John Donaldson and Secretary, Department of Employment

The Administrative Appeals Tribunal (AAT) considered the case of John Donaldson and the Secretary, Department of Employment, concerning Mr. Donaldson's eligibility for Newstart Allowance. The dispute centred on whether dividends and franking credits received by Mr. Donaldson constituted income for the purposes of the *Social Security Act 1991* (the Act), and if so, over what period this income should be assessed to determine if it exceeded the allowable income threshold for the allowance.

The Tribunal was required to determine two primary legal issues: first, whether share dividends and franking credits paid to Mr. Donaldson should be counted as income under the *Social Security Act*; and second, if they were to be counted as income, over what period this income should be applied. The resolution of the second issue was critical, as it would dictate whether the total income assessed during that period exceeded the income threshold for Newstart Allowance.

The Tribunal reasoned that company dividends, including franking credits, are defined as income under section 8 of the Act, as they are amounts earned, derived, or received and are not excluded by subsection 8(8). Citing *Re Painter*, the Tribunal affirmed that "earned" and "derived" have a broad connotation, meaning income does not necessarily have to be physically received to be considered. Furthermore, referencing the *Guide to Social Security Law*, the Tribunal noted that dividends from private companies, including imputation credits, are assessable income, as individuals without a tax liability can claim a refund of imputation credits. Consequently, the Tribunal found the dividend payment and franking credits received by Mr. Donaldson on 3 July 2015 to be income under the Act. Regarding the period of assessment, the Tribunal applied section 1073 of the Act, which stipulates that for income not derived from earnings, a person is taken to have received one fifty-second of the total amount as ordinary income each week for the year following the date of entitlement. The Tribunal rejected Mr. Donaldson's submission that the dividends related to the 2014/2015 financial year, holding that shareholders do not have an enforceable right to dividends until the company directors decide to pay them. As the date of the company's resolution to pay the dividends was not disclosed, the Tribunal found, in the absence of evidence to the contrary, that Mr. Donaldson became entitled to and received the payments on 3 July 2015.

Applying section 1073, the Tribunal determined that Mr. Donaldson's entitlement to Newstart Allowance was to be assessed on the basis of receiving 1/52 of the total dividend and franking credit amount ($35,714.28) weekly from 3 July 2015 until 2 July 2016. This assessment resulted in an income level that exceeded the allowable income threshold for Newstart Allowance, meaning the allowance was not payable.