Langton and Department of Family and Community Services
[2000] AATA 591
•17 July 2000
DECISION AND REASONS FOR DECISION [2000] AATA 591
ADMINISTRATIVE APPEALS TRIBUNAL )
) No. Q1998/992
GENERAL ADMINISTRATIVE DIVISION )
Re BRIAN LANGTON & JUDITH LANGTON
Applicant
And SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr D W Muller, Senior Member
Date17 July 2000
PlaceBrisbane
Decision The Tribunal sets aside the decision under review and determines that the applicants were not overpaid Disability Support Pension and Wife Pension respectively for the period 30 October 1997 to 27 November 1997.
...............Signed...............................
D W Muller
Senior Member
CATCHWORDS
SOCIAL SECURITY - Disability Support Pension – overpayment – debt – ordinary income test – three weeks earnings as tea lady – yearly basis calculation – ordinary income below earnings threshold for maximum rate pension
Social Security Act 1991 ss 117(a), 1064
Harris v Director-General of Social Security (1985) 7 ALD 277
Re Secretary, Department of Social Security v Moroney (unreported 9 July 1998, Decision No. 4108)
Rolley and Secretary, Department of Family & Community Services AATA 968 (17 December 1999)
Secretary, Department of Family & Community Services v Janet Rolley (20 June 2000, at Brisbane, French, Kiefel and Dowsett JJ)
REASONS FOR DECISION
17 July 2000 Mr D W Muller, Senior Member
This is a review of a decision of the Social Security Appeals Tribunal dated 7 September 1998, affirming a decision of a delegate of the Secretary as affirmed by an Authorised Review Officer, to raise and recover an overpayment of Disability Support Pension ("DSP") and Wife Pension respectively for the period 30 October 1997 to 27 November 1997, in the sum of $253.00 each.
The facts are not in dispute. The Tribunal finds as follows:
(a)At all times relevant to this matter, and in particular in 1997, Brian Langton was in receipt of DSP and Judith Langton was receiving payments of Wife Pension.
(b)Between 30 October 1997 and 27 November 1997, Judith Langton worked as the tea lady at a real estate office. She was filling in for a friend who was the permanent tea lady. She worked for two weeks plus one day, had a week off and then worked for a further week.
(c)Judith Langton earned a total of $1,437.05 for her three weeks work.
(d)On 4 December 1997, the applicants informed their local Centrelink office about the tea lady work. They supplied all of the payslips.
It is common ground between the parties that at an earlier time the applicants had been served with all necessary notices requiring them to inform Centrelink of any changes in their circumstances which could affect their pensions, within fourteen days of such change. Consequently, if there have been overpayments of pensions to the applicants between 30 October 1997 and 27 November 1997, they have incurred debts to which the provisions relating to the recovery of overpayments are applicable.
The rates of pensions payable to the applicants were subject to an income test. The higher the income the lower the pension. There was an "ordinary income free area" of $1,560 per year for each of the applicants at the relevant time.
The submissions for the applicants can be conveniently summarised as follows:
(a)The income earned by Mrs Langton ($1,437.05) was a "one-off" for the year and was well below their combined income free area of $3,120.
(b)There should have been no reduction in their pensions and consequently, no overpayment.
(c)If, upon earning $1,437.05, they had to pay $506 to Centrelink, there was no point in working.
(d)The legislation set an income free area of $3,120 per year of which they should be able to take advantage.
The respondent's advocate submitted that the correct method of calculating the applicants' pensions for the period 30 October 1997 to 27 November 1997, is to treat their combined income for the approximate four weeks as continuing for the rest of the year. That is, to treat a total income of $1,437.05 for four weeks as an income of $18,681.65 per annum for the four weeks. The income free area of $3,120 per year would be treated as $60 per week for the four weeks under review.
Section 117(a) of the Social Security Act 1991 ("the Act") provides that a person's DSP rate has to be worked out using Pension Rate Calculator A, which is found in section 1064 of the Act.
Pension Rate Calculator A is divided into a number of modules. To calculate a person's rate of pension, Steps 1 to 4 in Module A require the person's "maximum payment rate" to be calculated. Step 5 provides as follows:
"Step 5. Apply the ordinary income test using MODULE E, below to work out the income reduction."
Module E, which is headed "Ordinary Income Test" includes the following provisions:
"1064-E1. This is how to work out the effect of a person's ordinary income on the person's maximum payment rate:
Method Statement Step 1 Work out the amount of the person's ordinary income on a yearly basis. Note: For the treatment of the ordinary income of members of a couple see Point 1064-E2. Step 2 Work out the person's ordinary income free area (see points 1064-E4 to 1064-E9 below). Note: A person's ordinary income free area is the amount of ordinary income that the person can have without any deduction being made from the person's maximum payment rate. Step 3 Work out whether the person's ordinary income exceeds the person's ordinary income free area. Step 4 If the person's ordinary income does not exceed the person's ordinary income free area, the person's ordinary income excess is nil. Step 5 If the person's ordinary income exceeds the person's ordinary income free area, the person's ordinary income excess is the person's ordinary income less the person's ordinary income free area. Step 6 Use the person's ordinary income excess to work out the person's reduction for ordinary income using points 1064-E10 to 1064-E12 below.
…
Ordinary incomes of members of couples
1064-E2 If a person is a member of a couple, add the couple's ordinary incomes (on a yearly basis) and divide by 2 to work out the amount of the person's ordinary income for the purposes of this Module.
…
Pension reduction for ordinary income in excess of ordinary income free area
1064-E10 A person's reduction for ordinary income is worked out by dividing the person's ordinary income excess by 2.
Ordinary income excess
1064-E11 A person's ordinary income excess is the person's ordinary income less the person's ordinary income free area."
It is clear from the definition of "ordinary income" in section 8, that Mrs Langton's earnings from her casual work constituted "ordinary income".
The critical question for the Tribunal in this case is how to apply Step 1 of the Method Statement in section 1064-E1. It will be recalled that Step 1 says, "Work out the amount of the person's ordinary income on a yearly basis". The respondent contends that Step 1 requires Mrs Langton's rate of income during the period she was working to be converted to an annual figure as if she continued to earn an income at the same rate for a whole year. The applicants contend that the amount earned by Mrs Langton during the few weeks that she worked should be treated as her yearly income from employment.
This issue has been the subject of review and judgment in the Tribunal, the Federal Court and the High Court.
A convenient starting point is to look at what the High Court said in Harris v Director-General of Social Security (1985) 7 ALD 277, at 282:
"Income can be derived from various sources, as the definition of "income" in s18 makes clear. Some items of income may be received at frequent and regular intervals during a year (for example, weekly or fortnightly wages paid to an employee), some intermittently (for example, profits of a business) and others at lengthy intervals (for example, annual dividends on shares). Subject to the exceptions stated in the s18 definition and subject to the limitations expressed in s29, no income derived from any source is to be left out of account in ascertaining the annual rate of income. At the time when an annual rate of income is ascertained, it is necessary to have regard to the pensioner's sources of income at that time and to find what each of those sources would yield over the period of a year assuming the current yields from those sources were to continue. It is not necessary to predict whether the pensioner will retain his sources of income for the year or whether the current yields will be maintained, for the annual rate of income is the current rate of income though it is calculated and expressed as an annual rate. If the current income from a current source is receivable as so much per week or per month, it must be calculated and expressed as an amount per annum. But an annual rate of income is not ascertained merely by extending to a year the income receipts of a shorter period without considering the period in respect of which the particular item of income has been received. A pensioner whose only income apart from his pension is $1,000 paid annually as a dividend on an investment has an annual rate of income of $1,000. It is wrong in law as it is absurd in fact to say that he has an annual rate of income of $52,000 in the week in which he receives the dividend and a nil annual rate of income for 51 weeks of the year. His investment, the source of his income, yields an annual sum and, so long as the pensioner retains the investment, his annual rate of income from that source will be $1,000. If that source of income were lost, the annual rate of income from that source would be reduced to nil from the time of the loss. When a pensioner is in receipt of weekly wages from employment, however, his annual rate of income from that source is calculated on the assumption that his earnings at the current rate will continue for the year. If he were to retire from work, that source of income would be gone and the annual rate of income attributable to that source would be nil. In cases where pensioners or claimants are employed intermittently, it may be appropriate in some cases to treat the intermittent work as a continuing source of income and to take an average of earnings over a period as the yield from that source, and in other cases to treat each employment as a separate source of income yielding its particular amount of earnings. The former method would establish a comparatively constant annual rate of income; under the latter method, the annual rate of income would change as the pensioner or claimant went into and out of employment. The circumstances of the particular case would show which method is more appropriate."
and at 287 (per Wilson J):
"I accept that the general purpose of the age pension scheme may be described as one of income maintenance but that does not mean that the pensioner is to be assumed to spend his entire income, when it exceeds the amount allowed by the means test, in the period when it is received. The extreme case was mentioned in argument of a pensioner who receives his entire annual income of $7,000 in dividends in one month of the year. On the argument advanced for the respondent that pensioner would be entitled to receive his pension at the determined rate (on current practice, the maximum rate) for the other ten months of the year. I do not think the principle of income maintenance should be understood to require such a result. Of course, there may be other powers available to the Director-General, for example in s46, which would enable him to adjust the pension rate in such a case, but such action would merely demonstrate the limitations necessarily implicit in the income maintenance principle.
I therefore broadly agree, with respect, with the view taken by the majority in the Administrative Appeals Tribunal and by Ellicott J in the Federal Court to the effect that the means test requires that attention be given to the actual income of the pensioner during the pension year. As Ellicott J expressed it in colloquial terms, it means that a pensioner is permitted to earn up to $1,040 in each year without affecting the amount of his or her pension. I agree with his Honour in thinking this is what parliament intended."
In the case of Re Secretary, Department of Social Security v Moroney (unreported 9 July 1998, Decision No. 4108), the applicant was a pensioner who worked as Santa Claus for four weeks prior to Christmas each year. The Tribunal decided that Mr Moroney earned $1,800 over four weeks and that, with the benefit of hindsight (available to the Tribunal reviewing an overpayment case but not necessarily available to the person administering the Ordinary Income Test day to day) he did not earn further income as Santa Claus (or from any other source of employment) until the following December. Therefore the income to Mr Moroney on a yearly basis was determined to be $1,800.
The matter of Mrs Rolley's pension has generated an extensive analysis of the authorities concerning this matter. Her case was reviewed in the Tribunal, the Federal Court and the Full Federal Court.
In Rolley and Secretary, Department of Family & Community Services AATA 968 (17 December 1999), Deputy President Forgie set out the relevant facts, analysed a large number of authorities and concluded as follows:
"5. Mrs Rolley has been in receipt of age pension at all relevant times. On 30 October 1997, an officer of Centrelink sent her a notice. It advised her that her payment would be $353.20 per fortnight starting from 13 November 1997. That payment comprised age pension of $347.80 and a pharmaceutical allowance of $5.40. It had been calculated after reference to her yearly income which the notice stated to be $0.30 from financial investments. The notice went on to advise Mrs Rolley that she was required to advise Centrelink if, among other matters, her income increased, her income shown in the notice was incorrect or if she started, or recommenced, work. She had to do so within 14 days if any of these things happened or might happen.
6. Between 13 April 1998 and 31 July 1998, Mrs Rolley was engaged in casual employment as a relief cleaner with Queensland's Department of Education. During that time, she performed the duties of two cleaners who were absent from duty. She was paid $1,503.25 for her work. That was the only work and the only income she earned in addition to that which was already shown in the notice of 30 October 1997.
…
53. Returning to the case I must consider, I note that the rate of age pension has been struck by the Secretary in accordance with the 1991 Act and has been struck on an annual basis. As point 1064-A1 states, fortnightly amounts are provided for information only. To take a snapshot in time and to project income at that time over the whole year without regard to the period for which that particular item of income has been received is contrary to Harris. It also fails to take account of the age pension's being a pension paid at an annual rate with an annual ordinary income free area also set on an annual basis. A snapshot approach may well be appropriate in the case of an ongoing source of income. To take that approach in every case may be to deny an age pensioner the measure of social security which Parliament envisaged that he or she should receive.
…
57. Returning to Mrs Rolley's case, I am satisfied that she earned income for one period of sixteen weeks. It was a closed period. On the basis of her evidence, I am satisfied that she had no expectation of the work continuing. She did it only while one cleaner was on recreation leave and another was on sick leave. There has been no work before or since. In view of those findings, I am satisfied that it is appropriate in this case to treat Mrs Rolley's ordinary income on a yearly basis as including the particular amount of earnings she received from this one source of short term employment i.e. $1,503.25. Taking into account the $0.30 income she otherwise expected to receive from another source of income, her ordinary rate of income on a yearly basis did not exceed her ordinary income free area. Therefore, she did not have any ordinary income excess and there was no overpayment of age pension to her and so not debt is owed by her to the Commonwealth."
In Secretary, Department of Family & Community Services v Janet Rolley (20 June 2000, at Brisbane, French, Kiefel and Dowsett JJ), the Federal Court said (inter alia):
"The Ordinary Income Test for Age Pensions
This appeal depends upon the proper construction of Step 1 in Module E of the Social Security Act 1991. It is necessary to have regard to the statutory context of that provision and, in particular, the place of the calculation in Module E as one of the steps involved in the calculation under Module A of the rate of pension which is said in Part 1064-A1 of that Module to be "an annual rate". While point 1064-A1 states in parenthesis that "fortnightly amounts are provided for information only", instalments of age pension are payable on alternate Thursdays (s 23(1)) in instalments "worked out by dividing the amount of the annual rate of the pension by 26" (s 59(1)). So payment of the pension is done in fortnightly instalments calculated according to an annual rate. The fortnightly instalments so paid may vary as the annual rate varies according to fluctuations in the amount of a person's ordinary income calculated under Module E.
The first step in Module E requires the working out of the amount of the pensioner's income on a yearly basis. That is to be offset under Module A against the annual rate of pension payable. But the annual rate is payable by fortnightly instalments and may be varied according to changes in ordinary income from time to time albeit that ordinary income is calculated on a yearly basis. Despite the different language the basic conceptual framework remains the same as it was under the 1947 Act. This reflects the legislative intention expressed in the Second Reading Speech that the new Act is a "rewrite" not involving any major policy initiatives and not having any financial impact. So ordinary income on a yearly basis reflects the concept of annual rate of income referred to in s 28(2) of the 1947 Act.
On that basis it is appropriate in calculating ordinary income on a yearly basis to consider the character of the payments which have been received. So, as in the Harris case, an annual dividend payment of $1,000 would be treated under Module E as ordinary income of $1,000 on a yearly basis. The characterisation of some income by reference to its sources may require evaluative judgments as to whether or not it is to be treated as recurring income from which an annual rate may be extrapolated. The range of cases requiring such judgments is illustrated by reference to income derived from employment. So a person in regular employment, albeit it may be part-time, could expect to have income received from that employment dealt with on the assumption that earnings at the current rate would continue and be extrapolated by multiplication to an annual rate. On the other hand a one off payment for work unlikely to be repeated could be dealt with on the basis that it reflected the total income from employment likely to be derived in any period of twelve months. The Act having been properly construed, the judgment is evaluative and is to be treated as a judgment of fact. In the present case this would seem to have been the approach taken by the AAT.
What then is the error of law which the AAT is said to have committed? The Secretary accepts that the AAT correctly concluded that "ordinary income on a yearly basis" should be construed in the same way as "annual rate of income" in the 1947 Act. It was submitted however that "the whole tenor" of the judgment in Harris "makes it very clear that the annualising approach is imperative in relation to ordinary income derived from employment including casual and intermittent employment". But with respect to the Secretary's submission, that is not an exhaustive coverage of what the High Court said. In particular the court made it clear that some payments can be treated as isolated and one off payments. Even in the case of intermittent employment there are different approaches possible.
It may be appropriate "in some cases" as the court said in its joint judgment at 737, to treat such work as a continuing source of income and to take an average of earnings over a period as the yield from that source and "in other cases to treat such employment as a separate source of income yielding its particular amount of earnings". The circumstances of the particular case would show which method is more appropriate. Similarly the circumstances of the particular case will determine whether or not a payment is to be treated as isolated. It is said that the Deputy President conceived her ultimate task to be an assessment or prediction of an annual amount of income. She had, however, proper regard to the nature of the income in taking the approach that she did. That being a finding of fact, not informed by any demonstrated error in her construction of the relevant provisions of the Act, the appeal must be dismissed.
In the case of Mr and Mrs Langton, the Tribunal finds their circumstances so similar to those of Mr Moroney and Mrs Rolley that they should be treated in the same way as Mr Moroney and Mrs Rolley were.
It is appropriate to treat the $1,437.05 earned by Mrs Langton from one source of short term employment as her ordinary income on a yearly basis.
The decision under review is set aside, and the Tribunal determines that Mr and Mrs Langton were not overpaid their pensions for the period 30 October 1997 to 27 November 1997.
I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Mr D W Muller (Senior Member)
Signed: .....................................................................................
R. Hayes, AssociateDate of Hearing 19 March 1999
Date of Decision 17 July 2000
For the Applicant Ms G Bolton, Welfare Rights Centre
For the Respondent Mr J Walsh, Departmental Advocate
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