McLaughlin and Secretary, Department of Family and Community Serv Ices
[2003] AATA 298
•31 March 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 298
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2002/189
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Applicant
And
DONALD BURNS McLAUGHLIN
Respondent
DECISION
Tribunal The Hon C R Wright QC., (Deputy President) Date31 March 2003
PlacePerth
Decision The application to review the Social Security Appeals Tribunal decision is upheld, and that decision is set aside. The decision of the Secretary's delegate, as endorsed by the authorised review officer is affirmed and reinstated. (The Hon C R Wright QC)
Deputy President
CATCHWORDS
Social Security - pensions, benefits and allowances - age pension - income test - whether maturity value (less premiums) is assessable as income - whether such sum should be an "exempt lump sum".
Social Security Act 1991 - ss8, 9, 1073
Social Security (Administration) Act 1999 - Division 5
Varcoe and Secretary, Department of Family and Community Services (2000) AATA 1002
Davies and Secretary, Department of Family and Community Services (2002) AATA 904
REASONS FOR DECISION
31 March 2003 The Hon C R Wright QC., (Deputy President) The Application to review
1. The applicant asks the Administrative Appeals Tribunal to review a decision of the Social Security Appeals Tribunal (SSAT) delivered in Perth, Western Australia on 26 April 2002. In that decision the SSAT set aside a determination of an authorised review officer affirming a decision of the applicant’s delegate to assess, as income, the maturity value (less premiums paid) of 2 life insurance policies held by the respondent, Mr McLaughlin. The rate of the age pension claimed by the respondent had been reduced as a consequence of this assessment.
2. The SSAT decided that, except for a bonus of $286 which had accrued on one of the policies on 18 April 2001, the whole return on maturity on both policies was an “exempt lump sum” which should not have been taken into account as income in assessing the respondent’s pension rate. The applicant claims in the present proceedings that the SSAT decision was erroneous and that the original determination by the Secretary’s delegate should be restored.
History
3. On 17 February 1964 whilst living in Scotland, Mr McLaughlin took out an NFU Mutual life insurance policy. In May 1970 Mr McLaughlin and his wife emigrated to Australia and are now permanent residents. On 18 April 1977 Mr McLaughlin took out an AXA Australia life insurance policy.
4. On 17 February 2001 Mr McLaughlin’s NFU Mutual life insurance policy matured. The maturity amount of the policy was 12,983 pounds (using an exchange rate of 0.3839 this converted to $33,818.70). Over the period of the policy the premiums amounted to 1152.9496 pounds (using exchange rate of 0.3839 this converted to $3,003.25). The difference between the maturity payment and sum of the purchase price and premiums paid was $30,815.45.
5. Mr McLaughlin lodged a claim for age pension on 22 February 2001. He completed “MODULE A Asset Details” form as part of his age pension claim. On this form Mr McLaughlin advised Centrelink that he had NFU Mutual and AXA Australia life insurance policies with surrender values of $30,000 and $15,000 respectively (T5 page 37).
6. On 19 March 2001 Mr McLaughlin had an interview with a Centrelink Financial Information Services Officer at Geraldton. At this interview Mr McLaughlin again advised Centrelink about the existence of his NFU Mutual and AXA Australia life insurance policies. Mr McLaughlin agrees that at that interview he was advised that Centrelink would assess the profit of these policies (the difference between the maturity payment and the sum of the purchase price and premiums paid) as income for 12 months following maturity.
7. On 18 April 2001, Mr McLaughlin’s AXA Australia life insurance policy matured. The maturity amount of the policy was $18,860.00. Over the period of the policy the premiums amounted to $12,437.76. The difference between the maturity payment and the sum of the purchase price and premiums paid was $6,422.84.
8. On 8 June 2001, Mr McLaughlin was granted age pension with effect from 22 February 2001. At this time Centrelink decided to assess the `profit’ (the difference between the maturity payment and the sum of the purchase price and premiums paid) of Mr McLaughlin’s MFU Mutual and AXA Australia life insurance policies as income for 12 months following maturity. This had the effect of reducing Mr McLaughlin’s rate of age pension, as Mr McLaughlin was subject to the income test.
9. On 19 June 2001 Mr McLaughlin requested a review of Centrelink’s decision. On 25 June 2001 the original decision-maker advised Mr McLaughlin that the decision be affirmed. Mr McLaughlin requested a further review by an authorised review officer the same day. By letter dated 23 November 2001 Mr McLaughlin was advised that the authorised review officer had affirmed the decision under review.
10. Mr McLaughlin then applied to the SSAT for a review of the decision, the application being heard on 27 March 2002. On 19 April 2002 the SSAT set aside the decision under review and substituted its decision that, except for the bonuses accrued on the AXA Australia policy on 18 April 2001 in the sum of $286.00, the whole return on the maturity of the AXA Australia and MFU Mutual life insurance policies is an exempt lump sum.
Proceedings in the AAT
11. The application to review was heard in Perth on Wednesday, 12 March 2003. The applicant was represented by Ms K Hackney assisted by Mr S Ellis. The respondent was represented by Mr C T H Tham. The facts as stated in paragraphs 1 to 10 above were not in dispute. Documentary exhibits consisting of (i) the section 37 “T” documents (Exhibit “B”), (ii) Departmental file entries (Exhibit “A”); and (iii) “Questions and Answers – Social Security Income and Assets Tests Assessment of Conventional Life Insurance Policies” (undated) (Exhibit “C”) were taken into evidence. The respondent also gave brief oral evidence under oath.
The Issues
12. Section 55 of the Social Security Act 1991 (“the Act”) provides that the rate of payment of age pension should be determined according to “Pension Rate Calculator” at the end of s1064 in Part 3.2. of the Act.
13. Section 1064 - A1 sets out a method statement to work out a person’s rate. Relevantly, step 5 therein provides that the rate of payment is subject to the income test:
Step 5Apply the ordinary income test using MODULE E below to work out the income reduction.
14. Step 1 of Module E of the Rate Calculator requires that the person’s ordinary income be ascertained:
“MODULE E – ORDINARY INCOME TEST
Effect of income on maximum payment rate
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.”
15. The term “ordinary income” is defined in subsection 8(1) of the Act as follows:
“`Ordinary income’ means income that is not maintenance income or an exempt lump sum.”
“Income” is defined in subsection 8(1) as an income amount that is received by the person for their own use or benefit:
“income”, in relation to a person, means:
(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).”
16. An “income amount” includes moneys:
“income amount” means:
(a) valuable consideration; or
(b) personal earnings; or
(c) moneys; or
(d) profits;
(whether of a capital nature not).
17. The applicant contends that the “profits” (the difference between the maturity payment and the sum of the purchase price and premiums paid) received by Mr McLaughlin as a result of the NFU Mutual and AXA Australia life insurance policies, were “moneys” that he received for his own use and benefit. Therefore, it is an amount properly categorised as “income” under the Act.
18. Section 1073 of the Act, (so far as is relevant) provides that if a person receives an amount that:
“(a) is not income within the meaning of Division IB or IC of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.”
19. At issue is the question whether or not the `profit’ (the difference between the maturity payment and the sum of the purchase price and premiums paid) of Mr McLaughlin’s MFU Mutual and AXA Australia life insurance policies, is to be treated as “ordinary income” under subsection 1073(1). If it is not “ordinary income” then the amount received cannot be applied by operation of subsection 1073(1) to the rate calculators so as to affect the applicant’s rates of payment.
20. The applicant contends, as to sub-paragraph (a) the profit is not income within the meaning of Division 1B (deemed income) or Division 1C (income from an income stream) of Part 3.10 of the Act. As to paragraph (b) the Secretary contends that the profit is not:
(i) income in the form of periodic payments;
(ii) ordinary income from remunerative work.
That leaves the question whether the profit is an “exempt lump sum”. That term is defined in subsection 8(11) of the Act which, provides:
“8.(11) An amount received by a person is an exempt lump sum if:
(a)the amount is not a periodic amount (within the meaning of subsection 10(1A); and
(b)the amount is not a leave payment within the meaning of points 1067G-H20, 1067L-D16 and 1068-G7AR; and
(c)the amount is not income from remunerative work undertaken by the person; and
(d)the amount is an amount, or class or amounts, determined by the Secretary to be an exempt lump sum.
Note:Some examples of the kinds of lump sums that the Secretary may determine to be exempt lump sums include a lottery win or other windfall, a legacy or bequest, or a gift – if it is a one-off gift.”
The applicant contends that there are four criteria all of which have to be satisfied before an amount is an “exempt lump sum”. The amount received (“profit” – the maturity less the purchase price/premiums paid) from Mr McLaughlin’s NFU Mutual and AXA Australia life insurance policies satisfies subparagraphs 8(11)(a), (b) and (c). To be exempt it must also satisfy subparagraph 8(11)(d) which requires that the amount is an amount determined by the Secretary to be an exempt lump sum.
21. The Secretary contends that there are restricted delegations in relation to the exercise of the power under subparagraph 8(11)(d) with the intention of restricting the types of payments that are considered as exempt lump sums. The delegations can be found in Instrument Number 2 of 2002 and the power is presently delegated to only: (i) all positions of Deputy Secretary; (ii) all positions of Executive Director; and (iii) Chief Legal Adviser, Legal Services Branch. The determinations that have been made by the Secretary under subparagraph 8(11)(d) as to what presently constitutes exempt lump sums can be found in the Guide to the Social Security Law at Chapter 4.3.2.31. The Secretary contends that none of these determinations include or could be equated with matured insurance policies.
Discussion
22. The Guide need not be set out at length. It plainly does not include the proceeds of mature insurance policies as an exempt lump sum. The exempt lump sums mentioned in the Guide consist of payments from specific named funds and the list concludes with a final entry in these terms “Other individual exempt payments where customers will hold an 8(11) Determination signed by the Secretary of Family and Community Services”. This, perhaps unnecessary, entry serves nonetheless as a reminder that s8(11)(d) invests the applicant with an ongoing power to make exempt lump sum determinations in future cases. The respondent contends that, as in the case of Varcoe and Secretary, Department of Family and Community Services [2000] AATA 2002, the power invested in the Secretary, can be exercised in “customer specific cases” so as to avoid unfairness, injustice and unequitable treatment to an individual.
23. The applicant contends that even though the AAT made this decision in relation to Mr Varcoe’s matured insurance policies, there has been no determination by the Secretary to include such policies as exempt lump sums. This suggests an intention that such amounts are not to be treated as exempt lump sums.
24. The applicant also contends that while the AAT determined in Varcoe that the amounts received by Mr Varcoe by way of matured insurance policies were to be exempt lump sums for the purposes of income testing, the AAT’s decision was expressly not intended to be a universal determination that these classes of amounts were to be exempt lump sums. The Secretary contends that in Varcoe, the AAT exercised the power in subparagraph 8(11)(d) incorrectly, insofar as it directed that the lump sum be dissected to assess as income only the amount accrued after 21 July 1997 (the date of the policy change).
25. The relevant definition of income in section 8 of the Act requires that the money be “earned, derived or received”. This money was not earned or derived over the period it accrued, as there was no present legal entitlement to it. The money was, however, received by Mr Varcoe and, by virtue of s1073 of the Act, it is assessable income from that date.
26. The applicant also referred to the decision of Senior Member W J F Purcell in Davies and Secretary, Department of Family and Community Services delivered on 3 October 2002, the outcome of which differed from that in Varcoe’s case. The Davies decision supports the approach contended for in paragraph 24 above. At paragraph 20 of that Decision SM Purcell commented that “the total accumulated bonuses are assessed as income, irrespective of the period during which the bonuses were accumulated, or the person was a recipient of social security payments”.
27. In Varcoe, the AAT said that: “In the absence of a general determination, specific determinations are a way to achieve a more equitable result in individual matters”. The applicant contends that while it may be the case that the Secretary would be able from time to time to determine that a certain individual’s one-off lump sum payment is to be exempt from income-testing, there still has not been a determination made by the Secretary (or delegate) in respect of matured life insurance policies as exempt lump sums. The Secretary contends that in the absence of such a determination, amounts received by a person out of matured insurance policies remain assessable as income under s1073 of the Act.
28. The nature of the payments to be regarded as exempt lump sums, are identified in the Note to subsection 8(11) of the Act. The applicant contends that the Note provides clear guidance as to the features of the types of lump sums that the Secretary may determine to be exempt lump sums. The Secretary notes that subsection 39(1A) of the Act provides that the note at the foot of subsection 8(11) is considered to be part of that subsection:
“39.(1A) For the purposes of this Act, a Note is to be taken to be part of:
(a)if the Note immediately follows a section that does not contain subsections – the section;
or
(b)if the Note immediately follows a subsection – the subsection.”
It is therefore submitted, plainly correctly, that the usual presumption that notes following a section are not part of the Act (see subsection 13(3) of the Acts Interpretation Act) and are therefore given only minor weight in the interpretation of the section, is rebutted by subsection 39(1A) of the Act. This means that the note to subsection 8(11) must be considered as part of the Act in determining the scope of the discretion conferred by paragraph 8(11)(d).
29. The applicant contends that the Note to subsection 8(11) covers payments for which a person cannot provide - payments that are unexpected and non-anticipated - payments that “come a persons way”.. The Secretary contends that such a description does not apply to the type of insurance products that Mr McLaughlin held. The Davies decision supports this approach. Senior Member Purcell’s comments in Davies suggest that the exemption power ought to be used only in relation to unexpected, non-anticipated amounts. She stated (at para 23) that “the notes to the section set out some examples of the kinds of lump sums that the Secretary might determine to be exempt lump sums - such as a lottery win or other windfall, a legacy or bequest, or a one-off gift. These examples relate to unexpected, non-anticipated amounts. Such a description does not apply to the type of product, the insurance policy with bonuses, that the applicant held”. Senior Member Purcell was obviously applying the “ejusdem generis” rule of statutory interpretation.
30. The secretary contends that the features of insurance products show the distinct nature of insurance policies when compared to the other classes of exempt lump sums. While the main purpose of conventional life insurance policies is to provide death cover, some policies, such as those held by Mr McLaughlin, include an investment element. Such policies are purchased with contributions/premiums over a period of time, the investments often provide returns/bonuses and the policy matures with the payment of an expected amount at the end of a specified term or event. The applicant contends that a person who invests in such a policy is deriving income from a profit-making transaction. To ignore the income from life insurance policies for income test purposes would be: (i) inequitable compared to the treatment of other products; and (ii) inconsistent with the intention of the Act to assess income from all sources, with very limited exceptions. The income test is used to target income support to people at times of financial need while ensuring that the social security safety net remains sustainable for Australian taxpayers.
31. The Secretary submits that the Davies decision is consistent with current Departmental policy dealing with the treatment of conventional life insurance policies. Prior to 21 July 1997, bonuses on conventional life insurance policies were not assessed as income. The relevant Departmental policy guidelines, prior to 21 July 1997 read:
“GUIDE TO THE SOCIAL SECURITY LAW
Conventional life insurance policies
Conventional life insurance policies are distinguished from insurance bonds. They should also be distinguished from unbundled life insurance policies which combine elements of conventional life insurance and investment similar to insurance bonds.
The main purposes of conventional life insurance policies is to provide death cover, although some policies also mature if the insured becomes totally disabled. Some kinds of conventional insurance also include an investment element. Bonuses on these policies are not assessed as income either during the term of the policy or on maturity.”
32. However, after 21 July 1997 the income testing of life insurance policies at surrender or maturity changed, as a result of a clarification of policy to ensure that there was no misinterpretation of the Act. Details of this policy change were made available to the public in a Centrelink publication dated March 2000 entitled “Questions and Answers, Social Security Income and Assets Tests – Assessment of Conventional Life Insurance Policies” (Exhibit “C”). The relevant Departmental policy guidelines, post July 1997, are paragraphs 4.3.9.20 and 4.4.4.10 of the Guide to the Social Security Law: The respondent was made aware of these guidelines.
“Guide to the Social Security Law
4.3.9.20 Income from Life Insurance Products
Conventional life insurance policies – bonuses
Bonuses on conventional life insurance policies are NOT assessed as ongoing income during the term of the policy. On maturity, the difference between the maturity payment and the sum of the purchase price and premiums paid by the investor IS assessed as income for 12 months. This applies for both pension and benefit purposes.
Act reference: SSAct section 1073 Certain amounts taken to be received over 12 months.
Policy reference: The Guide 4.4.4.20 Deemed Income from Life Insurance Products – Managed Investments, 4.4.4.10 Deemed Income from Life Insurance Products – Conventional Policies.
4.4.4.10 Income from Life Insurance Products – Conventional Policies.”
Is also relevant but need not be quoted in detail.
33. The applicant contends that there is no inequality in treatment of lump sum superannuation payments and lump sum payments on maturity of life insurance policies once a person reaches pensionable age (whatever that may be). In each case, the lump sum payment is assessed as income under section 1073 the Act. Subsection 8(8) of the Act provides:
“Excluded amounts – general
8.(8) The following amounts are not income for the purposes of this Act:
(a) a payment under this Act;
(b) any return on a person’s investment in:
(i) a superannuation fund; or
(ii) an approved deposit fund; or
(iii) a deferred annuity; or
(iv) an ATO small superannuation account;
until the person:
(v) reaches pension age; or
(vi) starts to receive a pension or annuity out of the fund.”
34. The Secretary contends that the Varcoe and Davies decisions were incorrect insofar as they assert that there is an inequality in treatment of lump sum superannuation payments and lump sum payments on maturity of life insurance policies once a person reaches age pension age.
The Secretary contends that only certain irregular superannuation payments paid prior to pensionable age are treated as exempt lump sums and this cannot lead to the conclusion that the treatment of some irregular superannuation entitlements as exempt lump sums requires the treatment of matured life insurance policies as such.
The following paragraph from the Guide to the Social Security Law was quoted.
“4.3.2.30 Other Income Exempt from Assessment – Legislated
Summary
Exempt lump sums
Some lump sums are NOT treated as income for social security purposes. These
Lump sums are defined by their characteristics rather than by nominated lump sum types. These characteristics are:· unlikely to be repeated, and
· cannot be reasonably expected to be received or necessarily anticipated, and
· do not represent receipt of money for services rendered directly or indirectly.
They include items like:
· one-off gifts, irrespective of the source of the gifts, if they are not of a periodical nature or representing a form of continuous support,
· windfall gains such as lottery winnings, the distribution of capital from a legacy or inheritance, or prizes/awards,
· ex-gratia superannuation payments, for example, bona fide redundancy payments or the lump sum payment of a superannuation invalidity benefit,
· irregular superannuation amounts such as:
·lump sum amount from the conversion, or
·commutation of a superannuation pension, or
·the payment of arrears at the time of commencing a superannuation pension.
Exception: Periodical lottery winnings that are a series of payments under one contract – each instalment is assessed as income over the period it represents. For example, each instalment of $50,000 paid once a year would be held as income over 12 months.
Example: For lottery winnings received in annual instalments of $50,000 per year for 20 years, each instalment is assessed as income over 12 months.
Further references to exempt lump sums can be located in (4.3.2.31) Other Income Exempt from Assessment – Specifically Approved, details in Lump sums exempted under section 8(11).
Note: The initial exemption of a lump sum amount from the income test does NOT mean that any on-going income generated by the lump sum is exempt, nor does it mean that the asset the lump sum turns into is exempt. The continuing assets and income tests treatment will be determined by how a person makes use of the funds. The funds may be used to obtain additional assets such as a car. For a purchase such as this the assets test would apply. Or, the funds may be invested with a financial institution. The funds have then become a financial asset, assessable as an asset and subject to the income test deeming rules.
Act reference: SSAct section 8(8) Excluded amounts – general, section 8(11) An amount received by a person is an exempt lump sum …
Policy reference: The Guide 4.4.1.30 Scope of Deeming.”
35. The respondent contends that Varcoe was not wrongly decided and that the unbalanced and unfair treatment of life insurance proceeds when compared with lump sum superannuation referred to in Varcoe and endorsed in Davies was correctly described and identified. Senior Member Purcell said this in Davies at paragraph 23:
“I agree with Senior Member Dwyer that there is an equality in the treatment of lump sum superannuation payments and lump sum payments on maturity of age insurance policies; but in my view, this has arisen in the historical context of the development over time of different superannuation schemes, investment products, and changes in Departmental policy in relation to these products.”
However, aided by both Ms Hackney’s written submissions and Mr Ellis’ oral argument, I am in little doubt as to the correctness of the applicant’s submission that there is no relevant discrepancy or unequality in the treatment accorded to these two different sources of retirement funds.
36. The respondent also contends that the note to s8(11)(d) is not “exhaustive” and although there is “a theme to the types of amounts listed in the note, there is no express intention to limit s8(11)(d), as suggested by the applicant”. I agree that there is no express intention but I also agree with Senior Member Purcell in Davies where she in effect applied the “ejusdem generis” rule and concluded that there is a plain legislative intent to confine exempt payments in accordance with the tenor of the note to s8(11)(d) to unexpected windfalls, fortuitous receipts of money and the like.
37. The respondent concedes that the decision in Varcoe did not result in a general determination i.e. a determination with binding effect in respect of similar future cases. It is also properly conceded that the applicant has not made a general determination applicable to endowment policies. However, it is also submitted that this does not prevent the Secretary from making a “customer specific” determination for the respondent’s benefit in the present case. This proposition has the effect of supporting a view that the Secretary has a virtually unrestricted discretion which can be exercised in favour of individuals so as to achieve “fairness” or “equitable treatment” for them in an unspecified manner in unlimited circumstances. I cannot agree with such a proposition. There can be no doubt that the Secretary can make a determination in respect of individual cases as well as “class” cases, but in my opinion any such determination must be consistent with the spirit and intent of the legislative scheme of the Act as more particularly exemplified by the sections which have already been discussed in these reasons. Misunderstandings of the legislation, poor advice from financial advisers or disadvantageous choices of retirement planning mechanisms could not, in my view, provide justification for the Secretary making an exempt payment declaration to ameliorate the consequences of the claimant’s flawed judgment.
38. It was also argued, as it had been in Varcoe, that if the respondent had invested money in a bank account over the years rather than investing in a life insurance policy he would not have been assessed as having income therefrom by reference to the accrued funds in the bank at the date of his retirement. However, this argument overlooks a number of factors. In the first place the periodically accruing interest on the bank funds would have been taxable as income on an annual basis over the period during which the account was in existence, whereas the bonuses on the life insurance policies would not and, second, the premiums paid on the life policies would have created eligibility for tax deductibility in respect of a substantial part, if not all, of the premiums paid. Furthermore direct access to both capital and accrued interest in the bank account would be possible, whereas the invested funds in a life policy would not be accessible until policy maturity. There may be other factors which should also be taken into account in a process of weighing up benefits to be notionally achieved by competing forms of investments over many years, but these are sufficient I think to illustrate that the comparison arguments which found favour in Varcoe are of very limited, if any, value.
39. The respondent says:
“8.2Section 1073 of the Act is an artificial provision that is intended to prevent people who do not require financial assistance from receiving unnecessary pensions. Section 1073 is artificial in the sense that it allows payments that would otherwise be capital to become income for the purposes of assessing a person’s pension entitlements under the income test.
8.3The legislature recognised the potential injustice that could be caused by s1073 and included s8(11)(d). Section 8(11)(d) is a provision that is designed to alleviate unfairness, injustice and inequity that may arise from the universal operation of s1073 of the Act.”
I agree with the submission in paragraph 8.2, and also, within the limitations I have already expressed above, with paragraph 8.3.
However, in general I am in agreement with the applicant’s submissions in this case. In my opinion there is no good reason to regard the Secretary’s delegate as being in error in assessing the respondent’s income in the way that he did. In making the decision he did he was applying the law as it stood in the absence of a determination by the Secretary that life assurance policy profits constituted an “exempt lump sum”.
40. The Social Security (Administration) Act 1999 Division 5, Section 178 and following provide that decisions of officers under the Social Security Law which have been reviewed by the SSAT may be the subject of an application for further review by the AAT. In relation to the present application to review it appears clear to me that the relevant decision of an officer which is the subject of the application is either the decision of the original decision-maker who assessed the profits of the respondent’s policies as income for 12 months following maturity or the decision of the authorised review officer who confirmed that assessment. Those officers both approached the matter for resolution on the basis that these amounts were not exempt lump sums. On the basis of the law which they were obliged to apply, I have no doubt that they were correct in this approach. There is no evidence that either officer held a delegation to make a determination on behalf of the Secretary under s8(11)(d) that the relevant sums were “exempt lump sums”. Indeed the evidence is to the contrary.
41. It seems to me that, quite apart from the other issues which have been discussed above, those officers, the SSAT and this Tribunal cannot go behind the fact that neither the Secretary, nor his authorised delegate has made a determination under s8(11)(d) that any such profit derived by the applicant is, or is not, an exempt lump sum.
42. In such circumstances I have considerable difficulty in understanding how I, or the SSAT can go behind the fact that, according to the present state of the law, the insurance profits are not exempt lump sums. As in Varcoe, the SSAT in the present case purported to exercise the Secretary’s function - a legislative function - not an administrative function in making a determination pursuant to s8(11)(d) in favour of the respondent. Even if I were persuaded that there was merit in the argument that a determination should be made by the Secretary so as to exempt the relevant lump sums in the present case, this is not a decision which in the absence of persuasive authority I would regard myself as having power to make.
43. In my opinion this is a basic issue of jurisdiction. Even if a direct approach had been made to the Secretary to classify these sums as exempt lump sums and that request had been refused, I have considerable doubt as to whether a valid appeal under the relevant provisions of the Social Security (Administration) Act 1999 could be pursued. There may also be some doubt as to whether or not the Secretary may delegate the function bestowed upon him under s8(11)(d). As I have already said it seems to me that the power entrusted to the Secretary is a legislative power. Such a power is generally not delegable without express statutory authorisation “delegatus non potest delegare”.. However it is inappropriate to go down these paths or to attempt to resolve these issues in the absence of further argument and in my view that course is unnecessary having regard to the views which I have formed as to the intrinsic merits of the case.
44. The simple fact is, however, that the present appeal is not one against the Secretary’s refusal to exercise his power under s8(11)(d). It is an appeal against an officer’s decision that, in the absence of any such determination as might have been made favourably to the respondent in the exercise of such power by the Secretary, the proceeds of the respondent’s policies (less premiums) should be classified as income received over a 12 month period. In my opinion this determination should not be disturbed.
45. The application to review the SSAT decision will be upheld and that decision will be set aside. The decision of the Secretary’s delegate as endorsed by the authorised review officer will be affirmed and reinstated.
I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon C R Wright QC., (Deputy President)
Signed: KL Miller (Administrative Assistant)
Date/s of Hearing 12 March 2003
Date of Decision 31 March 2003
Counsel for the Applicant Ms K Hackney
Solicitor for the Applicant Centrelink
Counsel for the Respondent Mr C T H Tham
Solicitor for the Respondent Martin de Haas Commercial Lawyers
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