Hurry; Secretary, Department of Social Services and (Social services second review)
[2016] AATA 94
•23 February 2016
Hurry; Secretary, Department of Social Services and (Social services second review) [2016] AATA 94 (23 February 2016)
Division
GENERAL DIVISION
File Number(s)
2015/2046
Re
Secretary, Department of Social Services
APPLICANT
And
Ken Hurry
RESPONDENT
DECISION
Tribunal Senior Member J F Toohey
Date 23 February 2016 Place Sydney The decision under review is set aside and in substitution the Tribunal decides that the discretion to accept a late application for registration under the Pension Bonus Scheme should not be exercised in Mr Hurry’s favour.
.............................[sgd]...........................................
Senior Member J F Toohey
CATCHWORDS
SOCIAL SECURITY – pension bonus scheme – late registration – meaning of gainful work – whether discretion to treat activity as gainful work should be exercised – whether respondent met record-keeping requirements – whether record-keeping requirements should be waived – decision under review set aside
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth) ss 92C, 92H, 92Q, 92T, 92U, 92X, 92Y, 93C
Social Security (Administration) Act 1991 (Cth)Social Security and Veterans' Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998 (Cth)
CASES
Beadle and Director-General of Social Security (1984) 6 ALD 1
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Groth and Secretary, Department of Social Security [1995] FCA 1708
Polchow and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 224
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] AATA 179
Re Ivovic and Director-General of Social Services [1981] AATA 57
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Senior Member J F Toohey
23 February 2016
BACKGROUND
This matter concerns an application by Mr Ken Hurry for registration for membership of the Pension Bonus Scheme (PBS).
The PBS is a scheme by which a person who qualifies for the age pension may accrue a bonus by remaining in paid work and deferring receipt of the pension; the longer the deferral, the greater the bonus to which a person may be entitled. The scheme is now closed to new registrations but that has no bearing on these proceedings.
The requirements for qualification for the pension bonus are in s 92C of the Social Security Act1991 (Cth) (the Act). They include the requirement that a person register for the PBS within the period that commences 13 weeks before, and ends 13 weeks after, he or she reaches pension age: s 92H(1).
Mr Hurry turned 65, and reached age pension age, on 8 May 2005. On 22 April 2014, he applied to register for the PBS. There is no dispute that his application was nearly nine years late. On 24 October 2014, Centrelink decided that the discretion to accept a late application for registration could not be exercised in Mr Hurry’s favour because he did not pass the work test in the Act.
Mr Hurry sought review of Centrelink’s decision by the Social Security Appeals Tribunal (“the SSAT”, now the Social Services and Child Support Division of the Administrative Appeals Tribunal). On 5 March 2015, the SSAT determined that Mr Hurry qualified to be registered for the PBS from 8 May 2005 when he reached age pension age and that he was entitled to payment on the basis that he satisfied the work test from that date to 22 April 2014 when he applied for registration. The Secretary seeks review of that decision.
THE POLICY UNDERLYING THE PBS
Introducing the Social Security and Veterans' Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998 (Cth), Senator Jocelyn Newman described the PBS as follows:
The scheme will apply to people who qualify for age pension (or equivalent Veterans' Affairs payments) but who delay their retirement and keep working. Eligible customers will receive a tax free lump sum bonus payment when they stop working, in addition to commencing to receive their ongoing age pension or Veterans' Affairs equivalent. This measure, by offering people an incentive to keep working, will assist in reducing the ratio of retired people to working people and will increase the financial well-being of older Australians. This will be particularly helpful for women and small family business owners.
The Senate Community Affairs Legislation Committee, at page 2 of its report on the Bill, described the objectives of the PBS as being to:
·increase labour market participation of retirement age persons;
·allow people who defer their pension to increase their retirement savings during the deferment period; and
·restrain growth in pension outlays.
The Committee said:
The Scheme also recognises the contribution made by people who remain in employment and defer their age pension by providing a reward for this behaviour. The Scheme has a strong labour market focus, being targeted at those who already have a substantive attachment to the workforce upon reaching retirement age, and intend to continue to undertake substantial work.
The policy underlying the 13-week time limits for registration was explained by the Committee as being “to minimise the capacity of people to disperse or reduce their retirement savings following the cessation or reduction in work” (at page 3).
RELEVANT LEGISLATION
The intention and overall scheme of the PBS may be straightforward enough, but the legislation is complex and detailed.
Section 92C of the Act provides that a person qualifies for a pension bonus if:
(a)both:
(i) the person starts to receive an age pension at or after the time when the person makes a claim for the pension bonus; and
(ii) that age pension is received otherwise than because of a scheduled international social security agreement (see section 5 of the Social Security (International Agreements) Act 1999); and
(b)the person has not received an age pension at any time before making a claim for the pension bonus; and
(c)the person is registered as a member of the pension bonus scheme; and
(d)the person has accrued at least one full-year bonus period while registered as a member of the pension bonus scheme; and
(e)the person has not received:
(i) a social security pension (other than an age pension or a carer payment); or
(ii) a social security benefit; or
(iii) a service pension (other than a carer service pension); or
(iv) an income support supplement (other than an income support supplement that is payable as a result of the operation of subclause 8(3) of Schedule 5 to the Veterans' Entitlements Act);
at any time after the person qualified for an age pension; and
(f)the person has not already received:
(i) another pension bonus; or
(ii) a bonus under Part IIIAB of the Veterans' Entitlements Act; or
(iii) DFISA bonus under Part VIIAB of the Veterans' Entitlements Act.
Put briefly, to qualify for payment, a person must register within the statutory period and then accrue at least one full-year bonus period before claiming the pension bonus. It is common ground that Mr Hurry did not register for membership of the PBS within the statutory period.
Section 92T concerns the accrual of bonus periods. Relevantly, it provides:
Full-year bonus period
1The first bonus period that accrues to a person is the full-year period of the person's accruing membership of the pension bonus scheme:
…
(b)for which the person passes the work test.
…
Part-year bonus period
3A part-year period of the person's accruing membership of the pension bonus scheme is a bonus period that accrues to the person if:
(a)the person passes the work test for that period; and
…
For present purposes, it is not necessary to go into the provisions concerning the effect of accruing a part-year bonus period.
A person cannot accrue more than one bonus period unless those periods are consecutive, or are separated by a period of non-accruing membership: s 92T(4). A period of non-accruing membership is one in which a person is unable to satisfy the work test because of, for example, imprisonment or confinement in a mental health facility: s 92Q. It is common ground that there are no periods during which Mr Hurry had non-accruing membership.
Provisions concerning when a person must claim a pension bonus are in the Social Security (Administration) Act 1991 (Cth). In summary, a person must make a claim for the pension bonus if he or she lodges a claim for age pension or if he or she fails to accrue a bonus period (unless declared to be a non-accruing member).
The effect of these provisions is that, in order to receive the pension bonus, Mr Hurry must satisfy the work test for each full-year period from 8 May 2005, when he reached age pension age, to 22 April 2014 when he applied for registration for membership of the PBS.
Section 92U of the Act concerns the work test. It provides, relevantly, that a person passes the work test for a full-year period if:
(a)in any case--the person satisfies the Secretary that the total number of hours gainfully worked by the person during that period was at least 960 and that at least 640 of that total number of hours were worked in Australia;
…
and either
(d)the person satisfies the Secretary that the applicable record-keeping requirements (see section 93C) have been complied with in relation to that period; or
(e)the Secretary decides to waive compliance with the applicable record-keeping requirements in relation to that period.
Gainful work is work for financial gain or reward, whether as an employee, a self-employed person or otherwise, that involves a substantial degree of personal exertion on the part of the person concerned: s 92X
By s 92Y, the Secretary has discretion to treat activity as gainful work if satisfied that:
(a)the person, or the person’s partner, has engaged in a particular activity; and
(b)the activity involves a substantial degree of personal exertion on the part of the person or the person’s partner, as the case may be; and
(c)the activity does not consist of voluntary work for a charitable, welfare or community organisation; and
(d)because of special circumstances, the activity should the treated as gainful work;
As it was at the time of Mr Hurry’s application for registration, s 92H of the Act provided that the Secretary could extend the period within which a person had to lodge an application: s 92H(3). This was qualified by s 92H(4) which provided:
4The Secretary must not make a decision to extend the period within which a person must lodge an application unless, if it were assumed that the person had been a member of the pension bonus scheme throughout the pre-application period:
….
(b)both:
(i) the person would have been an accruing member for some or all of the pre-application period; and
(ii) the person would have passed the work test for each test period that is applicable to the person.
The combined effect of these provisions is that, unless Mr Hurry passes the work test for each year from 8 May 2005 to 22 April 2014, the period within which he had to register for the PBS must not be extended.
The Secretary has prepared a Guide to Social Security Law (“the Guide”) to assist decision-makers to interpret and apply social security legislation. While not binding, the Guide represents government policy and should be applied by the Tribunal unless there is good reason not to do so: Re Drake and Minister for Immigration and Ethnic Affairs (No 2)[1979] AATA 179. Relevant parts of the Guide are considered below.
CONTENTIONS
Save for a period around December 2006 when he received the proceeds of the sale of a business, Mr Hurry acknowledges that he received no financial gain or reward for his activity throughout the relevant period. He contends, however, that the activity in which he was engaged throughout that period should be treated as gainful work.
As to the record-keeping requirements, Mr Hurry contends that the information he has provided about the nature and extent of the activity in which he was engaged is sufficient to establish that he was engaged in that activity for at least 960 hours in each full-year period. Alternatively, he contends that the record-keeping requirements should be waived.
The Secretary disputes both contentions.
INFORMATION BEFORE THE TRIBUNAL
The Secretary has provided the Tribunal with three bundles of documents in accordance with s 37 of the Administrative Appeals Tribunal Act1975 (Cth) (“T-documents”).
Mr Hurry has submitted extensive documentation including a lengthy written statement detailing: the work undertaken by companies of which he was, or is, managing director; the time he has spent on research and related activities; and copies of reports he has produced based on that research. He has also submitted supporting letters from two accountants concerning the hours in which he was engaged in those activities. He gave oral evidence at a hearing on 18 January 2016.
MR HURRY’S CENTRELINK CLAIMS
Mr Hurry obtained a diploma in structural engineering in 1970. He has been involved in a number of businesses and trusts since then.
In September 2004, Mr Hurry applied for newstart allowance on the basis that his businesses were running a loss and he had no income. His application was refused on the ground that his assets exceeded the allowable limit. In April 2005, he made a “Claim for consideration under hardship”. The purpose of such claim is to seek special consideration where the application of the assets test creates severe financial hardship. After initially refusing Mr Hurry’s claim, Centrelink decided it should be granted.
In September 2005, Centrelink cancelled Mr Hurry’s newstart allowance as it was no longer payable once he reached age pension age. Correspondence followed between Mr Hurry and Centrelink which it is not necessary to detail here.
In March 2008, Mr Hurry applied for the age pension. He indicated he did not wish to claim the pension bonus. I accept that he may have been confused, and meant to indicate that he would await the outcome for his claim for age pension before applying to register for the PBS. His claim for age pension was rejected on the ground that his assets exceeded the allowable limit. Mr Hurry disputed the assessment of his assets and sought consideration under the hardship provisions. His claim was rejected.
Mr Hurry contacted Centrelink again in February 2014 and advised of his intention to claim the age pension. On the relevant claim form, he indicated he did not wish to register for the PBS. His claim for age pension was rejected again. On 22 April 2014, he applied to register for the PBS.
IKI INTERNATIONAL TRADING PTY LTD
At the time he reached age pension age, Mr Hurry was managing director of IKI International Trading Pty Ltd (IKI) a company he describes as a “start up business”. Mr Hurry describes the business of IKI as “researching and then sourcing suitable products globally” and “importing and sending steel frame front entrance doors from China”.
IKI had not earned a profit since starting in about 1997. Mr Hurry had not drawn an income from the business and had been living on a home equity loan and the proceeds of a property sale. The assets that were taken into account in assessing his claims for newstart allowance and age pension comprised loans by various companies and trusts in which Mr Hurry was involved, and personal loans. Mr Hurry maintains the loans were not realisable for various reasons.
Mr Hurry says he worked 40 to 50 hours each week at IKI from when it commenced until December 2006 when he sold the company for $112,000 ($100,000 for goodwill and $12,000 for stock).
REAL HEALTH CARE REFORM PTY LTD
In early 2007, Mr Hurry established Real Health Care Reform Pty Ltd (RHCR) for the purpose of pursuing his interest in the health system and health care in general. He gave evidence, which I accept, that he has always had an interest in health and in helping people. He therefore decided to investigate aspects of the health care system in Australia as “things just didn’t seem to add up”.
Mr Hurry says that each area he started to investigate led him into other “uncovered areas of great concern”. He has now investigated, or is in the process of investigating, 140 areas of the health system including hospital practices, food and chemical intolerance, patient safety, the effects of medications, childbirth, mental illness including post-traumatic stress disorder and post-natal depression, sudden infant death syndrome, ADHD, misdiagnosis by doctors, preventable medical errors, breast screening and breast cancer, children’s health and domestic violence.
Mr Hurry pursued his investigations by means of internet and library searches, and correspondence with individuals and organisations. He acknowledges he has no formal qualifications in health care or research but says his background as a company manager and his experience investigating and analysing business opportunities equips him for the task. Moreover, he regards his lack of any medical qualification or experience as giving him the independence and objectivity necessary for the task.
RHCR has completed seven reports of the results of Mr Hurry’s investigations with recommendations for change. They cover: the effects of food and chemical intolerance and “how they are ignored by doctors”; the “immense harm” caused to soldiers by the PTSD treatment used by the Australian Defence Force; Australian aged care; “the startling truth” about dementia, Alzheimer’s and Parkinson’s disease; the causes of, and cures for, domestic violence; the causes of, and cures for, mental health; and a report on “Changing Australia for the good of all”. RHCR has also prepared written recommendations to the National Commission of Audit for savings of up to $60 billion per year in the health system.
As I understand it, Mr Hurry’s intention has always been that his reports would be submitted to government and others for purchase. He has provided the Tribunal with copies of letters sent between November 2009 and November 2014 to “prospective buyers”: Nicola Roxon MP, then Federal Minister for Health; Mike Baird, Premier of New South Wales; Senators Nick Xenophon and Jacquie Lambie; Clive Palmer MP; Slater and Gordon, lawyers; and media outlets Channel 7, Fairfax Media and the ABC. The letters outline RHCR’s investigations into various aspects of health care, and seek meetings or advise that its reports are available for sale. Nothing in any of the replies which are before the Tribunal suggests that any of the writers wished to pursue the invitation.
Mr Hurry maintains that the work of RHCR requires a “significant investment in time and research” for which he anticipates a substantial reward in the future once his research is completed. He considers the anticipated reward will be compensation, in the form of income from sales, for the lack of income in the years he spent completing his research. He likens himself to an author who has a manuscript accepted after many unpaid years and finally achieves financial reward.
SHOULD MR HURRY’S ACTIVITY BE TREATED AS GAINFUL WORK?
I accept there was a period between May 2005, and around December 2006 when he sold IKI, when Mr Hurry’s activity as managing director of IKI might be treated as gainful work. However, I am not satisfied on the information before me that he was engaged in that activity for 960 hours per year or its equivalent. Moreover, Mr Hurry did not comply with the record-keeping requirements and, for the reasons below, I am not persuaded that compliance with those requirements should be waived in his case. It follows that I am not satisfied that Mr Hurry passed the work test for that period.
In any event, even if I accept that Mr Hurry passed the work test for that period, I am not satisfied that he passed it in any of the subsequent years up to when he applied for registration.
In order to treat activity as gainful work, it must bear some real resemblance to gainful work. I agree with the description by the Tribunal of gainful work in Polchow and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 224 (at para 27):
The work test is based on the expression gainful work. Gainful work is defined as work for financial gain or reward. With respect, simply being a director of a company looking for work cannot satisfy the requirement that the individual has performed work for financial gain or reward. The word financial is defined as: of or pertaining to finance or money matters (The Shorter Oxford English Dictionary). In the context of s 92X(1) of the Act, the word finance means: 1 money affairs and the management of them ▫ Government finance. 2 the money or funds needed or used to pay for something. (Chambers 21st Century Dictionary). The word gain means: 1 to get, obtain or earn (something desirable). The word reward means: 1 something given or received in return for work done, a service rendered, good behaviour, etc (Chambers 21st Century Dictionary). Therefore, it should be apparent that the expression gainful work in the context of the Act means work which involves a substantial degree of personal exertion on the part of the person concerned which results in that person receiving money or some other form of payment for that work.
An activity that has only a remote resemblance to what usually constitutes gainful work should not be treated as such. I accept that financial gain or reward is not always obtained at the same time as the personal exertion to which it is directed. However, the prospect of that gain or reward must be real. Activity which is unlikely to produce an income, or has only a faint prospect of doing so, should not in my view be treated as gainful work. With the greatest respect to Mr Hurry, the prospects of government or other agencies or individuals purchasing reports into complex issues concerning the health system from a person with no experience in that field, and no relevant experience in research, was always remote.
According to the Guide (at 3.4.7.70), the Secretary “may treat an activity as gainful work in situations in which the activity performed by the member appears to meet the spirit of the legislation but cannot be clearly defined as gainful work”. The Guide offers the following examples:
1A member engaged in a business that is temporarily running at a loss. In this case, their activity would be considered as gainful work, provided the activity did not appear to be deliberately contrived to meet the scheme's requirements.
2A member who has to practice for a performance such as a piano recital. The practice time would count as gainful work.
3A member who attends a training course or conference to maintain their qualifications or knowledge to perform their duties.
4A member who is, by the nature of their employment, required to perform tasks to gain employment, such as preparing tenders, which may or may not be successful. The preparation time would be counted as gainful work. This would be the case for people working as consultants.
5A member's time performing jury duty may be counted as gainful work.
Each of these examples suggests a close attachment between the activity in question and one that would constitute gainful work, or an activity during a break in one that otherwise produces some gain or reward. I accept that the “break” could come at the start of the activity but only for so long.
The fact that voluntary work is specifically excluded by s 92Y from being treated as gainful work is a clear indication that, consistent with the stated policy underlying the PBS, actual financial gain or reward is a necessary component of gainful work. Other than on the sale of IKI, Mr Hurry did not earn an income from either business after about 1997. He has obtained no financial gain or reward from RHCR in approximately ten years.
Finally, there must be special circumstances in order for the discretion to treat activity as gainful work to be exercised.
The meaning of the expression “special circumstances” for the purposes of the Act has been considered by the Tribunal and the courts on many occasions. It is “by its very nature incapable of precise or exhaustive definition” and contemplates circumstances that are “unusual, uncommon or exceptional”: Beadle and Director-General of Social Security (1984) 6 ALD 1. In Groth and Secretary, Department of Social Security [1995] FCA 1708, the Court described special circumstances as those that distinguish an applicant’s case from others’ and take it “out of the usual or ordinary case”.
In other cases, the Tribunal has looked to whether strict enforcement of liability would be “unjust, unreasonable or otherwise inappropriate”: Re Ivovic and Director-General of Social Services [1981] AATA 57; and whether any injustice or unfairness would be visited upon the applicant that is not visited upon all other recipients of social security payments: Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.
It might be thought unusual or out of the ordinary for a person to spend the very considerable time and resources that Mr Hurry has spent on his investigations without financial gain or reward, but that is not sufficient in my view to constitute special circumstances. The clear intention of the PBS is that a person use the accrual period to achieve financial gain or reward, special circumstances. The discretion is to be exercised in that context. I am not satisfied there are special circumstances in Mr Hurry’s case that take it out of the ordinary and warrant the exercise of the discretion.
DID MR HURRY COMPLY WITH THE RECORD-KEEPING REQUIREMENTS; IF NOT, SHOULD THE REQUIREMENTS BE WAIVED?
As it applies to Mr Hurry, s 93C sets out the following record-keeping requirements:
1For the purposes of the application of paragraph 92U(a) or 92V(1)(a) or subsection 93B(1) or (3) to a person, the applicable record-keeping requirements have been complied with in relation to a period of the person's accruing membership of the pension bonus scheme if:
(a)in a case where the person has:
(i) been given a group certificate or payment summary (within the meaning of section 16-170 in Schedule 1 to the Taxation Administration Act 1953 ) in respect of any gainful work carried on by the person during that period; or
(ii) lodged an income tax return that relates to any gainful work carried on by the person during that period;
the person would be in a position to produce a copy of the certificate or of the return, as the case may be, to the Secretary if the Secretary were to require the person to produce that copy; and
(b)both:
(i) the person has kept a recognised work record (see subsection (3)) in relation to gainful work carried on by the person during that period; and
(ii) the person would be in a position to produce that record to the Secretary if the Secretary were to require the person to produce that record.
…
3For the purposes of this section, a recognised work record, in relation to a person, is a written statement signed by the person that sets out, in relation to gainful work carried on by the person during a particular period:
(a)the nature of the gainful work; and
(b)the dates on which the gainful work was carried on; and
(c)the total number of hours gainfully worked; and
(d)the total number of hours gainfully worked in Australia; and
(e)in a case where any of the gainful work was carried on in the capacity of employee--the name or names of the employer or employers concerned; and
(f)such other particulars as the Secretary requires.
Mr Hurry asserts that he worked continuously for at least 40 hours each week for 50 weeks each year for IKI, and has worked those same hours for RHCR up to the present time. He maintains that the extensive nature of his investigations and his completed reports speak for themselves.
In support of his claim, Mr Hurry has submitted a letter dated 24 April 2014 from Mr Brian Johnson, his accountant from 1996 to June 2007. Mr Johnson states he was required, for his work, to visit Mr Hurry at IKI’s premises at least monthly, and sometimes weekly, and can confirm that he worked for at least 40 hours each week.
Mr Hurry has also submitted a letter dated 17 April 2014 from Ms Katreana Hughes, his accountant since 2011. Ms Hughes states:
I understand that Mr Hurry would be spending at least 40 hours per week working in and on his new venture “Real Health Care Reform” and whilst there is currently no financial rewards as the research is yet incomplete there certainly is an anticipation of financial reward once completed and sold. That income cannot be produced until the intricate amount of research and reporting is completed and suitable buyers negotiated with.
I accept Mr Hurry’s evidence that he was unable to obtain a similar letter from his accountant between 2007 and 2011 for reasons of cost.
The letters from Mr Johnson and Ms Hughes are of little, if any, assistance. They are in very general terms and neither was in a position to verify the hours that Mr Hurry worked. For the purposes of these proceedings, I given them no weight.
Mr Hurry has not kept a recognised work record or any record resembling the requirements of s 93C. It is not enough simply to say the reports “speak for themselves”. The record-keeping requirements are necessary because the assessment of the scheme is largely retrospective: the Guide at 3.4.7.60. The requirement to work the hours necessary to accrue a bonus period is an integral part of the PBS aimed at ensuring a person actually increases their income while accruing a pension bonus. In Mr Hurry’s circumstances I am not satisfied that requirements should be waived.
CONCLUSION
I accept that Mr Hurry has spent a great deal of time in his investigations and report-writing. However, for the reason I have given, I am not satisfied that his activity should be treated as gainful work for the purposes of the PBS. Nor am I satisfied that the record-keeping requirement should be waived. It follows that Mr Hurry does not pass the work test throughout the relevant period, and an extension of time in which to apply for registration for membership of the PBS must be refused.
For these reasons, the decision under review is set aside and in substitution the Tribunal decides that the discretion to accept a late application for registration under the Pension Bonus Scheme should not be exercised in Mr Hurry’s favour.
I certify that the preceding 62 (sixty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey .............................[sgd]...........................................
Associate
Dated 23 February 2016
Date(s) of hearing 18 January 2016 Counsel for the Applicant Mills Oakley Lawyers Solicitors for the Applicant Department of Human Services Respondent In person
Key Legal Topics
Areas of Law
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Administrative Law
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Statutory Interpretation
Legal Concepts
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Judicial Review
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Procedural Fairness
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Statutory Construction
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