John Dedes and Secretary, Department of Education, Employment and Workplace Relations
[2012] AATA 430
•10 July 2012
[2012] AATA 430
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/0367
Re
John Dedes
APPLICANT
And
Secretary, Department of Education, Employment and Workplace Relations
RESPONDENT
DECISION
Tribunal Deputy President D G Jarvis
Date of written reasons 10 July 2012 Place Adelaide The decision under review is affirmed.
........................................................................
Deputy President D G Jarvis
CATCHWORDS
SOCIAL SECURITY - Newstart allowance - income maintenance period - calculation of income maintenance period from termination payment - held that calculation of period is dependent on the period represented by the termination payment, and not on income received prior to the commencement of the period - decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth), ss 1068-G7AH and 1068-G7AQ
CASES
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Re Finch and Secretary, Department of Education, Employment and Workplace Relations (2009) 112 ALD 171
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Deputy President D G Jarvis
10 July 2012
The applicant, John Dedes, was employed by the Australian Valuations Office (AVO) from 1 July 2004 until 17 June 2010, when his employment was terminated as a result of involuntary redundancy.
On 8 July 2010 he received a lump sum termination payment from the AVO, comprising four separate components, as listed on his Employment Separation Certificate (ESC). Those components consisted of a payment in lieu of notice and payments for redundancy, annual leave and long service leave. On 8 July 2010 Centrelink received the details of Mr Dedes’ termination payment, and decided to impose an income maintenance period (IMP) on his Newstart allowance (NSA).
Mr Dedes applied for review of that decision, which was affirmed by an Authorised Review Officer (ARO) on 24 August 2010. It was subsequently set aside by the Social Security Appeals Tribunal (SSAT) on 28 October 2010 and remitted to Centrelink for reconsideration in accordance with certain directions, including relevantly that the payment in lieu of notice was not a termination payment. This finding was based on my earlier decision in the matter of Re Finch and Secretary, Department of Education, Employment and Workplace Relations[1]. It is common ground that the finding to exclude the payment in lieu of notice is not an issue in present proceedings.
[1] (2009) 112 ALD 171.
On 16 December 2010 Centrelink, among other things, implemented the SSAT’s finding to exclude the payment in lieu of notice and determined a new IMP from 8 July 2010 to 22 June 2011. An ARO purported to affirm this determination on 16 November 2011 (although I note that the ARO in fact varied the IMP to end on 30 June 2011, but also waived recovery of the one week of NSA overpayment, as the calculation of the shorter period was due to Centrelink error).
On 18 January 2012 the SSAT purported to affirm the decision of 16 December 2010 to apply an IMP from 8 July 2010 to 22 June 2011 (and I again note that the end date should have been 30 June 2011, as the SSAT did not disagree with the ARO’s findings). Mr Dedes has applied to this tribunal for review of the decision to apply the IMP from 8 July 2010 to 22 June 2011.
ISSUE BEFORE THE TRIBUNAL
The issue before the tribunal is whether the IMP was correctly calculated.
BACKGROUND
Mr Dedes was employed by the AVO, in the Australian Taxation Office (ATO), from 1 July 2004. On 30 March 2009 he was granted Sickness allowance from Centrelink and was on leave without pay from his employer. The ATO made an offer of voluntary redundancy on 10 March 2010. On 12 March 2010 he declined this offer.
He then commenced a retention period on 16 March 2010. On 17 June 2010 the ATO advised him that he had been unable to be placed in a suitable job within 3 months since the commencement of the retention period, and accordingly his employment was terminated as at that date[2]. He subsequently issued proceedings against the ATO for wrongful dismissal, and his claim was settled for a lump sum amount pursuant to an agreement dated 15 February 2011[3].
[2] Exhibit R1, T10, page 56.
[3] Exhibit R1, T14, page 61.
On 23 June 2010 Mr Dedes was advised by Centrelink that his Sickness allowance had been cancelled as he no longer had employment to return to. He was granted NSA on the same date, pursuant to the Social Security Act 1991 (Cth) (the Act). He has been receiving a disability support pension since January 2012.
The pay-out from the AVO which Mr Dedes received on 8 July 2010 was made up of a redundancy payment covering a period of 42.91 weeks, payment in lieu of notice for 5 weeks, an amount for annual leave for 21.69 days and an amount for long service leave for 1.75 months[4].
[4] ESC dated 1 July 2010, Exhibit R1, T11, page 57.
On 8 July 2010 Centrelink determined that an IMP applied to Mr Dedes' NSA, and notified him that NSA was not payable until the conclusion of this period.
Mr Dedes applied for review of that determination and of a further determination which took into account the lump sum he recovered from the settlement of his claim for wrongful dismissal. It is not necessary to set out the history of further reviews that followed, other than to state that this resulted in the length of his IMP being varied by subsequent decisions, and culminated in the determination of 16 December 2010 referred to in paragraph 4 above to impose an IMP from 8 July 2010 to 22 June 2011.
Mr Dedes contended that the IMP was incorrectly calculated. He referred to a payslip dated 8 July 2010, for the fortnight preceding his termination date, which showed his annual salary as zero[5]. He contended that, as his ordinary income or wage was zero in the period before the IMP was imposed, Centrelink should have calculated his IMP using the figure of zero as his income, rather than basing the calculation on the salary he received during an earlier period. Accordingly, Mr Dedes contends that his IMP should be nil.
[5] Exhibit A1, annexure 7.
LEGISLATION
Chapter 3 of the Act provides for the rate calculation process applicable to various categories of pensions and allowances, and refers to Modules that apply to calculations for different purposes. The rate of a benefit, including NSA, is set out in a calculator at the end of s 1068 of the Act (Benefit Rate Calculator B). Module G relates to the “income test”, and provides for how to work out the effect of a person’s ordinary income on his or her maximum payment rate[6]. It provides for an IMP in certain circumstances.
[6] Income definitions are set out in s 8 of the Act. “Income” is broadly defined and the definition of “ordinary income” excludes income that is an exempt lump sum. It was not contended that Mr Dedes’ termination payment is an exempt lump sum.
Section 1068-G7AH provides for the method of calculating an IMP. It deems a person who has received a “termination payment” to have received ordinary income for a period equal to the period to which the payment relates. It provides as follows:
“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.”
The meaning of “termination payment” and associated terms are defined in ss 1068-G7AQ and 1068-G7AR as follows:
“termination payment means:
(a) a leave payment relating to a person‘s employment that has been terminated; or
(b) a redundancy payment.
leave payment includes a payment in respect of sick leave, annual leave, maternity leave and long service leave, but does not include an instalment of parental leave pay.”
CONSIDERATION
In addition to challenging the correctness of the IMP, Mr Dedes questioned whether the IMP was correctly calculated given the decision by the SSAT in relation to the settlement amount paid in respect of his unfair dismissal action[7]. The SSAT decided, correctly in my view, that the settlement payment was not a termination payment giving rise to an IMP, but that decision has no relevance to the contentions he has made in the present proceedings. I am satisfied that components of Mr Dedes’ lump sum payment, being redundancy, annual leave and long service leave, were termination payments within the meaning of s 1068-G7AQ of the Act, and gave rise to an IMP[8].
[7] see Exhibit A1.
[8] For completeness, as I stated above, the payment in lieu of notice was also a component of Mr Dedes’ lump sum payment, but was excluded from the calculation of the IMP. The Act has since been amended so that a “redundancy payment” is taken to include “a payment in lieu of notice”, however the amendments only apply to payments made on or after 30 November 2011.
Section 1068-G7AKA stipulates when the IMP starts. It provides as follows:
“Subject to point 1068-G7AKC, if the person is covered by point 1068-G7AH, the income maintenance period starts, subject to point 1068-G7AKB, on the day the person is paid the termination payment.”
Sections 1068-G7AKB and 1068-G7AKC are not relevant to Mr Dedes. I therefore find that the IMP started on the date Mr Dedes received his termination payment, being 8 July 2010.
The combined effect of ss 1068-G7AH and 1068-G7AKA is that Mr Dedes is deemed to have received ordinary income for a period that commenced on 8 July 2010, the date he received the termination payment, and “for a period ... equal to the period to which the payment relates”.
The meaning of “period to which the payment relates” in s 1068-G7AH is defined in s 1068-G7AQ as follows:
“period to which the payment relates means:
(a) if the payment is a leave payment—the leave period to which the payment relates; or
(b) if the payment is a redundancy payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the redundancy) have received from the employment that was terminated—the period for which the person would have received that amount of ordinary income; or
(c) if the payment is a redundancy payment and paragraph (b) does not apply—the period of weeks (rounded down to the nearest whole number) in respect of which the person would have received ordinary income, from the employment that was terminated, of an amount equal to the amount of the redundancy payment if:
(i) the person‘s employment had continued; and
(ii) the person received ordinary income from the employment at the rate per week at which the person usually received ordinary income from the employment prior to the termination.” (emphasis added)
As mentioned above, Mr Dedes contends that the answer to both paragraphs (b) and (c), set out above, must be zero because he was forced on leave without pay for medical reasons and was instead receiving Sickness allowance, and therefore his ordinary income was zero[9].
[9] see Exhibit A1.
This argument is misconceived. There is nothing in s 1068-G7AH that requires consideration of the actual income received prior to the commencement of the period. The relevant provisions are concerned with whether a termination payment was received and the period that the termination payment represented. That period is determined, in the case of leave payments, according to the period to which the payments relate, and in the case of a redundancy payment, according to the period calculated by the employer. Mr Dedes did not question the calculation of the redundancy payment by his employer, or the correctness of the redundancy or leave payments he actually received. I also note that only paragraphs (a) and (b) of the definition of “period to which the payment relates” apply to Mr Dedes, and not paragraph (c).
Mr Dedes also sought to support his contention by reference to the table in Chapter 4.3.4.10 of the Guide to Social Security Law (the Guide). This sets out how to calculate the length of the IMP and provides as follows:
Calculating the length of the IMP
The following table sets out how to calculate the length of the IMP depending on the person's employment situation.
If a person's employment … Then… has ceased, the length of the IMP is calculated by adding together:
(1) the number of weeks (or days) that the leave payments represent, and
(2) the number of weeks that the portion of the redundancy payment based on the employee's wage (e.g. 2 weeks payment for every year of service) represents, and
(3) the number of weeks that the portion of the redundancy payment NOT based on the employee's gross wage (e.g. a gratuity payment) represents. This is obtained by dividing that portion of the redundancy payment by the relevant weekly wage (1.1.R.143) and then rounding down this figure to a whole week figure. A 5 day working week is used.
is continuing, the actual leave period is used instead, as lump sum or periodic leave payments will relate to a definite period. Note: An IMP is calculated using gross amounts of payments not net amounts; that is the total gross leave or redundancy payment and, where relevant, the person's gross relevant weekly wage (1.1.R.143).
The Guide is published by the Secretary to provide assistance to those who administer the Act. While the tribunal is not required to adhere to a policy guide, it should do so unless there is a cogent reason to do otherwise[10]. I am satisfied that no such reason arises in this case, since although the Guide uses language that differs from the wording of the definition of “period to which the payment relates” in s 1068-G7AQ of the Act, it conveys the same meaning as that definition.
[10] See Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60.
Mr Dedes contends that the operative word in the table is “wage”. He relies on the same argument as raised in relation to “ordinary income”, that is, that his wage must be found to be zero. However, the Guide correctly refers to the number of weeks that the redundancy payment represents, and in this case, the IMP was correctly based on the number of weeks which the payment to Mr Dedes represented. The formula in the table corresponds to the definition of “period to which the payment relates” in s 1068-G7AQ, and the Guide must of course be interpreted so as to be consistent with this Act. Mr Dedes’ contention in relation to the Guide is also misconceived, and my analysis at paragraph 23 above applies to the interpretation of the formula in the table.
For the sake of completeness, I add that Mr Dedes’ ESC sets out the period that each type of leave covers[11]. The calculation of those payments is also set out in a letter from the ATO to Mr Dedes dated 1 July 2010 advising of his final entitlements due[12]. This letter shows that the calculation of his various entitlements was based on his previous gross annual income. The ESC also sets out his average gross weekly wage. These figures were used by the AVO to work out Mr Dedes’ entitlements on the termination of his employment. The periods set out in the ESC are the periods that must be used to calculate the total length of the IMP, in accordance with the formula set out in the table and in the Act.
[11] Exhibit R1, T11, page 57.
[12] Exhibit R1, T13, page 59.
I also add that Mr Dedes’ contention that his income should be treated as zero for the calculation of his IMP would be contrary to the intention of s 1068 of the Act, which is to avoid persons who have received a payment that is taken to be income, or are in receipt of other income, from “double dipping” by also receiving social security payments.
The Act also provides, at s 1068-G7AM, that an IMP may be reduced when a person is in severe financial hardship due to unavoidable or reasonable expenditure. Mr Dedes did not make any submissions in relation to this, but on the contrary, he stated that the only issue was the calculation of the IMP. It is therefore not necessary for me to consider the question of hardship.
For the above reasons I find that the IMP was correctly calculated by the ARO as the period from 8 July 2010 until 30 June 2011. However, counsel for the Secretary, Mr A Parker, did not question the decision by the ARO to waive recovery of an overpayment for portion of this period, and so reduce the expiration of the IMP to 22 June 2011. I do not think it appropriate to disturb this aspect of the ARO’s decision.
DECISION
The decision under review is affirmed.
I certify that the preceding 31 (thirty -one) paragraphs are a true copy of the reasons for the decision herein of Deputy President D G Jarvis ........................................................................
Associate
Dated 10 July 2012
Date of hearing 21 June 2012 Applicant In person Advocate for the Respondent Mr A Parker Solicitors for the Respondent Centrelink Program Litigation and Review Branch
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