before Mrs Guerriero would qualify for reduction of the IMP which is applicable to her.
28. For these reasons, I have concluded that whilst Mrs Guerriero is in severe financial hardship, she is not suffering severe financial hardship because she has incurred unavoidable or reasonable expenditure as required by s 1064-F11. On her own evidence, the bulk of the termination payment received by Mr Guerriero was spent on the construction of a new home at Goodwood which in my view did not constitute an “unavoidable or reasonable expenditure” within the meaning of s 19C(4) of the Act. Therefore Mrs Guerriero’s current financial hardship is attributable to the decision she and her husband made to expend the termination payment in that way, and not because of “unavoidable or reasonable expenditure” within the meaning of s 19C(4).
29. It follows that the discretion to reduce the IMP which exists in s 1064-F11 of the Act is not enlivened as the circumstances for its exercise are not established.
30. As Mrs Guerriero has not established a basis for the IMP to be reduced consistent with the requirements of the applicable statutory framework, I am obliged to affirm the decision under review.
decision
31. The decision under review is affirmed.
I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member K Bean
Signed: ............J Coulthard....................................
AssociateDate of Hearing 28 September 2011
Date of Decision 11 November 2011
Advocate for the Applicant Self-representedAdvocate for the Respondent Mr G Camilos
Centrelink Program Litigation and Review Branch
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