Mr Anthony Nelson and Secretary, Department of Social Services

[2014] AATA 954

[2014] AATA 954

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2014/4878
Re	Mr Anthony Nelson
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Deputy President P E Hack SC and Senior Member A C Cotter
Date	12 December 2014
Date of written reasons	19 December 2014
Place	Brisbane

The decision under review is affirmed.

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Deputy President P E Hack SC

CATCHWORDS

SOCIAL SECURITY – disability support pension – asset-test exempt income stream – provision of actuarial certificate out of time – no fault on applicant’s behalf – no discretion to depart from guidelines – decision under review affirmed

LEGISLATION

Social Security Act 1991 (Cth) ss 9, 9A, 1064, 1118

CASES

Drake v The Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409

Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634

SECONDARY MATERIALS

Social Security (Actuarial Certificate – Lifetime Income Stream Guidelines) Determination 2012

REASONS FOR DECISION

Deputy President P E Hack SC and Senior Member A C Cotter

19 December 2014

1. The applicant, Mr Anthony Nelson, receives the age pension. As a general proposition, the rate at which age pension is payable depends upon the assets and other income the person has or receives.  But not all assets are required to be taken into account. The legislation allows for assets of particular classes to be disregarded.

2. Mr Nelson had an asset, an income stream from a self-managed superannuation fund, that was an asset that could be disregarded provided certain conditions were met. On 22 January 2014 a delegate of the respondent, the Secretary, Department of Social Services, decided that Mr Nelson had not satisfied the conditions with the result that his income stream could not be disregarded and the further result that his age pension was reduced by approximately $55.00 per fortnight from 1 January 2014. More recently that reduction has increased.

3. The decision was affirmed on internal review and by the Social Security Appeals Tribunal.

4. Mr Nelson seeks a review of the decision by this Tribunal.

5. The starting point is the legislation, the Social Security Act 1991 (Cth) (the Act). There is no doubt that Mr Nelson is qualified to receive the age pension. The issue is the rate at which it is payable. By virtue of s 1064(1) of the Act the rate of age pension is, subject to an irrelevant exception, to be calculated in accordance with the rate calculator at the end of the section. It is a sufficient explanation for present purposes to say that one of the steps in the calculation, set out in s 1064-G1 of the Act, specifies a process to work out the value of a person’s assets and the effect of those assets on the person’s maximum payment rate.

6. Section 1118(1) of the Act specifies various classes of assets that are to be disregarded in calculating the value of a person’s assets for the purposes of the Act. Paragraph (d) of that subsection refers to,

   (d)the value of any asset-test exempt income stream of the person, other than a partially asset-test exempt income stream

7. Section 9 of the Act defines the term "income stream". There is no doubt that Mr Nelson’s asset satisfied that description. Section 9A of the Act deals with asset test-exempt income streams. So far as is presently relevant, it provides:

   General requirements

   (1) An income stream provided to a person is an asset‑test exempt income stream for the purposes of this Act if:

   (aa)subject to subsection (1AA), the income stream’s commencement day happens before 20 September 2007; and

   (a) it is an income stream arising under a contract, or governing rules, that meet the requirements of subsection (2) and the Secretary has not made a determination under subsection (4) in respect of the income stream; and

   (b) subject to subsections (1B), (1C) and (1D), the Secretary is satisfied that in relation to an income stream, provided by a class of provider specified by the Secretary for the purposes of this paragraph, there is in force a current actuarial certificate that states that the actuary is of the opinion that, for the financial year in which the certificate is given, there is a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules; and

   (c) the Secretary is satisfied that the requirements of subsection (2) are being given effect to from the day the income stream commences to be paid.

   Note: For paragraph (b), financial year means a period of 12 months commencing on 1 July: see the Acts Interpretation Act 1901.

   …

   Guidelines relating to actuarial certificates

   (1B)The Secretary may determine, in writing, guidelines to be complied with when determining whether an actuarial certificate is in force and what constitutes a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules.

8. Given the present controversy, it is worthwhile highlighting two features of the legislation, the requirement in s 9A(1)(b) that the Secretary be satisfied that there is in force a current actuarial certificate setting out the matters specified, and the power conferred on the Secretary by s 9A(1B) to determine guidelines to be complied with in determining whether an actuarial certificate is in force.

9. The Secretary, by a delegate, made such a determination, the Social Security (Actuarial Certificate – Lifetime Income Stream Guidelines) Determination 2012 (the Determination), on 14 December 2012.  It is the key to this application and some reference to it is necessary. The general requirements of an actuarial certificate are set out in s 2.1(2) of the Determination in these terms:

   (2) The actuarial certificate required to be provided to the Department of Human Services by the person or the trustee of the fund under subsection (1) must:

   (a) be prepared in accordance with the Institute of Actuaries of Australia Guidance Note 465;

   (b) be certified no later than 26 weeks after the start of the financial year to which it applies and be provided to the Department of Human Services no later than 3 weeks after the end of that 26 week period;

   (c) specify whether there is a high degree of probability, at the valuation date, of the fund meeting the income stream payments specified under the fund’s trust deed or governing rules; and

   (d) specify an in force period from 1 July to 30 June of the financial year in which certification occurs.

   Again, given the issue in the proceedings, it is worth emphasising the requirement that the certificate "must… be certified no later than 26 weeks after the start of the financial year to which it applies".

10. By virtue of s 2.3(1) of the Determination, if the actuarial certificate provided does certify that for the financial year for which the certificate is given there is a high probability that the fund will be able to pay the person as required, then paragraph (b) of s 9A(1) of the Act is satisfied. But despite that, express provision is made in the conditions of s 2.1(2) of the Determination are not met. Section 2.3(2) provides,

    (2) Despite subsection 2.3(1), if an actuarial certificate in relation to a financial year is not:

    (a) certified under subsection 2.1(1) or subsection 2.2(1) within 26 weeks beginning on 1 July of that financial year, or

    (b) provided to the Department of Human Services by the person or the trustee of the fund under subsection 2.1(1) or subsection 2.2(1) within 29 weeks beginning on 1 July of that financial year,

    then paragraph 9A(1)(b) of the Act is considered to be not satisfied and the income stream is to be determined to be an asset-tested income stream (long term).

11. On 21 January 2014 an actuarial certificate was received by the Secretary. It was dated 20 January 2014; that is, it was certified later than 26 weeks after the start of the financial year to which it applied. The following day a delegate of the Secretary made the decision in issue in these proceedings, a decision that Mr Nelson’s income stream had lost its asset-test exempt status.

12. It is important to note that the failure to provide the certification in a timely way was not attributable to any fault on the part of Mr Nelson. Clever Super, the firm that acts as administrators and accountants of his superannuation fund, accepts that Mr Nelson provided all necessary information in a timely way, and that the delay in providing the actuarial certificate was attributable to them. The argument for Mr Nelson points to that absence of personal fault as a basis for exercising, favourably to him, a discretion to treat the requirements of s 9A(1)(b) of the Act as having been satisfied. It points as well to the opinion of the actuary that the details provided in his report were true and correct as at 31 December 2013.

13. The difficulty with the first argument is that there is no discretion capable of being exercised. There is no reason to doubt the correctness of the passages of the case of Drake v The Minister for Immigration and Ethnic Affairs[1] to which our attention is drawn. But there must first be identified a discretion.

    [1](1979) 46 FLR 409, 420-421; and Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.

14. Here, the parliament has specified criteria to be satisfied for an asset to obtain and retain a particular status. One of those matters is that the Secretary is satisfied of a particular fact. The parliament has empowered the Secretary to determine guidelines to be complied with when determining whether the particular fact is satisfied. Those guidelines, incorporated in the Determination, relevantly specify two temporal criteria concerning the certificate – that the certificate be certified no later than 26 weeks after the start of the financial year, and be provided no later than 3 weeks thereafter. There is nothing in the determination that would permit the Secretary to treat the certificate that did not satisfy those criteria as doing so. There is no "substantial compliance" or "special circumstances" exception that might otherwise allow non-compliance to be excused. On the contrary, s 2.3(2) of the Determination explicitly provides the consequence if either of the temporal requirements is not met – section 9A(1)(b) is taken not to be satisfied and the income stream is determined to be an asset tested income stream.

15. The other argument is that certification required refers to what might be called a date of effect: because it was certified on 20 January 2014 but as at 30 December 2013 the Act was complied with. We are unable to agree. The determination refers to the act of certification itself, not its content. The matter may be tested by asking whether, in considering the questions posed by s 2.1(2) of the Determination, the actuarial certificate was certified no later than 26 weeks after the start of the financial year. The answer to that question is plainly no. The result is most unfortunate for Mr Nelson. We have considerable sympathy for him; however we would not wish to compound his misfortune by creating a discretion where none exists thereby likely burdening him with the costs of an appeal to the Federal Court.

16. The result is that the decision under review will be affirmed.

I certify that the preceding 16 (sixteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC and Senior Member A C Cotter

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Associate

Dated 19 December 2014

Date of hearing	12 December 2014
Advocate for the Applicant	Mr P Mason-Cox, Keys Financial Planning
Counsel for the Respondent	Mr GJ Del Villar
Solicitors for the Respondent	Australian Government Solicitor