John Donaldson and Secretary, Department of Employment

[2016] AATA 512

Donaldson and Secretary, Department of Employment [2016] AATA 512 (21 July 2016)

Division	GENERAL DIVISION
File Number	2016/0963
Re	John Donaldson
APPLICANT
And	Secretary, Department of Employment
RESPONDENT

DECISION

Tribunal	Deputy President Dr Christopher Kendall
Date	21 July 2016
Place	Perth

The decision under review is affirmed.

...........................[sgd]................................

Deputy President Dr Christopher Kendall

CATCHWORDS

SOCIAL SECURITY – Newstart Allowance – whether dividends and franking credits constitute income – date applicant deemed to have become “entitled” to income – period during which income should be applied – whether total income during that period exceeds allowable income threshold for Newstart Allowance – decision under review affirmed

LEGISLATION

Social Security Act 1991 – sections 8, 1068-G1, 1072, 1073,

SECONDARY MATERIALS

Guide to Social Security Law – section 4.3.9.60 

CASES

Drake and Minister for Immigration and Ethnic Affairs [1979] 2 ALD 60

REASONS FOR DECISION

Deputy President Dr Christopher Kendall

21 July 2016

BACKGROUND

1. Newstart Allowance is an unemployment benefit paid to unemployed people aged 22 to 64. Like most payments administered by Centrelink, Newstart Allowance is subject to income and asset testing. 

2. On 30 June 2015, Suffolk Investments Pty Ltd (“Suffolk”) issued a Dividend Statement to John Donaldson (in his capacity as a shareholder of Suffolk) in respect of Suffolk’s activities during the 2014/2015 financial year (ie, during the period 1 July 2014 to 30 June 2015) showing a dividend of $25,000.00 and franking/imputation credits of $10,714.29 (rather than the amount of $10,714.28 as cited throughout the T Documents provided to the Tribunal). 

3. On 3 July 2015, Mr Donaldson received a cash payment of $19,018.15.  That payment represented the share dividend of $25,000 less an amount of $5,981.85 which was withheld from Mr Donaldson’s dividends to repay 50% of a debt owed by him to Suffolk.

4. On 26 October 2015, Mr Donaldson applied for Newstart Allowance. The evidence shows that Mr Donaldson was facing considerable financial and personal difficulties when he applied for Newstart Allowance.

5. On 30 November 2015, Centrelink rejected Mr Donaldson’s application on the basis that his assessable income exceeded the income threshold for payment of Newstart Allowance (the “Original Decision”). Centrelink treated the $25,000 dividend and the $10,714 franking credits as income that Mr Donaldson had received over a 52 week period from the date he received the $19,018.15 from Suffolk (ie, 3 July 2015, on the evidence then before Centrelink). 

6. On 7 December 2015, a Centrelink Authorised Review Officer (“ARO”) affirmed the Original Decision. The reasons for that decision are provided below.

7. Mr Donaldson appealed the ARO’s decision to the Social Security and Child Support Division (the “SSCSD”) of the Administrative Appeals Tribunal.

8. On 10 February 2016, the SSCSD affirmed the ARO’s decision.  The reasons for that decision are also provided below.

9. Mr Donaldson has now appealed the SSCSD’s decision to this Tribunal.

   ISSUES

10. This matter requires the Tribunal to determine whether Mr Donaldson is eligible for Newstart Allowance. 

11. To answer this question, the Tribunal must determine:

    a)whether share dividends and franking credits paid to Mr Donaldson should be counted as income for the purposes of the Social Security Act 1991 (the “Social Security Act”); and

    b)if so, over what period that income should be applied.  This is important because a determination in relation to the period in which the income is to be applied will ultimately determine whether that income exceeds the allowable income threshold for Newstart Allowance.

    EVIDENCE

12. The Tribunal received a detailed Statement of Facts, Issues and Contentions from the Secretary, Department of Social Services (the “Secretary”) dated 9 May 2016.  This document referenced a set of T-Documents that included, relevantly, the decision of the SSCSD and the ARO and information from Centrelink and Suffolk’s accountants in relation to Mr Donaldson’s financial interests in Suffolk.

13. On the day of the hearing before this Tribunal, Mr Donaldson provided a copy of a Dividend Statement from Suffolk dated 30 June 2015 (referred to above at paragraph 2).  Significantly, that Dividend Statement had not been provided to the SSCSD or the ARO. 

14. Mr Donaldson was not legally represented before this Tribunal.  Unfortunately, despite being provided ample opportunity to provide further documentary evidence of the sort outlined by the SSCSD that might assist him in relation to his application for Newstart Allowance, Mr Donaldson did not provide any further useful information other than the Suffolk Dividend Statement referred to above. Nor did Mr Donaldson provide any written statement outlining his main contentions and concerns. Mr Donaldson did provide verbal evidence and struck the Tribunal as entirely credible, although visibly agitated and understandably distressed at the financial and personal situation he now finds himself in. 

    LEGISLATION

15. The legislation relevant to this matter is contained in the Social Security Act 1991.

16. The Tribunal can also seek assistance from the policy advice contained in the Guide to Social Security Law (the “Guide”).  In accordance with the principles outlined in Drake and Minister for Immigration and Ethnic Affairs [1979] 2 ALD 60, the Tribunal can refer to and apply government policy as outlined in the Guide as long as what is relied on is not inconsistent with the provisions and objects of the Social Security Act.

    CONTENTIONS

17. The Secretary contended as follows:

    (a) the share dividend and franking credits paid to Mr Donaldson on 3 July 2015 from Suffolk Investments Pty Ltd are ‘income’ as defined by the Social Security Act;

    (b) in accordance with s 1073 of the Social Security Act, Mr Donaldson’s entitlement to Newstart Allowance must be assessed on the basis that he received 1/52 of the total amount of the dividend and franking credits ($35,714.28) each week for 52 weeks starting on 3 July 2015 (the date he received the income); and

    (c)     consequently, Mr Donaldson’s ordinary income at the time he made his application for Newstart Allowance (that being, 26 October 2015) was above the relevant income test threshold of $1,014.00 per fortnight.

18. Before this Tribunal, Mr Donaldson did not dispute that the income test threshold amount at the time of his application was $1,014 per fortnight. Nor did he dispute that he received the sum of $19,018.15 from Suffolk and that he received a payment in that amount on 3 July 2015. Nor did he dispute that any money received as a dividend payment is “income” for the purposes of the Social Security Act.

19. What Mr Donaldson does dispute is the date at which at which he is deemed to have become “entitled” to the amount in question as per the requirements of the Social Security Act. He says the correct date is not 3 July 2015. Rather, he contends, he was entitled to receive the amount in question long before that because the dividend covered the financial year 2014-2015 (ie, 1 July 2014 to 30 June 2015). In those circumstances, Mr Donaldson seems to suggest, he had a legal claim to the dividend amount long before Suffolk advised him on 30 June 2015 of its decision to pay him a dividend. If this argument is accepted, he argues, his income will not exceed the allowable income threshold and Newstart Allowance will be payable under the relevant income test.

    PRIOR DECISIONS

    ARO Decision, 7 December 2015 (T8 at 150)

20. Relevantly, the ARO’s decision provided:

    •On 3 July 2015 you received a cash payment of $19,018.15 from Suffolk Investments Pty Ltd in relation to your dividends for the 2014/2015 tax year. An amount of $5,981.65 [sic] was withheld to repay 50% of the moneys you owe to the company. The dividends payable also included franking credits of $10,714.28.

    •          On 26 October 2015 you claimed Newstart Allowance.

    •On 30 November 2015 a Complex Assessment Officer determined you had no formal, or informal control of the company Suffolk Investments Pty Ltd as you hold only 7.89% of the shares issued. The bulk of the shareholdings, 75%, are held by the Estate of the Late Mr John Wayne Donaldson. Therefore, the income and assets of this company are not attributable to you as a non-controller.

    •As you are a non-controller of the company Suffolk Investments Pty Ltd, a decision was made to assess the dividends of $25,000 and franking credits of $10,714 as income for 52 weeks from the date this payment was made to you on 3 July 2015.

    •Your assessable income exceeds the allowable income threshold and therefore Newstart Allowance is not payable.

    Reasons for Decision

    …

    The personal Income Test for Newstart Allowance is designed so that it does not affect a customer's payment if their total ordinary income in the fortnight is below $102.

    However, total ordinary income above $102 a fortnight will reduce the customer's payment by:

    •          50 cents for each $1 of income between $102 and $252 a fortnight, and

    •          60 cents for each $1 of income above $252 a fortnight

    These amounts apply from 1 July 2015.

    Dividends and distributions received from private companies and trusts are included in the income support recipient's income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income.

    The assessed income includes the actual amount of any individual payments, and any franking credits attached to them.

    Distribution income is the actual distribution from a private trust or a dividend payment from a private company made to a stakeholder.

    …

    On 26 October 2015 you lodged an online claim for Newstart Allowance indicating you were unemployed and incapacitated. During the claim process you advised you were involved in a private company - Suffolk investments Pty Ltd.

    On 30 November 2015 a Complex Assessment Officer determined you had no formal or informal control of the company Suffolk Investments Pty Ltd as you hold only 7.89% of the shares issued. The bulk of the shareholdings, 75%, are held by the Estate of the Late Mr John Wayne Donaldson. Therefore, the income and assets of this company are not attributable to you as you are a non-controller.

    However, the income tax return for the Suffolk Investments Pty Ltd for the 2014/2015 tax year shows a dividend of $25,000 and franking credits of $10,714 was paid to you. Mr Jeff Nolan of Jeffrey Nolan, Chartered Accountants advised a cash payment of $19,018.15 was paid to you on 3 July 2015. An amount of $5,981.65 [sic] was withheld from your dividends to repay 50% of the funds owed by you to the company. As the dividends for the 2014/2015 tax year were paid to you on 3 July 2015, this amount is assessed as income for 52 weeks from this date.

    …

    Your assessable income exceeds the allowable income threshold and Newstart Allowance is not payable under the income test.

    SSCSD, 10 February 2016 (T3 at 5)

21. The SSCSD’s reasons are detailed and provide a useful overview of the way in which income is calculated for the purpose of Newstart Allowance.  The SSCSD decision provides as follows:

    …

    CONSIDERATION

    9.The rate of newstart allowance payable to a suitably qualified person is calculated under section 1068 of the Act. Payment is subject to an income test.

    …

    13.Subsection 8(1) of the Act defines income as being an amount that is earned, derived or received by a person. Company dividends are not among the payments, specified in subsection 8(8) of the Act, that are excluded as income.

    14.In Re Painter and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 327 the Tribunal stated:

    I agree with the proposition that income does not have to be actually received to come within the provisions of the Act to which I have referred, and that the words “earned” and “derived” have a wider connotation.

    15.The Guide to Social Security Law (the Guide) provides, at 4.3.9.60, that dividends and distributions received from private companies are to be included as assessable income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income. From 1 July 2001, this includes any franking credits attached to the payments. The Guide states that this is because, from 1 July 2001, a person without a tax liability may lodge an Application for Refund of Imputation Credits for Individuals with the Australian Taxation Office and receive a payment equal to the amount of imputation credits.

    16.The Tribunal is satisfied that the dividend payment of $25,000 plus the franking credit of $10,714.28 that Mr Donaldson received on 3 July 2015 was “income” within the meaning of section 8 of the Act.

    17.The next issue to consider was how receipt of this income affects the rate of newstart allowance that could be paid to Mr Donaldson.

    18.Section 1073 of the Act provides that if a person receives an amount that essentially is not income from earnings, the person is taken to have received one fifty-second of that amount as ordinary income for each week of the year following the date upon which the person is entitled to receive the payment. Under subsection 23(2) of the Act a person is taken to be receiving a payment under this Act from the earliest day on which the payment is payable to the person even if the first instalment of the payment is not paid until a later day.

    19.Mr Donaldson submitted that the dividend payments were in respect of the 2014/2015 financial year and so should be regarded as received by him in that year.

    20.In Re Morris and Secretary, Department of Social Security [1996] AATA 638, the Tribunal stated that there is authority for the notion that income can be “derived” prior to its actual receipt and that a present legal entitlement to money exists when there is an enforceable right of claim to it.

    21.The payment of dividends by a company to shareholders is not automatic; shareholders do not have an enforceable right of claim to dividends. The directors of a company determine for any given year, or part of the year, whether a dividend will be paid and, if so, in what amount. Mr Jeff Nolan, accountant for Suffolk Investment Proprietary Limited, confirmed in his statement dated 30 November 2015 that F class shareholders, like Mr Donaldson, are entitled to dividends at the discretion of the company.

    22.This means that, even though the dividend payments issued on 3 July 2015 are said to relate to the 2014/2015 financial year, Mr Donaldson had no legal entitlement to these payments prior to the company’s decision to pay the dividends. The Tribunal finds that Mr Donaldson derived the income relating to the dividends when the company decided to make the dividend payments. 

    23.The documents before the Tribunal do not disclose the date at which the company resolved that such dividend payments would be made. The Tribunal considers it most likely that this was on or shortly prior to the date payments were made: 3 July 2015. In the absence of any evidence supporting an earlier date, the Tribunal finds that Mr Donaldson became entitled to and received the payments on 3 July 2015.

    24.Applying section 1073 of the Act, Mr Donaldson’s entitlement to newstart allowance is to be assessed on the basis that he received 1/52 of the dividend and franking credit amount (a total of $35,714.28) each week from 3 July 2015 until 2 July 2016.

    25.The resultant income is above the threshold for newstart allowance to be payable. …

    CONSIDERATION

    Are both the share dividend and the franking credits ‘income’

22. Before this Tribunal, the Secretary responded to this question in detail at paragraphs 11 to 17 in a Statement of Facts, Issues and Contentions dated 9 May 2016.  Mr Donaldson did not dispute that summary.  The Tribunal highlights that summary as follows.

23. The rate of Newstart Allowance is determined under the rate calculator provided at the end of section 1068 of the Social Security Act. This includes the income test in Module G. Section 1068-G1 provides that the income test is based on the person's fortnightly ordinary income.

24. Section 8(1) of the Social Security Act defines the term ordinary income as “income that is not maintenance income”.

25. Section 8(1) of the Social Security Act states that the meaning of “income, in relation to a person” includes any “income amount earned, derived or received by the person” that is not “excluded under subsection (4), (5) or (8)”.

26. Share dividends and franking credits are not among the payments specified in section 8(4), (5) or (8) as items excluded from the definition of income.

27. The Guide provides, at section 4.3.9.60, that dividends and distributions received from private companies are to be included as assessable income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income. From 1 July 2001, this includes any franking credits attached to the payments. 

28. Section 4.3.9.60 of the Guide provides:

    (a)Dividends and distributions received from private companies and trusts are included in the income support recipient’s income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income.

    (b)The assessed income includes the actual amount of any individual payments, and any franking credits attached to them.

    (c)Prior to 1 July 2000, a taxpayer obtained a tax rebate equal to the amount of imputation credits received. The rebate reduced income tax payable, but once tax payable was reduced to zero, no benefit was obtained from further excess credits and was lost.

    (d)From 1 July 2001, a person without a tax liability may receive the gross amount of the dividend from the source of the dividend, i.e. eligible taxpayers will be able to receive early refunds of excess imputation credits.

29. The Secretary contends that, in the circumstances, the dividend payment and franking credits which Mr Donaldson received are both ‘income’ for the purposes of the Social Security Act.

30. The Tribunal agrees and finds that the share dividend and franking credits paid to Mr Donaldson from Suffolk are ‘income’ for the purposes of the Social Security Act. This then requires the Tribunal to determine when Mr Donaldson became entitled to that income. The answer to this question will ultimately determine whether Mr Donaldson exceeds the allowable income threshold for Newstart Allowance and whether he receives Newstart Allowance.

    When did Mr Donaldson become “entitled” to the share dividend and franking credits?

31. The answer to this question is central to Mr Donaldson’s appeal and was the main focus of the SSCSD decision.

32. In relation to this question, the Secretary contends as follows in its Statements of Facts, Issues and Contentions:

    18.The effect of section 1073(1) of the SSA is that, subject to particular exceptions, where a person receives income in the form of a lump sum, then “... the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount”.

    19.Accordingly, the Applicant must be taken to receive a weekly income that is “one fifty-second of [the amount of the Share Dividend and Franking Credits] as ordinary income ... during each week in the 12 months commencing on the day on which [the Applicant became] entitled to receive [those amounts]” in accordance with section 1073 of the SSA.

    20.It is common ground that the Applicant received the Share Dividend and Franking Credits from Suffolk Investments Pty Ltd on 3 July 2015. However, there is no evidence as to the date on which the Applicant first became entitled to the Share Dividend and Franking Credits.

    21.In the first review proceedings, the Tribunal stated that it considered it “most likely that [the date on which the Applicant became so entitled] was on or shortly before the date payments were made: 3 July 2015” and that “in the absence of any evidence supporting an earlier date, the Tribunal finds that Mr Donaldson became entitled to and received the payments on 3 July 2015” (see paragraph 23 of the Tribunal's decision in the first review proceedings in T3 at page 8).

    22.On 12 April 2016, that the Tribunal directed “[t]he Applicant have leave until 18 April 2016 to give to the Tribunal and the Respondent any evidence and submissions upon which the Applicant intends to rely at the hearing of this matter.”

    23.The Applicant has not provided any evidence or submissions to the Respondent’s representatives as the date of this document.

    24.In all of those circumstances, the Respondent submits that the Tribunal in these proceedings should make the same inference made by the Tribunal in the first review proceeding, being that the Applicant became entitled to receive the Share Dividend and Franking Credits on 3 July 2015.

    25.If that submission is accepted, then it follows that the income which the Applicant received in the form of the Share Dividend and Franking Credits on 3 July 2015 must be notionally apportioned as 52 equal weekly payments over the 12 month period following that date in accordance with section 1073 of the SSA (see paragraph 18 above). On that basis:

    (a)   for the purposes of the SSA, the Applicant has been in receipt of a weekly income of $686.81 (being the amount of the Share Dividend and the Franking Credits divided by 52) during the period from 3 July 2015 until 2 July 2016; and

    (b)   accordingly, the Applicant’s income was well above the NSA threshold at the time the Applicant applied for that allowance on 26 October 2015.

1. In relation to 25(b) in paragraph 32 above and the calculation of the Newstart Allowance threshold at 26 October 2015 (ie, the date Mr Donaldson applied for Newstart Allowance), the Secretary further explains that the amount of $1,014.00 per fortnight was the income test threshold for part allowance for people who are single with no children.  As noted above, Mr Donaldson did not dispute this before this Tribunal. 

2. The Tribunal finds that the amount of $1,014.00 is the correct amount in relation to the income test threshold for people in Mr Donaldson’s position as at the date of Mr Donaldson’s application for Newstart Allowance (ie, 26 October 2015): Department of Human Services website at >

   In relation to when Mr Donaldson became “entitled” to the Suffolk dividends and franking credits, the Tribunal notes that neither the SSCSD or the ARO had before them the Suffolk Dividend Statement of 30 June 2015.  This is significant.  The SSCD inferred on the available evidence before it that Mr Donaldson became entitled to the payments in question on 3 July 2015 – the day he physically “received” $19,018.15 as a cash payment.

3. This Tribunal has had the benefit of seeing the Dividend Payment dated 30 June 2015.  As such, it is open to this Tribunal to find that Mr Donaldson became “entitled” to the relevant payment on 30 June 2015, rather than 3 July 2015.  As will be discussed below, the Tribunal will do so.

4. Although Mr Donaldson was not entirely clear on this point, it seems from what Mr Donaldson said before this Tribunal (and, indeed, the SSCSD), that he would not agree with the date of 30 June 2015 as being the date he was “entitled” to the income amount in question.  Rather, Mr Donaldson contends that the share dividend and franking credits he received as a cash payment on 3 July 2015 “were paid to him in respect of the business activities of Suffolk during the 2014 to 2015 Financial Year” (i.e. the period between 1 July 2014 and 30 June 2015).  The result, he argues is that he was “entitled” to the full amount prior to the day he actually received the money – and long before that date.

5. In relation to this argument, the Secretary argues as follows:

   32.… as stated in paragraph 20 of the [SSCSD’s] decision in the first review proceedings (see T3 at page 7):

   20.     In Re Morris and Secretary, Department of Social Security [1996] AATA 638, the Tribunal stated that there is authority for the notion that income can be “derived” prior to its actual receipt and that a present legal entitlement to money exists when there is an enforceable right of claim to it.

   21.     The payment of dividends by a company to shareholders is not automatic; shareholders do not have an enforceable right of claim to dividends. The directors of a company determine for any given year, or part of the year, whether a dividend will be paid and, if so, in what amount. Mr Jeff Nolan, accountant for Suffolk Investment Proprietary Limited, confirmed in his statement dated 30 November 2015 that F class shareholders, like Mr Donaldson, are entitled to dividends at the discretion of the company.

   22.     This means that, even though the dividend payments issued on 3 July 2015 are said to relate to the 2014/2015 financial year, Mr Donaldson had no legal entitlement to these payments prior to the company's decision to pay the dividends. The Tribunal finds that Mr Donaldson derived the income relating to the dividends when the company decided to make the dividend payments.

6. The Tribunal agrees with this assessment.  As accurately explained by the SSCSD, the directors of a company determine for any given year, or part of the year, whether a dividend will be paid and, if so, in what amount.  Payment of dividends by a company to shareholders is not automatic and shareholders do not have an enforceable right of claim to dividends. It is noted that Suffolk’s accountant confirmed in his statement dated 30 November 2015 that F class shareholders, like Mr Donaldson, are entitled to dividends at the discretion of the company.  This means that, even though the dividend payments issued on 30 June 2015 are said to relate to the 2014/2015 financial year, Mr Donaldson had no legal entitlement to these payments prior to Suffolk’s decision to pay the dividends – that decision having been made on 30 June 2015 on the evidence before this Tribunal.

7. Although the provisions of the Income Tax Assessment Act 1936 are not entirely relevant to this matter, the way in which that statute interprets the word “paid” is nonetheless of assistance to this Tribunal in understanding when dividends and franking credits can be deemed to have been paid for the purposes of threshold calculations under the Social Security Act. Specifically, the Tribunal notes that for income tax purposes “paid” in relation to a dividend is defined to include “credited” or “distributed”: s 6(1) of the Income Tax Assessment Act 1936. A dividend is “credited”, so as to have been “paid”, provided a dividend has been declared, profits have been appropriated to its payment and the shareholder’s account with the company is credited in such a way that it may be drawn on as and when the shareholder desires. In this case, although Mr Donaldson may not have received (derived) the dividend and franking credits until 3 July 2015, it is clear from Suffolk’s financial statements for the 2015 year and the Dividend Statement from Suffolk dated 30 June 2015 that the dividend and franking credits were “paid” to Mr Donaldson on 30 June 2015 and not on any earlier date. This is significant in so far as “payments” are deemed to be made under the Social Security Act as it is the only material before the Tribunal evidencing any kind of payment to, or intention to pay, Mr Donaldson.

8. It is common practice for private companies to declare dividends and franking credits on the last day of the financial year and that is what happened here. There is simply no evidence before the Tribunal that Suffolk decided to make a dividend payment prior to issuing the Dividend Statement.  Rather, the evidence shows that Mr Donaldson was entitled to the income payment on 30 June 2015 and on that date alone.

9. In the circumstances and on the evidence before it, the date at which Mr Donaldson can be deemed to have been entitled to the dividends and franking credits is 30 June 2015.  That differs from the 3 July 2015 date determined by the SSCSD and argued by the Secretary but that difference arises because neither the SSCSD nor the Secretary had access to the 30 June 2015 Dividend Statement presented to this Tribunal on the day of the hearing.  As noted above, that Dividend Statement settles the issue in relation to when Mr Donaldson was entitled to the dividend payment and franking credits.

10. The 30 June 2015 date does not, however, alter the outcome of Mr Donaldson’s application for Newstart Allowance.  He is not entitled to receive it because his income still exceeds the allowable income threshold.  Specifically, having found that Mr Donaldson was entitled to the dividend income on 30 June 2015, the Tribunal finds as follows in relation to this issue:

    (a)in accordance with s 1073 of the Social Security Act, Mr Donaldson’s entitlement to Newstart Allowance must be assessed on the basis that he received 1/52 of the total amount of the dividend and franking credits ($35,714.29) each week for 52 weeks starting on 30 June 2015 (the date he became entitled to the income); and

    (b)consequently, Mr Donaldson’s ordinary income at the time he made his application for Newstart Allowance (that being, 26 October 2015) was above the relevant income test threshold of $1,014.00 per fortnight.

    Should the money withheld by Suffolk for a debt owing to Suffolk be reduced from total income?

11. One final issue was raised before this Tribunal that was not addressed by the SSCSD or the ARO.  In light of what has been said above, the resolution of this issue does not alter the Tribunal’s decision.  However, for the sake of completeness, the matter is addressed below.

12. In addition to arguing that he should be deemed to have received the amount in question long before 30 June 2015 (an argument now rejected above by this Tribunal), Mr Donaldson also disputes whether his total income received should be $35,714.29.  Specifically, he contends that that amount should be reduced to $29,732.64 as he did not actually “receive” the amount of $5,981.85 that Suffolk withheld to cover 50% of a debt that Mr Donaldson owed the company.   

13. In relation to this issue, the Tribunal notes that section 1072 of the Social Security Act provides that a reference to ordinary income is a reference to a person's gross ordinary income from all sources for the period calculated without any reduction.

14. The amount of $5,981.85 was deducted from a debt owed to Suffolk by Mr Donaldson. There is no dispute that Mr Donaldson owed that amount to the company. Nor is it disputed that once it was paid, Mr Donaldson’s total debt was significantly reduced. In those circumstances, it is clear that Mr Donaldson received a benefit from the payment of the $5,981.85 in question as it was used to cover a debt. As such, the withheld amount can rightly be included as income for the purposes of the Social Security Act.

15. In any event, even if it were found that the $5,981.85 in question does not constitute “income” and should thus be reduced from total income for the purposes of the Newstart Allowance income threshold, Mr Donaldson would still have been in receipt of a weekly income of $571.78 (i.e. the amount of the share dividend and franking credits, less the Withheld Amount, divided by 52). As such, Mr Donaldson’s income would be $1,143.56 per fortnight.  This is still well above the Newstart Allowance threshold at the time Mr Donaldson applied for that allowance on 26 October 2015 (ie, $1,014.00 per fortnight).

    CONCLUSION

16. On 30 June 2015, Suffolk issued a Dividend Statement to John Donaldson in respect of Suffolk’s activities during the 2014/2015 financial year showing a dividend of $25,000.00 and franking/imputation credits of $10,714.29 – for a total of $35,714.29. 

17. On 3 July 2015, Mr Donaldson received a cash payment of $19,018.15.  That payment represented the share dividend of $25,000 less an amount of $5,981.85 which was withheld from Mr Donaldson’s dividends to repay 50% of a debt owed by him to Suffolk.

18. The evidence, in the form of a Dividend Statement from Suffolk, shows that Mr Donaldson became “entitled” to that amount on 30 June 2015, even though he did not actually receive a cash payment until 3 July 2015.

19. For the purposes of the Social Security Act, Mr Donaldson’s income as at 30 June 2015 includes the share dividend and franking credits from Suffolk.

20. Pursuant to section 1073 of the Social Security Act, Mr Donaldson’s entitlement to Newstart Allowance must be assessed on the basis that he received 1/52 of the total amount of the dividend and franking credits ($35,714.29) each week for 52 weeks starting on 30 June 2015.

21. Accordingly, Mr Donaldson’s ordinary income at the time he made his application for Newstart Allowance (that being, 26 October 2015) was $686.81 per week.  This is above the relevant income test threshold of $1,014.00 per fortnight.

22. Further, Mr Donaldson’s income as at 26 October 2015 included the withheld amount of $5,981.85. However, even if the withheld amount is excluded from an assessment of Mr Donaldson’s income as at the date he applied for Newstart Allowance, Mr Donaldson’s income on that date would still be $571.78 per week.  This would amount to $1,143.56 per fortnight and still exceeds the allowance income threshold for Newstart Allowance of $1,014.00 at the relevant date.

23. In the circumstances, Mr Donaldson was not entitled to Newstart Allowance when he applied for it on 26 October 2015.

    DECISION

24. For the reasons outlined above, the decision under review is affirmed.

I certify that the preceding 57 (fifty seven) paragraphs are a true copy of the reasons for the decision herein of Deputy President Dr Christopher Kendall.

.......................[sgd]............................

Administrative Assistant

Dated 21 July 2016

Date of hearing	24 June 2016
Applicant	In person (self represented)
Representative of the Respondent	Mr P Shanahan
Solicitors for the Respondent	Clayton Utz