Howie; Secretary, Department of Social Services and (Social services second review)
[2017] AATA 1149
•25 July 2017
Howie; Secretary, Department of Social Services and (Social services second review) [2017] AATA 1149 (25 July 2017)
Division:General Division
File Number: 2015/6482
Re:Secretary, Department of Social Services
APPLICANT
AndTyrone Howie
RESPONDENT
File Number: 2015/6483
Re:Secretary, Department of Social Services
APPLICANT
AndCharmaine Howie
RESPONDENT
DECISION
Tribunal:Deputy President SA Forgie
Date:25 July 2017
Place:Melbourne
The Tribunal decides to:
1.set aside the decision dated 2 November 2015 of the Tribunal’s Social Services and Child Support Division; and
2.substitutes a decision to:
(a) affirm the decision of the delegate of the Secretary dated 14 April 2015 as affirmed by an authorised review officer on 5 August 2015;
and the Tribunal notes that:
3.the effect of the decision is that:
(a) Mr and Mrs Howie’s account-based income stream products are assessed by reference to the deeming provisions under Division 1B, and not under Division 1C of Part 3.10 of the Social Security Act 1991, after the fortnight ending 13 April 2015.
...............[sgd].........................................................
Deputy President S A Forgie
Catchwords
SOCIAL SECURITY – aged pension – income stream - income earned from employment – whether “continuously receiving” aged pension – not “a continuous period” - deeming provision not relevant – decision under review set aside
Legislation
Social Security Act 1991 ss 4, 8, 9, 16A, 23, 38B, 44, 55, 82, 146V, 237, 598, 1064, 1073AA, 1073, 1074, 1075, 1097A
Social Services and Other Legislation Amendment Act 2014 Part 2 and Sch 11, item 48
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Regulations 1994
Cases
Visa International Service Association v Reserve Bank of Australia [2003] FCA 977; (2003) 131 FCR 300
Secondary Materials
Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
Explanatory Memorandum to the Social Services and Other Legislation Amendment Bill 2013
REASONS FOR DECISION
Deputy President S A Forgie
Mr and Mrs Howie are qualified for, and have been in receipt of, age pension since 27 October 2014 and 6 December 2013 respectively. They have three “income streams” within the meaning of s 9(1) of the Social Security Act 1991 (SS Act). In very broad terms and subject to qualifications in the definition set out in s 9(1), an “income stream” is an income stream arising in relation to superannuation or retirement income, provided as a life insurance business or a family law affected income stream. Prior to 31 March 2015, Mr and Mrs Howie’s income streams were not assessed under the provisions relating to “deemed income” as they were not produced by investments regarded as “financial assets” or “financial investments” for the purposes of the deeming provisions. From 1 January 2015, amendments made to the SS Act by the Social Services and Other Legislation Amendment Act 2014 (2014 Amendment Act) meant that, subject to one qualification, Mr and Mrs Howie’s income streams were produced by investments that were subject to the deeming provisions. The qualification was that those who had existing income streams as at 31 December 2014 and who were receiving an income support payment, which includes an age pension, as at that date, would be assessed under the previous law until they changed products or ceased to be continuously in support of an income support payment.
Mr Howie is employed and volunteered to work over the Easter period in 2015. Although he did not work more hours than usual, the hours that he worked over that Easter period were paid penalty rates leading to his earning more than usual. As a result, the amount of income on which his entitlement to age pension and that of his wife was increased and their entitlement was assessed to be nil for the fortnight ending 13 April 2015. Mr Howie’s income from his employment returned to its usual amount in the following fortnight. Their entitlement to age pension in that fortnight was found to be more than nil but a figure less than it had been up until the fortnight ending 13 April 2015.
The delegate of the Secretary decided on 14 April 2015 that Mr and Mrs Howie had not been continuously in receipt of an income support payment (being the age pension) because their entitlement had been assessed to be nil. Therefore, they were no longer excluded from the operation of the amendments made to the SS Act to include in the income deeming provisions the investments from which Mr and Mrs Howie’s income streams were produced. The delegate’s decision was affirmed on internal review on 5 August 2015 by an Authorised Review Officer but set aside on review in the Social Services and Child Support Division of this Tribunal (AAT1 review) on 2 November 2015. The conclusion of the AAT1 review relied on s 38B(6) of the SS Act to conclude that Mr and Mrs Howie had been continuously in receipt of an income support payment throughout and including the fortnight ending 13 April 2015.
I agree with the AAT1 review that the issue in this case is whether Mr and Mrs Howie can be said to have “… been continuously receiving an income support payment” in circumstances in which their entitlement to age pension was nil. If they have been, the amendments made by the 2014 Amendment Act will not apply to them and their three income streams will continue to be assessed under Division 1C of Part 3.10 rather than subject to the income deeming provisions of Division 1B. At all times, an age pension has been an “income support payment”.[1] The AAT1 review decided that s 38B of the SS Act operates to deem the fortnight in which the rate of age pension payable was nil as a continuous period in respect of which Mr and Mrs Howie have received an income support payment being an age pension. I respectfully disagree with that conclusion and have decided that s 38B does not apply to assist Mr and Mrs Howie. As the rate of age pension was assessed to be nil in that fortnight, it was not payable to them and, as a consequence, they were not in receipt of it. Therefore, they could not be said to have been continuously receiving age pension. Therefore, they were no longer able to take advantage of the transitional provisions in the 2014 Amendment Act enabling their income streams to be assessed under Division 1C. After the fortnight ending 13 April 2015, they had to be assessed under Division 1B.
[1] An “income support payment” includes a “social security pension” which, in turn, includes an age pension: SS Act; s 23(1).
LEGISLATIVE BACKGROUND
Section 55(a) of the SS Act provides that, for people in Mr and Mrs Howie’s circumstances, their age pension rate is worked out using Pension Rate Calculator A at the end of s 1064. Pension Rate Calculator A has a number of modules. If, after applying that Rate Calculator, an age pension is not payable, the person’s age pension rate would be nil.[2]
[2] SS Act; s 44(1). The only qualification to that outcome is found in s 44(2): “Subsection (1) does not apply to a person if the person’s rate would be nil merely because an election by the person under subsection 915A(1) (about quarterly energy supplement) or 106VA(1) (about quarterly pension supplement) is in force.”
Pension Rate Calculator A
Module A sets out the method of calculating the rate, which is a daily rate arrived at by dividing the annual rate calculated in accordance with the Rate Calculator by 364. In broad terms and subject to qualifications that do not apply in this case, the annual rate is calculated by, for each of Mr and Mrs Howie:
(1)working out their maximum basic rate using Module B;
(2)adding to the maximum basic rate the amount of pension supplement using Module BA, any energy supplement using Module C and the amount of rent assistance in accordance with s 1070A(b) to arrive at the maximum payment rate;
(3)applying the ordinary income test using Module E to work out the income reduction and take the income reduction from the maximum payment rate to reach the income reduced rate;
(4)applying the assets test using Module G to work out the reduction for assets and take the reduction for assets away from the maximum payment rate to reach the assets reduced rate;
(5)comparing the income reduced rate with the assets reduced rate. The lower of the two rates, or the income reduced rate if they are equal, is the provisional annual payment rate; and
(6)calculating the rate of pension by:
(a)subtracting from the provisional annual payment rate any special employment advance deduction under Part 3.16B and, if there is any amount remaining, subtracting from it any advance payment deduction under Part 3.16A; and
(b)adding any amount payable by way of remote area allowance under Module H.[3]
[3] SS Act; s 1064-A1
Mr and Mrs Howie are “members of a couple” or “partnered” within the meaning of s 4(2) of the SS Act.[4] Therefore, they are treated as pooling their income and assets and sharing them and their expenses equally between them.[5]
[4] SS Act; ss 23 and 4(2)(a)
[5] SS Act; s 1064-A2
Ordinary income test: Module E
In this case, I am concerned with the application of the ordinary income test using Module E to work out the income reduction and, ultimately, the income reduced rate for each of Mr and Mrs Howie. Point 1064-E1 sets out six steps:
(1)work out the amount of the person’s ordinary income on a yearly basis;
(2)work out the person’s ordinary income free area under point 1064-E4;
(3)work out whether the person’s ordinary income exceeds the person’s ordinary income free area;
(4)work out the person’s ordinary income excess:
(a)if the person’s ordinary income does not exceed the person’s ordinary income free area, the person’s ordinary income excess is nil; and
(b)if the person’s ordinary income does exceed the person’s ordinary income free area, the person’s ordinary income excess is the person’s ordinary income free area; and
(5)use the person’s ordinary income excess to work out the person’s reduction for ordinary income using points 1064-E10 to 1064-E12:
(a)a person’s reduction for ordinary income is:
Ordinary income excess x 0.5.
A. The meaning of “ordinary income”
A person’s “ordinary income” is “… income that is not maintenance income or an exempt lump sum” ….[6] A reference to a person’s ordinary income for a period is a reference to that person’s gross income from all sources for a particular period. Other than deductions for certain business income permitted under Division 1A of Part 3.10, no deduction may be made from the person’s gross ordinary income for that period.[7]
[6] SS Act; s 8(1)
[7] SS Act; s 1072 with reference to ss 1074 and 1075
B. The meaning of “income”
The word “income”, is defined in relation to a person to mean:
“(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).
…”[8]
[8] SS Act; s 8(1) Sections 8(4) and (5) exclude certain amounts that are paid to or on behalf of a person under a home equity conversion agreement and s 8(8) excludes a number of payments, none of which is relevant in this case.
The term “income amount” referred to in this definition means:
“(a) valuable consideration; or
(b)personal earnings; or
(c)moneys; or
(d)profits (whether of a capital nature or not).”[9]
[9] SS Act; s 8(1)
Where a person is a member of a couple, the ordinary income for each member of the couple taken on a yearly basis is worked out. The two amounts are then added together and the total divided by two to work out the amount of ordinary income of each of them for the purposes of Module E.[10]
[10] SS Act; point 1064-E2. This does not apply if working out a person’s disability support pension but that is not the situation in this case: Module F.
C. Qualifications to the meaning of “ordinary income”
These are the general provisions relating to the concept of “ordinary income” but there are qualifications to them to be found in other provisions. Other provisions affecting the amount of a person’s ordinary income are to be found in s 1073AA relating to work bonus, ss 1074 and 1075 relating to business income, Division 1B relating to income from financial assets and certain income streams and Division 1C relating to income from income streams not covered by Division 1B. I am concerned with Divisions 1B and 1C.
C.1 Divisions 1B and 1C before 1 January 2015
Divisions 1B and 1C of Part 3.10 of the SS Act deem a person’s financial assets to return a rate of income that is assessed in accordance with their provisions. Division 1B applied to deemed income from financial assets and Division 1C with income streams.
Beginning with Division 1B, a “financial asset” meant, as it still does, a “financial investment” or a “deprived asset”.[11] As defined before the 2014 Amendment Act came into operation on 1 January 2015, a “financial investment” included available money, deposit money, a managed investment, a listed security, a loan that has not been repaid in full, an unlisted public security, gold, silver or platinum bullion or an asset-tested income stream (short term).[12] Those investments are the subject of further definition in s 9. The expression “managed investment” has the meaning given by ss 9(1A), (1B) and (1C). The amount of income that a person was taken to have received each year was a deemed amount determined according to the formulae set out in Division 1B.
[11] SS Act; s 9(1). In general terms, a “deprived asset” is an asset of which a person has disposed: SS Act; s 9(4).
[12] SS Act; s 9(1)
Income streams from account based superannuation funds of the sort held by Mr and Mrs Howie were not regarded as coming within the definition of a “managed investment”. An “asset-tested income stream (long term)” was not a “managed investment”, and so not a “financial investment” or a “financial asset” for the purposes of Division 1B. They were regarded as coming within Division 1C and were not the subject of deeming provisions.
Again before the amendments made by the 2014 Amendment Act with effect from 1 January 2015, Division 1C was concerned with “income streams” that are not family law affected streams. The definition of the expression “income streams” in s 9(1) included various income streams arising under arrangements regulated by the Superannuation Industry (Supervision) Act 1993 (SIS Act), a public sector superannuation scheme, a retirement savings account, provided as a life insurance business or designated as an income stream by the Secretary having regard to the guidelines determined under s 9(1E).[13] Division 1C set out the ways in which income from various income streams was to be determined. Generally, it was the amount returned by the income stream less a certain amount.
[13] SS Act; s 9(1)
C.2 Divisions 1B and 1C on and after 1 January 2015
After the amendments by the 2014 Amendment Act, Division 1C does not apply to an asset-tested income stream (long term) that is an account-based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) or an asset-tested income stream (long term) that is an annuity within the meaning of the SIS Act provided under a contract meeting the requirements determined under an instrument under s 9(1EA) of the SS Act. They are now included in the definition of a “financial investment” in s 9(1) and so a “financial asset” bringing them within the compass of Division 1B.[14] At the same time, they are excluded from the scope of Division 1C by the addition of s 1097A(2) expressly excluding them. Therefore, they came within the provisions of Division 1B as “financial assets” and subject to its deeming provisions.
[14] 2014 Amendment Act; s 3; Schedule 11; Item 4
C.3 Transitional provisions
Part 1 of Schedule 11 to the 2014 Amendment Act contains the amendments bringing about the changes to which I have referred. Part 2 is concerned with the application of those amendments. Item 48 provides that the amendments made by Part 1 apply in relation to working out the ordinary income of a person in relation to days occurring on or after 1 January 2015.
The qualification that applied in Mr and Mrs Howie’s case is set out in Item 48(2):
“However, if:
(a)a person was receiving an income support payment immediately before 1 January 2015; and
(b)either:
(i)an asset-tested income stream (long term), that is an account-based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994, was being provided to the person immediately before 1 January 2015; or
(ii)an asset-tested income stream (long term), that is an annuity (within the meaning of the Superannuation (Supervision) Act 1993) provided under a contract that meets the standards determined in an instrument under subparagraph 1099DAA(1)(b)(ii) of the Social Security Act 1991, was being provided to the person immediately before 1 January 2015; and
(c)since the start of that day:
(i)the person has been continuously receiving an income support payment; and
(ii)that asset-tested income stream (long term) has been provided to the person;
then the amendments made by Part 1 do not apply in relation to the person (the primary beneficiary) and that asset-tested income stream (long term).”
D. Attribution of income
Section 1073 of the SS Act provides for the attribution of certain forms of income in relation to claims for certain allowances. It does not apply to claimants for, or recipients of, an age pension.
Section 1073A does relate to those who receive an age pension for it applies to those in receipt of a social security pension whose rate of payment is worked out with regard to an income test module of a rate calculator. In the case of an age pension, that is Module E in Pension Rate Calculator.[15] It provides:
[15] A “social security pension” includes an age pension: SS Act; s 23(1)
“(1) Employment income:
(a)that is a lump sum amount either:
(i)in respect of a period greater than a fortnight; or
(ii)resulting from remunerative work although not in respect of any particular period; and
(b)that is earned, derived or received, or is taken to have been earned, derived or received, by a person:
(i)who is receiving a social security pension; and
(ii)whose rate of payment of that pension is worked out with regard to the income test module of a rate calculator in this Chapter;
is to be taken to have been earned, derived or received over such period, not exceeding 52 weeks, as the Secretary determines.
(2)The person’s employment income for the period determined by the Secretary is to be reduced to a fortnightly rate rounded to the nearest cent (rounding 0.5 cents downwards).”
Section 1073B also applies to persons in Mr and Mrs Howie’s position. It provides:
“(1) If:
(a)a person is receiving a social security pension or a social security benefit; and
(b)the person’s rate of payment of the pension or benefit is worked out with regard to the income test module of a rate calculator in this Chapter; and
(d)the person earns, derives or receives, or is taken, either by virtue of the operation of section 1073A or any other provision of this Act, to earn, derive or receive, employment income during the whole or a part of a particular instalment period of the person;
the person is taken to earn, derive or receive, on each day in that instalment period, an amount of employment income worked out by dividing the total amount of the employment income referred to in paragraph (d) by the number of days in the period.
(2)If a person has reached pension age and is receiving a social security benefit, subsection (1) does not apply to the person, to the extent that it relates to that benefit.
Note 1:Subsection (1) applies to a person who has not reached pension age and is receiving a social security benefit.
Note 2:For pension age see subsections 23(5A), (5B, (5C) and (5D).”
Both Mr and Mrs Howie have reached “pension age” as that expression is defined in ss 23(5A), (5B), (5C) and (5D). Neither is receiving a “social security benefit”, however, each receives an age pension, which is a “social security pension” and not a “social security benefit” as that term is defined in s 23(1) of the SS Act.[16] Therefore, they are not excluded from the operation of s 1073B(1) by the terms of s 1073B(2).
[16] A “social security benefit” means a widow allowance, youth allowance, austudy payment, newstart allowance, sickness allowance, special benefit, partner allowance, a mature age allowance under Part 21.2B, a benefit (PP) (partnered) or a parenting allowance (other than a non-benefit allowance).
As s 1073B applies, regard must be had to s 1073C, which provides:
“If, in accordance with the operation of s 1073B, a person is taken to earn, derive or receive a particular amount of employment income on each day in an instalment period:
(a)the rate of the person’s employment income on a fortnightly basis for that day may be worked out by multiplying that amount by 14; and
(b)the rate of the person’s employment on a yearly basis for that day may be worked out by multiplying that amount by 364.”
FACTUAL BACKGROUND
The parties did not disagree about the factual matters. They begin with Mr Howie’s working the Easter weekend in 2015. His earnings for the instalment period from 31 March 2015 to 13 April 2015 were $3,644.51. In that period, Mr Howie also had derived $2,987.35 from an allocated pension, bank shares and bank savings. In accordance with the income test that I have set out, his income from all sources was added together and worked out as an annual figure amounting to $48,872.30. The income free area being the sum of $3,692 on an annual basis is then deducted. A further sum is deducted for the taper rate applied to assets above the assets test free area. The taper rate that had regard to Mr and Mrs Howie’s assets meant that an annual income reduction amount of $22,590.15 applied. That exceeded the maximum rate of age pension payable to a couple (who did not receive rent assistance) of $686 or $17,836 per year. Mr and Mrs Howie’s entitlement to age pension in the fortnight ending 13 April 2015 was nil. They received payments of age pension in subsequent fortnightly periods but at an amount that was less than they had previously received. That was as a result of the treatment of their income streams under Division 1B, rather than under Division 1C, of Part 3.10.
HAVE MR AND MRS HOWIE BEEN CONTINUOUSLY RECEIVING AGE PENSION?
The issue is whether, despite the nil payment of age pension for one fortnight, they have “been continuously receiving an income support payment”. Resolution of the issue requires consideration of what is meant by “continuously receiving” an income support payment, which, as defined in s 23(1), includes an age pension. I note that the word “continuously” means “… 1. incessant. 2. unbroken; uninterrupted. …”.[17] In the context of income maintenance, the relevant meanings of the word “receive” include “… 1. to get, be given or accept (something offered, sent, etc). …”.[18] Taken together, the expression “continuously receiving” would seem to mean that the issue is whether Mr and Mrs Howie have been given age pension in an unbroken or uninterrupted fashion.
[17] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[18] Chambers
Although that would seem to be so, I am also mindful that care must be taken to understand the whole expression and not by simply understanding the words separately. This point was made by Tamberlin J in Visa International Service Association v Reserve Bank of Australia:[19]
“In interpreting the definition of ‘payment system’ it is also important to bear in mind that an unduly analytical approach in the sense of analysing each word separately and then seeking to reconstruct the terms used by reference to the definitions can often lead to an artificial interpretation. It is necessary to bear in mind that the definition is a collocation of words selected as a whole and that sense must be given to the expressions read together as an entirety rather than to individual words added to each other: cf Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, at 398-401. To similar effect is the observation by Learned Hand J in, Helvering v Gregory [1935] USSC 5; (1934) 69 F.2d 809, at 810-811, where his Honour stated, with elegance and precision, that:
‘... the meaning of a sentence may be more than that of separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.’”[20]
[19] [2003] FCA 977; (2003) 131 FCR 300
[20] [2003] FCA 977; (2003) 131 FCR 300 at [293]; 370
The setting in which the expression “continuously receiving” is that of the SS Act in general terms. In more specific terms, it is found in the provisions providing for the transition of the way in which certain account-based pension and annuities are treated under the income test. The date of the transition is 1 January 2015 and the way in which they are treated from and after that date is quite different from the way in which they were treated before that date. The Explanatory Memorandum to the Social Services and Other Legislation Amendment Bill 2013 (2013 Bill) makes it clear that the combined effect of the amendments was:
“… that an asset-tested income stream (long term) that is an account-based pension or annuity will no longer be subject to the rules for assessing income that apply to most income streams. Instead, by including these asset-tested income streams (long term) in the definition of financial investment, they will be subject to the general rules for assessing income that apply to financial investments.”
The reason for the change from one form of treatment to another was also explained in the Explanatory Memorandum:
“For account-based income stream products assessed from 1 January 2015, the deeming provisions will apply. In effect, the deeming rates will apply to the combined value of a persons [sic] financial assets, including the current account balance of any account-based income streams, to calculate the amount of deemed income that is to be assessed under the income test to determine a persons [sic] pension entitlement.
Under the current income test rules for account-based income streams, income received by a person is reduced by an amount reflecting ,, [sic] return of capital. This amount is calculated by purchase price by the persons [sic] life expectancy at purchase. These rules often result in little or no income being assessed for these products and, accordingly, higher rates of income support payments and social security outlays.
The current income test rules favour people who can only afford to draw down the minimum amount from their income stream each year. Many of these people have no income from their income stream assessed against their pension.
People who draw down significantly larger amounts, including those who need to, would be better off under deeming rules compared to the current income test rules.
The change will improve the sustainability and equity of the income support system. It will assess financial investments held within account-based income streams in the superannuation environment in the same way as the majority of financial investments held outside of the superannuation system.
Account-based income streams held by income support recipients immediately before 1 January 2015 are grandfathered, and continue to be assessed under existing income test rules.”
This passage makes it clear that, if a person does not change his or her account-based streams, the assessment will be made under the provisions of Division 1C as before and not under the deeming provisions of Division 1B. What the passage and the Explanatory Memorandum does not address is the effect of the transition provisions.
The transition provisions need to be considered in the context of the SS Act and, in particular, in the context of the age pension provisions. Like other pensions, benefits and allowances for which it makes provision in Part 2, Part 2.2 deals separately with qualification for the age pension and its payability. Section 43, which is found in Subdivision A of Division 1 of that Part, sets out the circumstances in which a person is qualified for an age pension. Subdivision B is concerned with payability. I have already referred to s 44, which provides that an age pension is not payable if the pension rate is nil. In general terms, ss 47 and 47A provide that an age pension is not payable if the person, who is qualified to receive it, is already receiving certain other pensions or benefits. A person may continue to be qualified for an age pension under s 43 but will not receive it if it is not payable under ss 47 or 47A.
That distinction would seem to underlie the transition provisions in Item 48 of Schedule 11 to the 2014 Amendment Act. A person’s qualification for an age pension will be unbroken or uninterrupted, and so continuous, once the criteria in s 43 have been met. Payability need not be unbroken or uninterrupted, and so continuous because it depends on whether or not a person is entitled to certain other pensions or payments or, more relevantly in this case, the rate at which age pension being a rate that exceeds nil. If it is not payable, it cannot be received and so receipt cannot be unbroken or uninterrupted, and so continuous. If this is correct, Mr and Mrs Howie cannot be regarded as having been continuously in receipt of an income support payment since 1 January 2015. They would not be entitled to have their asset-tested income stream (long term) assessed under Division 1C as had been the case before 1 January 2015. Instead, it would be assessed under the deeming provisions of Division 1B.
That view does not take into account s 38B of the SS Act. The AAT1 review considered that the deeming provisions in s 38B(3) operated to deem Mr and Mrs Howie to be in receipt of age pension for the fortnight in which the rate at which it was payable was nil. I will set out the whole of s 38B:
“(1) The object of this section is to treat a person in certain circumstances as having received an income support payment in respect of a continuous period even though the person did not actually receive such a payment during a part or parts of the period.
(2)A continuous period in respect of which a person has received income support payments can only start on a day on which the person is receiving such a payment and can only end on a day when the person is receiving such a payment, and the following provisions of the section have effect subject to this section.
(3)Subject to subsection (4), in determining the continuous period in respect of which a person has received income support payments, any period of not longer than 6 weeks in respect of which the person did not receive an income support payment is taken to have been a period in respect of which the person received such a payment.
(4)If a person is taken, because of subsection (3), to have received income support payments in respect of a continuous period of at least 12 months, then, in determining, as at a time after the end of that period of 12 months, the continuous period in respect of which the person has received income support payments, any period of not longer than 13 weeks in respect of which the person did not receive an income support payment is taken to have been a period in respect of which the person received such a payment.
(5)In determining for the purposes of subsection (4) the length of a period in respect of which a person did not receive an income support payment, any part of the period that occurred immediately before the end of the period of 12 months referred to in that subsection is to be taken into account.
EXAMPLE OF APPLICATION OF SUBSECTION (5)
Facts:
John receives an income support payment for 48 weeks. He is then employed for 14 weeks. After the 14 weeks he again begins to receive an income support payment. How does his break in payments affect the calculation of his continuous period of receipt of income support payments?
Application:
At the end of the first 4 weeks of John’s employment he may be taken, under subsection 38B(3), to have received income support payments for a continuous period of 12 months because no longer than 6 weeks have elapsed since he actually received such a payment.
Therefore, as John may be taken to have accrued 12 months continuous receipt of income support payments, he may have a period, under subsection 38B(4), of not longer than 13 weeks without income support payments and still be taken to be in continuous receipt.
However, under subsection 38B(5), the period of not longer than 13 weeks allowed under subsection 38B(4) must include the period of 4 weeks that occurred immediately before, as well as the 10 weeks immediately after, John was taken to have accrued 12 months duration.
As his total period in which he did not receive income support payments was 14 weeks, it exceeds the 13 weeks allowed under subsection 38B(4). His continuous period in receipt of income support ceased, under subsection 38B(2), on the last day he received payment before he started employment.
A new period of continuous receipt of income support payments will begin when John resumes income support payments after his 14 week break.
(6) For the purposes of this section, a person who was receiving an income support payment is taken to have continued to receive the payment in respect of a period if:
(a) for the duration of the period, the person remained qualified to receive the income support payment by the operation of the exercise of the discretion under:
(i) section 516 of this Act as in force at a time before 20 September 1996; or
(ii)section 595 of this Act (disregard a period of employment);
but the person’s rate of payment was reduced to nil because of the operation of:
(iii) section 1067G, 1067L or 1068 of this Act; or
(b) the period was a compliance penalty period that applied to the person in respect of the income support payment; or
(c) subsection 547AA(1), 615(1) or 771HF(1) applied to the person in respect of the income support payment for the duration of the period.
Note: For income support payment see subsection 23(1).”
An age pension is an “income support payment” within the meaning of s 23(1) as is each of the payments that is the subject of the provisions to which I am about to refer. Examples of the circumstances in which the deeming provisions of s 38B might operate are found in ss 16A(1A), 82(6), 146V, 237(6) and 598(6). Taking s 598 as an example, it provides for a liquid assets waiting period in relation to a claim for a newstart allowance. Section 598(6) ameliorates the operation of that waiting period in the circumstances in which it applies when it provides:
“Subsection (1) does not apply to a person who becomes qualified for newstart allowance at the end of a continuous period in respect of which the person received income support payments (whether or not the kind of payment received has changed over the period and whether the period or any part of it occurred before or after the commencement of this subsection).
Note 1:For income support payment see subsection 23(1).
Note 2:For the determination of the continuous period in respect of which a person received income support payments see section 38B.”
Putting aside the clear signpost to s 38B placed in Note 2, the wording of the substantive text of s 598(6) points to s 38B. It requires an assessment of whether a person became qualified for newstart allowance at the end of a “continuous period in respect of which the person received income support payments”. That language mirrors that of s 38B.
The language of the other sections I have given as examples also mirrors that of s 38B although not as precisely and no reference is made to s 38B in a note. Section 82 is concerned with qualification for bereavement payments. One of the criteria for qualification is that the person’s partner was a “long-term social security recipient”.[21] Section 82(5) defines a “long-term social security recipient” as:
[21] SS Act; s 82(1)(d)(iii)
“(5) For the purposes of this section, a person is a long term social security recipient if:
(a)a person is receiving a social security benefit; and
(b)in respect of the previous 12 months, the person:
(i)was receiving a social security pension; or
(ii)was receiving a social security benefit; or
(iia)was receiving a youth training allowance; or
(iii)was receiving a service pension or income support supplement.”
Section 82(6) is a deeming provision. It provides that:
“A person is taken to satisfy the requirements of paragraph (5)(b) if:
(a)the person was receiving one or a combination of the payments referred to in that paragraph for a continuous period of 12 months; or
(b)the person was receiving one or a combination of the payments referred to in that paragraph for 46 weeks of the previous 52.”
Each of the payments referred to in s 82(5) is an income support payment as defined in s 23(1). Arguably, the deeming provisions of s 38B(3) would apply if the person did not receive one of them for a period of up to six weeks. The language is not precisely the same as that in s 38B but both refer to the continuous period in respect of which a person has received income support payments.
The language of Item 48(2)(c) in Schedule 11 does not mirror the language of s 38B when it refers to a person’s having been “continuously receiving an income support payment”. It does not refer to a “period in respect of which the person has received” the payment but to the person’s having been “continuously receiving” it. The difference in wording is crucial. Item 48(2)(c) is not concerned with payments over an extended period and whether that can be called a “continuous period” as is s 38B but with the fact of actual receipt of an income support payment and the continuity of that receipt. Whether a person is receiving a payment is assessed from moment to moment and not over a period.
The focus is on actual receipt of an income support payment. That is consistent with the policy underpinning the amendments made by the 2014 Amendment Act to the effect that all account-based income stream products would be subject to the deeming provisions of Division 1B of Part 3.10 of the SS Act. The intention of the transitional provisions would seem to be that the change would not affect those persons whose circumstances remained the same i.e. they did not change their account-based income stream products and they continued to receive an income support payment. There is no room for the deeming provisions of s 38B to apply.
DECISION
For the reasons I have given, I set aside the decision dated 2 November 2015 of the AAT1 review. In its place, I substitute a decision affirming the decision of the delegate of the Secretary dated 14 April 2015 and affirmed by an ARO on 5 August 2015. That means that Mr and Mrs Howie’s account-based income stream products are assessed by reference to the deeming provisions under Division 1B, and not under Division 1C of Part 3.10, after the fortnight ending 13 April 2015.
| I certify that the preceding 42 (forty two) paragraphs are a true copy of the reasons for the decision herein of Deputy President S A Forgie |
........[sgd]...............................................................
Associate
Dated: 25 July 2017
| Dates of hearing: | 27 January 2017 and 24 February 2017 |
| Advocate for the Applicant: | Mr Tim Noonan |
| Respondents: | In person |
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