Lozi and Secretary, Department of Social Services (Social services second review)
[2024] AATA 2921
•16 August 2024
Lozi and Secretary, Department of Social Services (Social services second review) [2024] AATA 2921 (16 August 2024)
ReviewNumber: 2023/6494, 2023/6495
Division: GENERAL DIVISION
File Number(s): 2023/6494 & 2023/6495
Re:Alan and Lamia Lozi
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Mr S Evans, Member
Date:16 August 2024
Place:Sydney
The reviewable decision is affirmed.
..............................[sgd].......................................
Mr S Evans, Member
CATCHWORDS
SOCIAL SECURITY – Jobseeker Payment (JSK) applications – lump sum termination payment – subject to income maintenance period (IMP) – date of grant for JSK – whether Applicants experiencing severe financial hardship – whether unavoidable or reasonable expenditure – Applicants not experiencing financial hardship – reviewable decision affirmed
LEGISLATION
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
CASES
Drake and Minister for Immigration, and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 33 ALD 13
Secretary Department of Education, Employment and Workplace Relations v Ergin[2010] FCA 1438
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Mr S Evans, Member
16 August 2024
INTRODUCTION
In 2022 Alan Lozi and Lamia Lozi (the Applicants) made applications for JobSeeker Payment (JSK).[1] The Department of Social Services (the Agency) granted both Applicants JSK from 4 July 2024.[2] The Agency determined that as Mr Lozi had received a redundancy payment from his former employer in 2020, he was subject to an income maintenance period (IMP) until that date.[3] The Applicants believe that the IMP should be waived so they can receive JSK from an earlier date as they had few liquid assets and were experiencing severe financial hardship.[4]
[1] T4, p.27-36; T11, p.89-96.
[2] T13, p.99; T21, p.135.
[3] T21, p.140-141; T23, p.152.
[4] T1, p.1-6.
For the reasons that follow, the reviewable decisions will be affirmed.
BACKGROUND
Mr Lozi was employed by QANTAS for 40 years. On 27 October 2020, he accepted a redundancy. The total of redundancy and leave payments Mr Lozi received was $275,173.[5] After the redundancy, Mr Lozi briefly continued to work his second job as a part-time security guard.[6]
[5] T8, p.57.
[6] T6, p.52.
On 25 May 2022, Mr Lozi submitted an online claim for JSK which was rejected on 18 June 2022 as he had failed to supply documents and a Module P (partner details) form requested by the Agency.[7] This decision was confirmed on 25 July 2022.[8]
[7] T4, p.27-36; T7, p.54; T21, p.128-129.
[8] T7, p.54.
In August 2022, Mr Lozi presented documents including his Employment Separation Certificate dated 30 October 2020 and bank statements relating to his two savings accounts.[9] He also provided a Details of Income Stream Product for Centrelink prepared by QANTAS Superannuation.[10] On 30 August 2022, Mr Lozi was granted JSK from 4 July 2024, owing to the imposition of an IMP.[11] On 5 September 2022, Mr Lozi advised the Agency that he was experiencing financial hardship.[12]
[9] T8, p.57; T9, 58-80.
[10] T9, p.79-80.
[11] T21, p.135.
[12] Ibid.
Mr Lozi sought review of the decision to grant JSK from 4 July 2024 and the decision was affirmed by an Authorised Review Officer (ARO) on 20 December 2022.[13] On 18 November 2022, Mrs Lozi applied for JSK which was also granted from 4 July 2024 due to the imposition of an IMP.[14] She also sought review of the decision to grant from 4 July 2024 which was affirmed by an ARO on 18 January 2023.[15]
[13] T14; T15; T21, p.140.
[14] T11, p.89-96; T22, p.146.
[15] T17; T18.
Both applicants lodged appeals of the ARO decisions Mr and Mrs Lozi lodged an appeal to the Social Security and Child Support Division of the Tribunal (AAT1) which affirmed the decisions on 1 August 2023.[16] The Applicant’s now seek second tier review of the AAT1 decision by the General Division of the Tribunal.[17]
[16] T2, p.7-10.
[17] T1, p.1-6.
LEGISLATION AND POLICY
The relevant legislation is to be found in the Social Security Act 1991 (Cth) (the Act) and the Social Security (Administration) Act 1999 (Cth) (the Administration Act).
The Social Security Guide (the Guide) provides relevant departmental policy guidance.[18] It is well established that the Tribunal is not bound by government policy, but it will generally be taken into consideration unless there is good reason not to do so.[19]
[18] Guide to Social Security Law.
[19] See Re Drake and Minister for Immigration, and Ethnic Affairs (No. 2) (1979) 2 ALD 634, 645 per Brennan J, which was cited with approval in Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 33 ALD 13, 30 per French and Drummond JJ.
ISSUES
The issue to be determined is whether to grant the Applicants’ claims for JSK from 4 July 2024 and not from an earlier date. This requires consideration of whether:
·the Applicants were subject to an IMP from 28 October 2020 to 3 July 2024; and if so
·whether the Applicants are experiencing severe financial hardship due to unavoidable or reasonable expenditure, such that the discretion to treat all or any part of the IMP as not applying should be exercised.
CONSIDERATION
Are the Applicant’s subject to an IMP?
Mr Lozi’s employment separation certificate dated 30 October 2020 confirms his employment at QANTAS ceased on 27 October 2020 and he received a final gross payment including leave and redundancy payments of $275,173.49.[20]
[20] T8, p.57.
Section 8(1) of the Act defines income as ‘an amount earned, derived or received by the person for the person’s own use or benefit’. Section 1072 defines ordinary income as ‘the person’s gross ordinary income from all sources for the period’. I am satisfied that Mr Lozi’s redundancy payment was ordinary income which is not maintenance income or an exempt lump sum.
The payment of JSK is calculated using Benefit Rate Calculator B in section 1068 of the Act. Section 1068-G1 provides the method to work out the effect of a person’s ordinary income on a person’s maximum payment rate.
Section 1068-G7AG to 1068-G7AH of the Act is used to work out whether leave or termination payments are treated as ordinary income such that an IMP exists. Section 1068-G7 covers lump sum payments arising from termination of employment and provides that termination payments are ordinary income.
Section 1068-G7AQ of the Act defines a termination payment:
termination payment includes:
(a) a redundancy payment; and
(b) a leave payment relating to a person’s employment that has been terminated; and
(c) any other payment that is connected with the termination of a person’s employment.
Section 1068-G7AR of the Act states that leave payment includes payments arising from ‘sick leave, annual; leave, maternity leave and long service leave’.
Under s 1068-G7AH provides that an IMP commences the day the person receives a termination payment and is equal to the period to which the person’s termination payment relates. Section 1068-G7AQ of the Act defines period to which the payment relates:
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 termination payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the termination) 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 termination 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 termination 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.
Section 1068-G7AP provides that if a lump sum payment is comprised of different kinds of termination payments, the periods to which each payment relates must be added together when working out the IMP.
The Guide at 4.3.4.10 provides instructions on how to calculate the length of an IMP after a person’s employment is ceased. The IMP is calculated by adding together:
1. the number of weeks (or days) that the leave payments represent
2. the number of weeks that the portion of the termination payment based on the employee's wage (e.g. 2 weeks redundancy payment for every year of service) represents, and
3. the number of weeks that the portion of the termination payment NOT based on the employee's gross wage (e.g. a gratuity payment) represents. This is obtained by dividing that portion of the termination payment by the relevant weekly wage … and then rounding down this figure to a whole week figure. A 5 day working week is used.
Based on the employment separation certificate, the Agency has calculated an IMP of 961 working days comprised of:
· 60 days in lieu of notice totalling $26,342 (28 October 2020 to 19 January 2021);
· 42 days annual leave totalling $14,067 (20 January 2021 to 18 March 2021);
· 645 days redundancy payment totalling $185,721 (19 March 2021 to 7 September 2023); and
· 214 days long service leave totalling (8 September 2023 to 3 July 2024).[21]
[21] R SOFIC at [56]-[58].
The Agency has calculated that 961 working days result in an IMP from 28 October 2020 to 3 July 2024.[22] I accept the calculation of 961 working days is correct based on the information set out in the employment separation certificate and that the IMP was properly imposed by the Agency.
[22] Ibid.
Discretion to shorten an IMP
Section 1068-G7AM provides the discretion to shorten an IMP if the person is in severe financial hardship because of ‘unavoidable or reasonable expenditure’ incurred during that period. The definition of ‘severe financial hardship’ in the context of a claim for JSK where the person is a member of a couple is provided in section 19C(3) of the Act. A person is in severe financial hardship where the value of the couple’s liquid assets is less than twice the fortnightly amount at the maximum rate of JSK payment.
Were the Applicant’s experiencing severe financial hardship?
When Mr Lozi lodged his claim for JSK on 25 May 2022 the maximum payment rate for a member of a couple was $585.30 per week.[23] Applying the formula in subsection 19C of the Act, to be in severe financial hardship Mr Lozi’s liquid assets must not have exceeded $1,170.60.[24]
[23] Ibid at [61].
[24] Ibid at [61]-[63].
At the time of his claim, Mr Lozi was in receipt of fortnightly income of $3,119.06 comprised of an income stream payment from his QANTAS Superannuation pension, and $239.67 from managed investment/shares/savings. Mrs Lozi’s income was nil.[25]
[25] Ibid; T24, p.172.
At the hearing Mr Lozi confirmed he was receiving income from his QANTAS Superannuation pension when he lodged the claim. However, he noted that the pension payments had and will continue to decrease over time. Subsection 14A(1) of the Act provides that liquid assets include ‘amounts due, and able to be paid, to the person by, or on behalf of, a former employer of the person’, such as Mr Lozi’s payments from QANTAS Superannuation.
In evidence are bank statements for Mrs Lozi’s savings account for the period 1 March 2022 to 31 May 2022 (CBA).[26] Mr Lozi has provided bank statements covering the period 1 January 2022 to 31 March 2022, and 1 April 2022 to 30 June 2022.[27] Following the hearing, Mr Lozi provided a bank statement covering the period 1 April 2024 to 27 May 2024.[28]
[26] T5, p.37-50.
[27] T9, p.59-80.
[28] Applicant further submissions filed 3 June 2024.
According to his bank statement, the opening balance of Mr Lozi’s account on 4 January 2022 was $39,021 and $3,671 by 31 March 2022.[29] Statements for the 3 months of March, April and May 2022 show that on eight occasions he withdrew $2000 in cash.[30] He explained these withdrawals related to money he had borrowed from his daughter, which he repaid in cash. Mr Lozi did not have any documentary evidence to verify this arrangement and denied any of the transactions were gifts.
[29] T9, p.67, 69.
[30] Ibid, p.59-80.
The Applicants have not provided bank statements from late 2020 which would show all the withdrawals of the redundancy payment. Absent bank account statements for the entire period between the redundancy payment and application for JSK, or other corroborative evidence to substantiate their financial circumstances, it is not possible to be certain what Mr Lozi’s liquid assets were in May 2022. However, as Mr Lozi was in receipt of the fortnightly income stream payment of $1,352.95, I find that his liquid assets did not fall below $1,170.[31] As such, his liquid assets did not fall below the maximum rate of JSK when he lodged the claim, and he was not in severe financial hardship for the purposes of section 19C of the Act.
[31] Ibid, p.70-75.
Unavoidable or unreasonable expenditure
The second precondition to the application of section 1068-G7AM of the Act and a reduction of the IMP is that the person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure. Unavoidable or reasonable expenditure is defined in Section 19C(4) of the Act:
(4) Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period or is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies, or in relation to working out if a person is subject to an ordinary waiting period, includes, but is not limited to, the following expenditure:
(a)the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:
(i) if the person is serving a liquid assets test waiting period—that part of the period that the person has served; or
(ii) if the person is subject to a seasonal work preclusion period—that part of the period that has expired; or
(iii) if an income maintenance period applies to the person—that part of the period that has already applied to the person; or
(iv) in relation to working out if the person is subject to an ordinary waiting period—the 4 weeks immediately before the person’s start day mentioned in paragraph 500WA(1)(a), 549CA(2)(a), 620(1)(a) or 693(a);
(b)the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;
(c) school expenses;
(d) funeral expenses;
(e)essential expenses arising on the birth of the person’s child or the adoption
of a child by the person;
(f)expenditure to buy replacement essential household goods because of loss of those goods through theft or natural disaster when the cost of replacement is not the subject of an insurance policy;
(g) the costs of essential repairs to the person’s car or home;
(h) premiums in respect of vehicle or home insurance;
(i) expenses in respect of vehicle registration;
(j) essential medical expenses;
(k)any other costs that the Secretary determines are unavoidable or reasonable
expenditure in the circumstances in relation to a person.
However, unavoidable or reasonable expenditure does not include any reasonable costs of living other than those referred to in paragraph (a).
In Secretary Department of Education, Employment and Workplace Relations v Ergin[32] (Ergin) the Federal Court held in relation to exercising this discretion:
Before the decision-maker can exercise the discretion which is conferred by the section she must be satisfied that the cause of an applicant’s hardship was the incurring of “unavoidable or reasonable expenditure” during the relevant period.
In some cases this question will easily be answered. The applicant may have expended all or almost all of the termination payment on goods or services which do not meet the statutory definition of unavoidable or reasonable expenditure. In such cases the second precondition will not be satisfied. Other cases, such as the present, will cause greater difficulty because some expenditure falls within the “unavoidable or reasonable” category and some does not.
…
Having regard to the context in which it appears, s 1068-G7 AM requires that the Secretary be satisfied that the cause of an applicant’s impecuniosity was the incurring of “unavoidable or reasonable expenditure” during the income maintenance period, before the power to exercise the discretion is enlivened.
[32] [2010] FCA 1438.
In her claim for JSK Mrs Lozi states she and Mr Lozi’s assets include a Toyota RAV 4 valued at $12,000 and a Toyota Lexus valued at $65,000.[33] ARO notes from December 2022 record that Mr Lozi had told the Agency that his redundancy payment ‘went towards the house and the car’.[34] He confirmed having contributed to $100,000 to their mortgage and said he purchased Mrs Lozi a new car for $76,000. They used the rest of the money to live off.
[33] T11, p.94-95.
[34] T14, p.101-102.
At the hearing Mr Lozi confirmed that he had purchased a Toyota Lexus 2021. He told me that he and Mrs Lozi needed a second car because he was using their other car. Mr Lozi acknowledged that the $100,000 he had put into his mortgage was not being demanded by his bank but was a voluntary payment to reduce the balance of their mortgage.
Mr Lozi confirmed that he and Mrs Lozi travelled to Singapore between 18 and 26 July 2022.[35] He agreed that he was not experiencing financial hardship at the time he was able to travel to Singapore.
[35] T23, p.156-157.
Mrs Lozi gave evidence that Mr Lozi bought her a new car because having worked for 40 years, he wanted to splurge a bit. She said the purchase of the vehicle and paying down the mortgage occurred before the financial hardship began. Most of the redundancy had been spent on normal daily expenses and bills including food, clothing, and insurance premiums. Their expectation was that Mr Lozi would begin working again when they had spent the redundancy payment. It turned out that by that time, Mr Lozi was no longer able to work for health reasons. This was unexpected. Since spending the redundancy, the Applicants have had to borrow money from their adult children to meet their essential expenses.
I acknowledge that the Applicants were not experiencing financial hardship - and did not anticipate doing so - when they purchased a new vehicle or paid $100,000 off their mortgage. Examples of what constitutes unavoidable or reasonable expenditure provided by the Guide at 4.3.4.40 include:
·purchases to assist the person to gain employment, such as a suitable car, computer or appropriate work clothing,
·initial purchases required for establishing a new residence, such as a rental bond or essential furniture and household goods,
·….
·debt repayments, for example, where non-payment may further disadvantage the person or result in repossession of the person's home, loss of the person's license or imprisonment.
Having regard to the Act and the Guide, I am not persuaded that the purchase of a new vehicle or the additional repayment of the Applicants’ mortgage was unavoidable or reasonable expenditure.
CONCLUSION
I am satisfied that the IMP applied to the Applicant’s at the time they lodged their claims for JSK. In order to exercise the discretion to shorten the IMP, I must be satisfied that the Applicants were experiencing severe financial hardship because they incurred unavoidable or reasonable expenditure.
Where the Applicants have accounted for their expenditure of Mr Lozi’s redundancy, it was overwhelmingly on expenses other than reasonable costs of living. In any event, the Applicants were not experiencing severe financial hardship as defined in the Act. As such, section 1068-G7AM cannot be exercised to shorten the IMP. It follows that the correct and preferable decision is to affirm the decision under review.
DECISION
The reviewable decision is affirmed.
I certify that the preceding 39 (thirty - nine) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member.
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Associate
Dated: 16 August 2024
Date(s) of hearing: 3 June 2024 Date final submissions received: 11 June 2024 Applicants: In-person Solicitors for the Respondent: Mr G. Lozynsky, Services Australia
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