Maguire and Secretary, Department of Social Services (Social services second review)
[2016] AATA 44
•2 February 2016
Maguire and Secretary, Department of Social Services (Social services second review) [2016] AATA 44 (2 February 2016)
Division
GENERAL DIVISION
File Number
2015/4295
Re
Allison Maguire
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member A C Cotter
Date 2 February 2016 Place Brisbane The decision under review is affirmed.
.........................[Sgd]...............................................
Senior Member A C Cotter
CATCHWORDS
SOCIAL SECURITY – income maintenance period – classification of termination payment – lump sum payments arising from termination of employment – long service leave – financial hardship.
LEGISLATION
Social Security Act 1991, ss 1072, 1068-G7, 1068-G7AH, 1068-G7AQ, 19C(3)
CASES
Wainwright and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 858;
Secretary, Department of Family and Community Services and Bazzi [2000] AATA 794;
Neilsen and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 591;
Warren and Secretary, Department of Social Services [2013] AATA 881.
SECONDARY MATERIALS
The Guide to Social Security Law (“Guide”), 4.3.4.10.
REASONS FOR DECISION
Senior Member A C Cotter
2 February 2016
INTRODUCTION
After working for McDonald’s Australia Limited (“McDonald’s”) for over 24 years, Allison Maguire was dismissed on 23 April 2015.
On 26 April 2015, she received a termination payment from McDonald’s totalling $17,233.72 gross, which included the following amounts:
(a)$4,662.98 (the equivalent of 25 working days) in lieu of notice;
(b)$401.78 (the equivalent of 21.15 hours or 2.8 working days) for annual leave entitlements; and
(c)$11,077.55 (the equivalent of 496 hours or 65.3 working days) for long service leave entitlements.[1]
After tax, the net amount of $13,418.72 was paid into the joint bank account of Mrs Maguire and her husband on 28 April 2015.[2]
[1] Exhibit 1, T Documents, T 11, page 68, Employment Separation Certificate dated 1 May 2015.
[2] Exhibit 3, Attachment to Applicant’s Statement of Facts and Contentions dated 26 November 2015 (Heritage Bank account statement dated 15 August 2105).
On 28 April 2015, Mrs Maguire lodged a claim for Newstart Allowance (“NSA”).[3]
[3] Exhibit 1, T Documents, T 12, pages 70-74, NSA Application dated 28 April 2015.
The next day, she transferred $8,000.00 from her bank account to another account and withdrew cash of $5,419.00.[4] She later confirmed that the $8,000.00 amount was paid towards her and her husband’s line of credit for their mortgage.[5] Although Mrs Maguire said that $5,150.00 of the cash withdrawal was paid towards their credit card[6], it seems from the bank records that only an amount of $2,900.00 was paid from that cash withdrawal on that date[7], with the balance of the cash presumably being retained by Mrs Maguire.
[4] Exhibit 3, Attachment to Applicant’s Statement of Facts and Contentions dated 26 November 2015 (Heritage Bank account statement dated 15 August 2105).
[5] Exhibit 1, T Documents, T 15, page 89, file note dated 28 May 2015; and T 7, page 57, letter from Mrs Maguire dated 29 May 2015.
[6] ibid
[7] Exhibit 1, T Documents, T 7, page 59, extract from Westpac statement.
Mrs Maguire followed up the progress of her application about three weeks later, and was told that due to her termination pay, an Income Maintenance Period (“IMP”) would be imposed. She responded that the money had already been spent.[8]
[8] Exhibit 1, T Documents, T 15, page 93, file note dated 20 May 2015.
On 26 May 2015, an IMP was imposed for the period 26 April 2015 to 31 August 2015.[9]
[9] Exhibit 1, T Documents, T 15, page 92, file note dated 26 May 2015
A review by an Authorised Review Officer[10] and a later first tier review by the Social Services and Child Support Division of the Administrative Appeals Tribunal (“AAT1”)[11] confirmed the original decision to impose the IMP and not to shorten or end it.
[10] Exhibit 1, T Documents, T 5, pages 52-55, Authorised Review Officer’s letter dated 1 June 2015.
[11] Exhibit 1, T Documents, T 2, pages 10-14, AAT1 Decision and Reasons for Decision dated 3 August 2015.
Still dissatisfied, Mrs Maguire has sought a review of the AAT1 decision.
ISSUES FOR THE TRIBUNAL
The issues which fall for my consideration are:
a)whether Mrs Maguire was subject to an IMP commencing on 26 April 2015 and ending on 31 August 2015; and
b)if so, whether the IMP could be shortened.
I deal with each of those issues below.
CONSIDERATION
Was Mrs Maguire subject to an IMP between 26 April 2015 and 31 August 2015?
There is no dispute that Mrs Maguire was qualified for NSA at the time of the claim. The issue is whether the payment was payable. NSA is an income tested payment and a person’s rate of NSA is calculated by reference to the Benefit Rate Calculator B at the end of s 1068 of the Social Security Act 1991 (Cth)(“Act”).[12] Module G of s 1068 sets out a Method Statement for determining the effect of a person’s ordinary income on the maximum payment rate. In this case, that leads to a consideration of whether Mrs Maguire’s termination payout is to be classed as ordinary income.
[12] Exhibit 2, Secretary’s Statement of Facts and Contentions dated 25 November 2015, paragraph [17].
Is the termination payout ordinary income?
The answer to this question depends on a consideration of a number of related sections of the Act.
Section 1072 of the Act states that a reference in the Act to a person’s ordinary income for a period is a reference to the person’s “gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A”.
Lump sum payments arising from the termination of employment are dealt with in s 1068-G7. It provides that if a person’s employment has been terminated and as a result, they are entitled to a lump sum payment from their former employer, the person is taken to have received the lump sum on the day on which the person’s employment was terminated.
Section 1068-G7AH states that if a person’s employment has been terminated and they receive a termination payment, they are taken to have received ordinary income for a period (the IMP) equal to the period to which the payment relates.
A number of relevant definitions are contained in s 1068-G7AQ. “Termination payment” is defined to include:
(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.[13]
“Redundancy payment” is defined to include a payment in lieu of notice, while “leave payment” is relevantly defined to include “a payment in respect of sick leave, annual leave, maternity leave and long service leave.”[14]
[13] My emphasis added.
[14] My emphasis added.
Mrs Maguire having received on her termination from McDonald’s a payment in lieu of notice and payments in respect of her annual leave and long service leave, she received a termination payment of those amounts for the purposes of the Act. By reason of s 1068-G7AH, she is therefore taken to have received ordinary income for the period to which those payments relate. In other words, she was subject to an IMP equal to the periods to which the payments related.
Calculation of IMP
Based on Mrs Maguire’s Employment Separation Certificate from McDonald’s and Centrelink’s further inquiries of McDonald’s, it was determined that the termination payment equated to 128 days in total (being 92 working days). After having regard to The Guide to Social Security Law (“Guide”)[15], I am satisfied that calculation is correct.
[15] At 4.3.4.10.
According to the Guide[16], the IMP takes effect from the date the employer pays the termination payments (in this case, 26 April 2015). On that basis, I am satisfied that the IMP ended on 31 August 2015, being 128 days later.
[16] Ibid.
Mrs Maguire’s contentions
Mrs Maguire’s husband, John, appeared at the hearing as her representative. His submissions raised three matters: his and Mrs Maguire’s dealings with Centrelink on 23 April 2015 and the implications of those dealings; that it is incorrect to classify the payment of long service leave entitlements as wages or income; and the fact that Centrelink had previously ruled differently in another matter and that its determination in this case was inconsistent with that previous ruling. I am not persuaded by those arguments, for the following reasons.
Mrs Maguire’s dealings with Centrelink on 23 April
The first matter concerned the dealings which Mrs Maguire and her husband had with Centrelink on the day of her termination, 23 April 2015. Mrs Maguire gave evidence at the hearing that following her termination, she went immediately to a Centrelink office. She saw a Centrelink officer whom she described as a “Chinese lady”. As Mrs Maguire had not at that stage received anything from McDonald’s in writing, she told the officer what had happened and gave details about her expected payment in lieu of notice and her long service leave entitlements. Mrs Maguire said that the officer keyed that information into the computer, and advised her the amount that she would receive as NSA and the adjusted amount that her husband would be paid for his existing Disability Support Pension (“DSP”). The officer told Mrs Maguire that she could expect to receive her first payment at about the same time as her husband’s next DSP payment. No documentation was created by the officer. When Mrs Maguire returned home, she says that she was vague about the detail, which is understandable after the events of earlier in the day. Consequently, she returned to the Centrelink office, this time accompanied by Mr Maguire. They saw the same Centrelink officer who repeated what she had said earlier. Again, no documentation was produced.
Mr Maguire submitted that by keying in the information provided by Mrs Maguire and advising details of the payments she and he were to receive, the Centrelink officer (and therefore, Centrelink) accepted that the payment of the long service leave entitlement was not classed as wages.
No Centrelink record of the discussions on 23 April was produced. Nor was the Centrelink officer called as a witness. Without knowing her version of what transpired, it is difficult, if not impossible, to form a view as to what was said on those occasions, and by whom. Notwithstanding that, it seems clear from the material before me that at least some initial contact was made by the Maguires on that day. The NSA application shows that while the claim was submitted on 28 April 2015, the claim creation date was recorded as 23 April.[17] Similarly, the Customer Declaration Form shows the initial contact date as 23 April 2015.[18]
[17] Exhibit 1, T Documents, T 12, page 70, NSA application submitted 28 April 2015.
[18] Exhibit 1, T Documents, T 14, page 76, Customer Declaration Form - Newstart Allowance dated 26 May 2015.
Giving Mrs and Mr Maguire the benefit of any doubt and assuming, for present purposes, that the discussions took place as they recounted them, I am nevertheless unconvinced that the simple act of the Centrelink officer keying in information in order to respond to a customer inquiry could be construed as evidence of Centrelink’s acceptance that the long service leave entitlement is not wages or income. I say that for several reasons.
First, it is supposition on Mr and Mrs Maguire’s part that the Centrelink records in fact treated the long service leave entitlement in that way. There was no suggestion that the Centrelink officer made a representation to that effect, nor did she provide the document on which her advice of payments and timing was based. All that is said is that she indicated that Mrs Maguire could expect to receive the first payment of NSA at about the same time as Mr Maguire’s next scheduled payment of DSP. If there were an error, it could be attributed to other reasons, such as a simple mistake in communicating the date.
Second, it is clear from the material before the Tribunal that the discussions on 23 April were as they are described – “initial contact”. At that stage, Mrs Maguire had not received formal advice from McDonald’s about the payout she would receive, although she did have some idea of the amounts. Further, it is obvious that there was further information that was required by Centrelink before any definitive decision on Mrs Maguire’s NSA application could be made. As I have mentioned already, the application form itself was not submitted until five days later, on 28 April, and the required declaration from Mrs Maguire appears not to have been sent to her until 26 May. It would have been apparent from those documents that a final decision on the application would not be made until that information was confirmed.
Third, in view of the clear and express wording of the relevant legislative provisions discussed earlier, it is inconceivable that the Centrelink computer system would permit an incorrect overriding of the relevant statutory provisions.
For those reasons, I am not convinced that the Centrelink officer’s discussions of 23 April with the Maguires was proof that Centrelink accepted that the long service leave entitlement should not be treated as income.
As I mentioned earlier, what is said to have been wrong advice as to the NSA commencement could be attributed to nothing more than a simple mistake in reading the information or communicating the start date. However, that does not affect the question I have to consider, and is beyond the scope of this proceeding. If Mrs Maguire feels aggrieved, there may be other avenues potentially open to her, either through the Department itself, or the Ombudsman.
The categorisation of long service leave
Mr Maguire’s second submission was that Centrelink was wrong in treating long service leave as “wages”, saying that rather, it was to be classified as “an entitlement for years worked”.[19] In support of that submission, he relied on comments received from Mrs Maguire’s first boss, a Mrs Whiting, who is in charge of staff at Woolworths Booval.
[19] Exhibit 3, Applicant’s Statement of Facts and Contentions dated 26 November 2015.
While I understand the sentiment expressed by Mrs Whiting, it is not relevant to my considerations. It is the Act which sets out what termination payments include, and how they are to be treated for the purpose of applying the income test. That language is clear and express; there is nothing to warrant my departure from those clear words.
An earlier precedent?
Finally, Mr Maguire called as a witness Mr Darrin Maguire, a relation who successfully challenged a Centrelink determination in 2014. Darrin Maguire is a DSP recipient who successfully sued his former employer and recovered a lump sum amount. That amount represented recompense for underpayments of award penalty rates for weekends and public holidays that he worked over several years. Centrelink initially treated that amount as income earned at the time of his receipt of the settlement, but an Authorised Review Officer varied that decision on review, saying that the amount should be treated as income over the period the wages were earned and not as income at the time of receipt.[20]
[20] Exhibit 3, Attachment to Applicant’s Statement of Facts and Contentions dated 26 November 2015 (Letter, Centrelink to Mr Darrin R Maguire dated 26 May 2014).
While I understand the reasoning behind that decision, I do not think it is relevant to the present circumstances. It is to be confined to its own particular facts and does not touch upon the central issue here, of whether termination payments in the nature of payments in lieu of notice, and payments for annual and long service leave entitlements are to be classed as ordinary income for the purpose of the income test. As I have said already, those matters are governed by the clear and unambiguous language of the relevant provisions of the Act. There is no reason, or justification, to depart from them.
Summary
To summarise, I consider that Mrs Maguire was subject to an IMP between 26 April 2015 and 31 August 2015. The relevant provisions of the Act make it clear that the termination payments in question should be treated as ordinary income for the purpose of the income test. I am satisfied that the calculation of the IMP was correct. I do not consider that the arguments raised by Mr Maguire on behalf of his wife justify a departure from the clear language of the Act.
Could the IMP be shortened?
Under s 1068-G7AM of the Act, the Secretary may, in certain circumstances, determine that the whole, or part, of an IMP does not apply to a person. Those circumstances are where the Secretary is satisfied that the person is in severe financial hardship because they incurred unavoidable or reasonable expenditure while an IMP applied to them.
The expression “severe financial hardship” is defined in s 19C(3) of the Act in respect of a person who is a member of a couple. It requires that the value of the couple’s “liquid assets”[21] is less than twice the fortnightly amount at the maximum payment rate of the payment or allowance that would be payable to the person if the IMP did not apply. As Mrs Maguire’s maximum payment rate for NSA was $468.80 per fortnight,[22] the value of the couple’s liquid assets for this purpose is $937.60. That means that in order for Mrs Maguire to claim that she was in severe financial hardship at the time, she needs to establish that her and her husband’s liquid assets were less than $937.60.
[21] Defined in ss 14A(1) and (2) of the Act.
[22] Exhibit 1, T Documents, T 8, page 61, Centrelink letter to Mrs Maguire dated 26 May 2015.
The Secretary contended that during the IMP, Mrs Maguire had more than $937.60 available in liquid assets. She first had access to cash of about $2,500.00 (being the balance of the cash withdrawal on 29 April after paying $2,900.00 towards her credit card the same day), and later, access to about $80,000.00 deposited from Sunsuper (on 14 May). Later again in the period, she had access to at least $40,000.00 in a line of credit account with Heritage Bank.[23]
[23] Exhibit 2, Secretary’s Statement of Facts and Contentions dated 25 November 2015, paragraph [43].
That contention was not challenged by Mrs Maguire. On re-examination by her husband, she pointed out that the funds from Sunsuper were directed towards payment of the line of credit for their home loan. She also testified that, for the pending Christmas season, they had spent about $700.00 for Christmas presents.
Having considered the bank statements produced to the Tribunal and in the absence of any significant challenge by Mrs Maguire, I accept the Secretary’s contention that during the IMP Mrs Maguire had more than $937.60 available in liquid assets. As to the points mentioned in re-examination, a positive balance of about $45,000.00 remained in the Heritage Bank account after payment of the home loan,[24] and the expenditure on Christmas presents was after the conclusion of the IMP. I therefore do not consider that during the IMP Mrs Maguire was in severe financial hardship, as that term is defined in s 19C(3) of the Act.
[24] Exhibit 2, Secretary’s Statement of Facts and Contentions dated 25 November 2015, Attachment B (bank balance extract).
Although it is not necessary for me to consider the point, I should add that I have serious doubts that the repayment of credit cards and loans beyond the required repayment schedule could be seen as “unavoidable or reasonable expenditure” as that expression is defined in the Act.(See, for example, Wainwright and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 858, [19] and [27]; Secretary, Department of Family and Community Services and Bazzi [2000] AATA 794, [43]; Neilsen and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 591,[36]; and Warren and Secretary, Department of Social Services [2013] AATA 881, [33]-[35]).
As Mrs Maguire was not in financial hardship as that term is understood in the Act, I do not consider that it was possible to shorten the IMP under s 1068-G7AM.
CONCLUSION
To summarise, I consider that Mrs Maguire was correctly subject to an IMP from 26 April 2015 to 31 August 2015. She not having been in severe financial hardship during the period, I do not believe there was any basis to shorten that period as it applied to her.
Accordingly, the decision under review is affirmed.
I certify that the preceding 43 (forty -three) paragraphs are a true copy of the reasons for the decision herein of Senior Member A C Cotter .........................[Sgd]...............................................
Associate
Dated 2 February 2016
Date of hearing 11 December 2015 Advocate for the Applicant John Maguire Solicitors for the Respondent Department of Human Services
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