Kennewell and Repatriation Commission

[2005] AATA 765

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 765

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2005/91

VETERANS' APPEALS  DIVISION		)
Re		JOHN LANG KENNEWELL

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Deputy President Don Muller

Date10 August 2005                    

PlaceBrisbane

Decision  The Tribunal affirms the decision under review.

................SIGNED..............................

D.W. MULLER

DEPUTY PRESIDENT

CATCHWORDS

VETERANS’ AFFAIRS – service pension reduced due to income deemed to have been received from investment in a low interest bearing deposit – overpayment raised and recovered – Special Rate pension banked and saved in same account is an asset and is also subject to the deeming provision – decision affirmed

Veterans’ Entitlements Act 1986: ss5J, 37N, 46D, 54, 54AA, 128(1)

WRITTEN REASONS FOR ORAL DECISION

Deputy President Don Muller        

1.      John Lang Kennewell receives a service pension pursuant to the provisions of the Veterans’ Entitlements Act 1986 (the Act), on the grounds of permanent unemployability, with effect from 4 September 1982.  He also receives a disability pension which was increased to the Special Rate with effect from 18 October 1984.

2.      In May 2003, Mr. Kennewell inherited $213,030 which he banked on 30 May 2003.  Unfortunately, he deposited the sum into an account which produced little or no interest.

3.      On 17 May 2004 a determination was made that Mr. Kennewell had been overpaid service pension over the period 30 May 2003 to 15 March 2004, to a total amount of $1,493.67.  It was also determined that his fortnightly rate of service pension should be reduced by approximately $93 per fortnight.

4.      Mr. Kennewell has complained that his “investment” generates no income and should not be counted against him for the purposes of calculating the rate of pension payable to him.  He seeks a review of the decision to raise and recover the overpayment and the decision to reduce his pension.

5.      Mr. Kennewell also complains that some of the money in his bank account is due to his saving his Special Rate pension and that this money should not be included for the purposes of any assets test.

6.      The facts are not in dispute and the Tribunal finds as follows:

(a)Mr. Kennewell was born on 5 September 1935.

(b)He served in the Australian Regular Army from 4 January 1952 to 3 July 1968, including service in Malaya, Thailand and Borneo.  Service included infantry combat in jungle terrain.

(c)He was granted service pension on the grounds of permanent unemployability with effect from 4 September 1982.  He also receives a disability pension which was increased to the Special Rate (Totally and Permanently Incapacitated) with effect from 18 October 1984.

(d)Service pension was initially paid to him on a partnered basis, but following marital separation, assessment was made on a single basis with effect from 3 March 1983.

(e)On 15 June 1998 he was sent a notice under s.54 of the Act setting out his obligations as a service pensioner.  The publication “You and Your Pension” was included, with specific advice that it was a statement of his obligations as a service pensioner.

(f)On 14 June 1999 he was sent a letter in order to remind him of the obligations notice issued on 15 June 1998.  The letter also included information on changes to obligations and service pension assessment, including the “deeming” provisions.  Similar reminder letters were sent to him on 24 June 2000, 24 June 2001, 25 June 2002 and 21 June 2003.

(g)On 16 March 2004 he was sent a notice under s.54AA of the Act that requested completion of a “Statement of Circumstances” form in order to discover income and asset details for the express purpose of reviewing entitlement to service pension.

(h)The completed “Statement of Circumstances” form was returned on 22 March 2004.  At question 24 of the form, a National Australia Bank savings account in the name of John Lang Kennewell was declared, with a current balance of $211,000.

(i)On 15 April 2004 the National Australia Bank supplied historical information about his bank account, completed on 13 April 2004 in answer to a request made under s 128(1) of the Act.  This showed, amongst other information, that his account received an amount of $213,030 on 30 May 2003.

(j)On 17 May 2004 he was sent notice of an overpayment determination to the effect that service pension had been overpaid over the period 30 May 2003 to 15 March 2004 to a total amount of $1,493.67.

(k)On 19 May 2004 he refunded the overpaid service pension in full.

(l)He currently receives the following pension payments from the Department of Veterans’ Affairs:

Invalidity Service Pension  $ 382.32

Pharmaceutical Allowance  $     5.80

Special Rate Disability Pension (TPI)    $ 798.80

TOTAL FORTNIGHTLY PAYMENT       $1186.92

(m)The current maximum single service pension is $476.30, so the reduction is currently $93.98 per fortnight.  This is based on a telephone notification by him on 9 August 2004 that the balance of his NAB Flexi account 439046646 was $200,167.

(n)The interest generated by his deposit in the NAB Flexi account is very close to zero.

7.      Service Pension, like the social security age pension and disability pension, is means-tested.  Service pension ceases altogether when the income or assets are in excess of the amount set by the government.

8.      The rate at which invalidity service pension is paid is governed by s.37N of the Act, which in turn is governed by the Rate Calculator.  If the pensioner is single, as in Mr. Kennewell’s case, the pension is reduced by 40 cents for every $1 of income earned each fortnight in excess of an income free area.  The relevant income-free area in Mr. Kennewell’s case was $122.00 per fortnight.  That is, his service pension would have ceased if his income had reached $1,313 per fortnight.

9.      A pensioner who has a “financial asset”, defined as a “financial investment” (s.5J(1)), is expected to invest that money in such a way as to make full use of the interest or dividends available to investors in the commercial world.  A pensioner who has financial assets is deemed to receive “ordinary income” on the assets, whether the pensioner actually earns interest or dividend or not (s.46D(2)).  The quantum of the deemed income is calculated according to the “total value” of the pensioner’s assets (s.46D(3)).

10.     In Mr. Kennewell’s case, his savings at one stage stood at $200,167.  Interest was deemed to have been generated on that asset, even though in fact no interest was paid.  The deemed interest was $356.94 per fortnight, calculated as follows:

$36,400 @ 3% per annum, divided by 26 fortnights =            $ 42.00

$163,767 @ 5% per annum, divided by 26 fortnights =           $314.94

$356.94

The income free area was $122 per fortnight.  Hence, Mr. Kennewell’s income was deemed to be $234.94 in excess of the income free area.  A reduction of 40 cents in the dollar for every $1 over the income free area meant a decrease in pension of $93.98 per fortnight from the maximum payable.

11.     Consequently, the Respondent was duty bound to reduce Mr. Kennewell’s rate of pension on and from the date on which he deposited over $200,000 in his bank account.

12.     The overpayment for the period in question was validly raised and recovered.

13.     As to the question of Mr. Kennewell saving his Special Rate pension, he is clearly entitled to do what he likes with his pension.  However, if he puts it in the bank it becomes part of his deposit money, (his financial assets) and will be subject to being deemed to generate income for the purpose of the means test associated with the calculation of Mr. Kennewell’s fortnightly service pension.

14.     The decision under review is affirmed.

I certify that the 14 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller

Signed:         .....................................................................................
           R. Link, Associate

Date/s of Hearing  23 June 2005
Date of Decision  23 June 2005
Written reasons  10 August 2005
Applicant   Mr. Kennewell, himself
Respondent   Mr. A. Harris, departmental advocate