HILLS and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2011] AATA 678

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 678

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2011/0136

GENERAL ADMINISTRATIVE  DIVISION		)
Re		GINA HILLS

Applicant

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

Respondent

DECISION

Tribunal  Ms A F Cunningham (Senior Member)

Date 30 September 2011

Place Hobart

Decision  The decision under review is affirmed.

[Sgd Ms A F Cunningham]

Senior Member

CATCHWORDS

SOCIAL SECURITY – disability support pension – whether husband’s redundancy payment received prior to marriage is assessed as ordinary income for the purposes of working out the rate of disability support pension payable to the applicant – husband subject to income maintenance period – Tribunal found husband’s termination payment should be treated as ordinary income in assessing applicant’s rate of DSP – original decision affirmed

Social Security Act 1991, ss 8(1), 1064

Social Security (Administration) Act 1995

Guide to Social Security Law

Acts Interpretation Act 1901, s 15AA

Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

Green and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 831

Muller v Dalgety & Co Ltd (1909) 9 CLR 693

Federal Commissioner of Taxation v Comber (1986) 10 FCR 88; 64 ALR 451

REASONS FOR DECISION

30 September 2011   Ms A F Cunningham (Senior Member)   

1.      The applicant, Gina Hills, has been in receipt of disability support pension (DSP) from 6 August 1998 following a steady decline in her health.  In 1989 she was injured in a car accident and suffered various injuries including a spinal injury.  Over the years Mrs Hills has been cared for by her son and more recently by Wayne Hills who she married on 9 October 2010.

2.      Mr Hills received a lump sum payment of $189,338.82 on 30 April 2010 when he ceased work with Tas Paper Pty Ltd.  The payment included entitlements to redundancy, sick leave and long service payments.  When Mr and Mrs Hills married Centrelink reassessed Mrs Hills DSP entitlement taking into account a combination of her own earnings, the income maintained from Mr Hills’ termination payment as well as deemed income from financial investments.  Centrelink determined that Mrs Hills’ ordinary income exceeded the income limit for a couple and accordingly assessed her rate of DSP as nil. 

3.      Mrs Hills sought reviews of Centrelink’s decision which was affirmed by an authorised review officer and by the Social Security Appeals Tribunal on 8 December 2010.  Mrs Hills now seeks a review by the Administrative Appeals Tribunal.

ISSUES

4.      The issue for the Tribunal to determine is whether the rate of Mrs Hills’ DSP should be assessed taking into account Mr Hills redundancy payment which was received prior to their marriage.  It was not contended on behalf of Mrs Hills that she was in severe financial hardship due to unavoidable or reasonable expenditure such that any part of the income maintenance period applied to Mr Hills redundancy payment should be disregarded. 

BACKGROUND

5.      Upon the marriage of Mr and Mrs Hills on 9 October 2010 Centrelink decided that an income maintenance period should apply to Mrs Hills’ disability support pension on the basis of the redundancy payment received by Mr Hills when his employment was terminated.  By virtue of the payment received by Mr Hills, the deemed ordinary income was calculated at $2,721.00 per fortnight for the period 30 April 2010 to 13 December 2012.  The applicant accepted that the income maintenance period had been correctly calculated by Centrelink.  It was submitted however, that receipt of these monies should not be taken into account in the assessment of Mrs Hills’ rate of DSP because the monies were received by Mr Hills prior to the marriage and even prior to the parties contemplating marriage.  It was submitted that the monies had not been “received” by Mrs Hills within the meaning of the legislation and should not be taken into account. 

6.      The termination payment received by Mr Hills was made up as follows:

·           Redundancy  $180,376.00 

·           Sick Leave  $1,825.00

·           Long Service Leave            $2,867.00

7.      It was accepted that the payments were made several months before Mr Hills moved into Mrs Hills’ residence to care for her.  Mr Hills has been in receipt of a carer’s pension from 27 July 2010 which is not subject to an income maintenance period.

8.      At the time of Mr and Mrs Hills’ marriage in October 2010, Mr Hills had $15,000.00 in a term deposit and $38,206.31 in his bank account having expended his monies on the purchase of a new car, repayment of a credit card debt and loan for a hip replacement operation.

LEGISLATION

9.      The relevant legislation is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1995 (the Administration Act).Reference was also made to the Guide to Social Security Law and relevant government policy where it is not inconsistent with the legislation on the basis of the Federal Court decision in Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60.

10. The calculation of the rate of DSP is provided for in section 1064 of the Act which refers to the overall rate calculation process contained in Module A at the end of the section. Module A gives the overall rate calculation process. Step 5 of the Module refers to the application of Module E for the ordinary income test and contains the following note:

“Module F contains provisions that may apply to working out the ordinary income of a person, and the ordinary income of a partner of the person, for the purposes of disability support pension”.

11. Income and ordinary income are defined in section 8(1) of the Act as follows:

“income, in relation to a person, means:

(a)  an income amount earned, derived or received by the person for the person’s own use or benefit; or

(b)  a periodical payment by way of gift or allowance; or

(c)  a periodical benefit by way of gift or allowance;

but does not include an amount that is excluded under subsection (4), (5) or (8).

…

ordinary income means income that is not maintenance income or an exempt lump sum.

…”

12. The ordinary income test is contained in Module E. There is a specific module, Module F, for working out the ordinary income for the purposes of DSP. Section 1064-F1 states:

“Application of this Module

1064-F1  This Module applies only for the purposes of working out the rate of disability support pension payable to a person.  It so applies to that person and, if the person is a member of a couple, to the person’s partner”.

13.     Module F contains provisions specific to lump sum payments arising from termination of employment and certain leave payments.  1064-F5 provides:

“If:

(a)  a person’s employment has been terminated; and

(b)  the person receives a termination payment (whether as a lump sum payment. As a payment that is one of a series of regular payments or otherwise);

the person is taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates”.

14.     In accordance with 1064-F5 Mr Hills termination payment was assessed by Centrelink as ordinary income and an income maintenance period imposed from 30 April 2010.  The Secretary has since conceded that the correct start date is 3 May 2010 being the date the payment was received.  (1064-F8).

15. Under Module E – Ordinary Income Test, where a person is a member of a couple, section 11064-E2 provides that the couples ordinary income is added together and divided by 2 to work out the amount of the person’s ordinary income for the purposes of the module. The notes specifically provide that in working out a person’s DSP rate, Module F applies to working out the ordinary income of both members of a couple. Module E is the module that applies to all payment types covered by section 1064 and Module F is specifically directed to the calculation of the assessment of ordinary income for the purposes of DSP.

16. Module F was introduced into the Act in 2005 in the Employment and Workplace Relations Legislation Amendment (Welfare to Work and other Measures) Bill 2005.   The Explanatory Memorandum provides the following background:

“SUMMARY

From 20 September 2006, a person who claims or receives the disability support

pension under section 94 will have an income maintenance period applied.

Permanently blind persons in receipt of disability support pension are not subject to

the ordinary income test and so will be excluded from the application of the income

maintenance period.

BACKGROUND

Income maintenance provisions are already applied to most income support payments for working age people. The introduction of the income maintenance period for disability support pension purposes will enhance consistency in the eligibility conditions for income support for working age people and will assist in ensuring that income support is targeted towards those most in need.

Under the income maintenance period, where a person receives a leave payment or a redundancy payment, the amount of that payment will be apportioned over the period that the payment represents and maintained as ordinary income for that period.

…

“New Module F

Item 4 inserts at section 1064, after Module E, a new Module F – Ordinary income

for the purposes of disability support pension. Module F is modelled on the existing

provisions relating to an income maintenance period, that applies to beneficiaries of

youth allowance, austudy payment, widow allowance, newstart allowance, sickness

allowance, partner allowance, mature age allowance and parenting payment. However, additional provisions are required to ensure that other payments calculated

under Pension Rate Calculator A that are not subject to the income maintenance

period (for example, age pension) are unaffected by the new arrangements for

disability support pension.

An income maintenance period will apply to recipients of disability support pension if

the person or the person’s partner were to receive a leave payment or a redundancy

payment on termination of employment, or a lump sum leave payment while

continuing in employment.

Point 1064-F1 ensures that Module F only applies for the purposes of working out the

rate of disability support pension payable to a person. Module F only applies to that

person, and if the person is a member of a couple, to the person’s partner.

By way of example, in the case of a couple where one partner receives disability

support pension and the other an age pension, Module F will operate as follows:

•         When calculating the ordinary income for the purposes of the age pension,

Module F does not apply. Consequently, neither partner’s ordinary income for

age pension purposes can include amounts calculated under the income

maintenance period provisions.

•         When calculating the ordinary income for the purposes of the disability support pension, Module F does apply. Consequently, either partner’s ordinary income for disability support pension purposes could include amounts calculated under the income maintenance period provisions.

In such a case, the amount of income attributed to each partner under existing

1064-E2 will be different depending on whether the payment being calculated is the

age pension or the disability support pension”.

CONSIDERATION

17.     It was contended on behalf of the respondent that the legislative intent is clear where a DSP recipient or their partner has received a lump sum termination payment, that payment must be taken into account in calculating the rate of DSP.  Carer payments and age pension are not subject to Module F in that lump sum termination payments are not considered as ordinary income for these payments. 

18.     In Green and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 831, the Tribunal concluded that the termination lump sum payment received by Mrs Green was correctly assessed as ordinary income in determining the rate of DSP for Mr Green. The Tribunal commented at paragraph 35:

“… the Secretary must take into account that the person who has received a termination payment is in fact paid ordinary income for a specified period of time which is reflected by the way in which the termination payment is calculated. That being the case, a person would not ordinarily be entitled to a social security payment where the person was receiving payments as if his or her employment was continuing. Another way of putting it is the way the Secretary puts it: Centrelink claimants and partners should use leave and redundancy payments to support themselves before being paid the full rate of a pension or benefit. That interpretation is further supported by the provisions in 1064-F8, which provide that the income maintenance period starts on the day on which the person is paid the termination payment”.

19.     This interpretation of the above provisions was not disputed by the applicant at the hearing.  What was in dispute was whether the termination payment received by Mr Hills prior to the marriage should be treated as ordinary income against the assessment of Mrs Hills’ DSP.  It was argued on behalf of the Secretary that the provisions in Module F relating to the calculation of the start date and duration of the income maintenance period are clear such that if a termination period is received it must be maintained as ordinary income for the period that the payment represents.  There is no provision to disregard this ordinary income simply because the start date predated a person becoming partnered. 

20. Ms Eder on behalf of the applicant contended that Mr Hills redundancy payment was not “derived or received” by Mrs Hills for her own use and benefit within the meaning of income as it is defined in section 8(1). She argued that the words “Where two people are members of a couple, they will be treated as pooling their resources (income and assets) and sharing them on a 50/50 basis …” which appear in section 1064-A2 should not be treated as a deeming provision such that it applies to two people who become members of a couple after the resources are received. It was submitted by Ms Eder that there is no provision within section 1064 Module E that allows for Mr Hills’ redundancy payment to be “deemed” as ordinary income and assessed against Mrs Hills’ DSP. It was further submitted that the wording of section 1064-F1 is restricted to the person in receipt of DSP and does not extend to that person’s partner. It was contended that without clear or express wording that provides for the inclusion of a DSP’s partners income or resources in the assessment of the rate of DSP, they should not be included.

21.     Ms Eder referred the Tribunal to two authorities regarding the application of deeming provisions, namely Muller v Dalgety & Co Ltd (1909) 9 CLR 693 and Federal Commissioner of Taxation v Comber (1986) 10 FCR 88; 64 ALR 45. There it was held that deeming provisions should be construed strictly and only for the purposes for which they are intended. Further, that their application is unnecessary where the express provision is itself capable of sensible and rational application.

22.     The use of the expression “deemed” was described by Griffiths CJ in Muller v Dalgety and Co as a statutory fiction used to extend the meaning of the term to a subject matter which it properly does not designate.  In such circumstances it is important to consider the purpose for which the fiction has been introduced.  The word “deemed” can also be used in a definition to extend its meaning by including matters that might or might not fall within the scope of the word defined.  (Refer Statutory Interpretation in Australia, 7th Edition, DC Pearce & RS Geddes at 4.44)

23.     It was Ms Eder’s argument that a restricted interpretation of the legislation would mean that Mr Hills’ termination payment is not assessed as ordinary income for the purpose of calculating Mrs Hills’ rate of DSP as it was not received when the parties became members of a couple.

24.     In considering the meaning of legislative terms it is appropriate to have regard to the overall intent of the social security legislation which is to clearly assist those persons most in need by the payment of social security benefits.  Section 15AA of the Acts Interpretation Act 1909 provides that a term should be construed in a way that promotes the purpose of object underlying the Act whether that is expressly stated in the Act or not.

25. In the Tribunal’s view the wording of s1064-E2 and 1064-F1 applies to the income of both the DSP claimant and his or her partner. The words specifically clearly provide for this and there is no deeming provision intended or necessary. Whilst the redundancy payment was not literally received by Mrs Hills as the term is defined in section 8(1) the subsequent provisions of 1064-E2 and F1 make it clear that amounts received by a person’s partner are to be included irrespective of when the payments are received.

26. The rate of DSP is periodically reviewed and there is an obligation upon a recipient to advise Centrelink of any significant changes in their circumstances that would affect the rate of DSP. Becoming a member of a couple is one of those significant circumstances. If Ms Eder’s interpretation of the legislation was correct, the provisions referred to in section 1064 would have no practical function. The Explanatory Memorandum specifically states that redundancy payments are to be included in the income maintenance period to ensure that income support is targeted towards those most in need. The inclusion of redundancy payments and the calculation of the income maintenance period recognises that the primary purpose of a redundancy payment is to support a person’s income for a period after the loss of employment. When a person becomes a member of a couple, it is clear from the legislation that the total income of the couple is to be taken into account. There is no provision that allows any part of the redundancy payment that has been spent or dissipated during the income maintenance period to be disregarded. Module F specifically provides that a termination payment is maintained as ordinary income for the period that the payment represents, that is, the date from when the payment was received.

27.     Ms Eder submitted that the word “receives” referred to in section 1064-F5(b) is in the present tense and should not be construed as including a termination payment received in the past.  The Tribunal however disagrees with this interpretation.  If the applicant was already in receipt of a termination payment at the time of applying for DSP, it would undoubtedly be included in the assessment of that person’s rate of DSP.          To do otherwise would clearly be contrary to the objectives of the social security legislation and permit a person to receive DSP while still subject to an income maintenance period. 

CONCLUSION        

28.      For the above reasons the Tribunal finds that Mr Hills’ termination payment is to be treated as ordinary income for the purposes of assessing Mrs Hills’ rate of DSP.  Mr Hills’ deemed ordinary income is $2,721.00 per fortnight up to and including 13 December 2012.  The maximum income a couple can currently earn before received a new rate of pension is around $2,415.20 per fortnight.  Accordingly Mrs Hills is therefore not presently eligible to receive any DSP.  The decision to reduce the rate of Mrs Hills’ DSP to nil from 9 October 2010 is affirmed.

I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member)

Signed:    R Hunt - Associate

Date/s of Hearing  1 September 2011

Date of Decision  30 September 2011
Counsel for the Applicant         Ms Shelley Eder
Solicitor for the Applicant          Launceston Community Legal Centre Inc
Counsel for the Respondent     Mr Flemming Aaberg
Solicitor for the Respondent     Program Litigation and Review Branch