Muir and Secretary, Department of Social Services (Social services second review)

Muir and Secretary, Department of Social Services (Social services second review) [2020] AATA 702 (3 April 2020)
Division:GENERAL DIVISION
File Number: 2019/5701
Re:Ms Muir
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Ms Anna Burke, AO Member
Date:3 April 2020
Place:Melbourne

The Tribunal sets aside the decision under review and remits it to the Secretary to recalculate Ms Muir’s income maintenance period excluding the equivalent of six days from the calculation.
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Ms Anna Burke, AO Member
Catchwords
SOCIAL SECURITY – fair entitlements guarantee payment – income maintenance period – whether severe financial hardship – decision under review set aside and remitted.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth)
Secondary Materials
Guide to Social Security Law, Department of Social Services
REASONS FOR DECISION
Ms Anna Burke AO Member
3 April 2020

Ms Muir (the Applicant) is seeking a second tier review of the decision made by the Secretary of the Department of Social Services (the Respondent) to impose an Income Maintenance Period (IMP) on her Disability Support Pension (DSP) for the period 23 May 2019 to 3 July 2019.
The application was heard on 11 February 2020. Ms Muir was self-represented and Mr Brian Sparkes, a government lawyer in the Freedom of Information and Litigation Team of Services Australia, appeared for the Respondent.
BACKGROUND
On 25 February 2013, Ms Muir was granted the DSP.
In October 2016, Ms Muir commenced part time employment with Ferntree Gully Auto Salvage, trading as Haawind Pty Ltd. On 3 July 2018, she was placed on unpaid leave and was eventually terminated on 5 October 2018 from Haawind Pty Ltd when the company was placed into liquidation.
On 21 May 2019, Ms Muir was advised by the Fair Entitlements Guarantee (FEG) Branch of the Department of Jobs and Small Business that she was eligible for a FEG payment of $2,990.27 (before tax) in respect of unpaid wages, accrued annual leave entitlements and payment in lieu of notice.
On 28 May 2019, the Department of Human Services (Centrelink) imposed an IMP on Ms Muir because she had received money for a redundancy payment and/or unused leave entitlements for the period ending on 3 July 2019.
On 1 July 2019, a departmental Authorised Review Officer (ARO) reviewed the decision to impose an IMP on Ms Muir and affirmed the decision to impose an IMP from 25 May 2019 to 3 July 2019, which resulted in her rate of DSP being reduced. The ARO’s reasons for decision found:
A person who receives a lump sum leave payment or termination payment is expected to use that money for their own support. If a person has ceased employment, then any lump sum or termination payment is assessed as income. This income is assessed for a period equal to the amount of time the leave or termination payment would have covered, had it been paid in instalments equal to the person’s regular wage. This is called the income maintenance period.
An income maintenance period either precludes a person from receiving any DSP, or at least reduces the amount which can be paid. The income maintenance period commences on the day that the person is paid the lump sum or termination payment.
You were paid your FEG payment on 22 May 2019 for 5.3 weeks annual leave (based on a weekly wage of $430.32) and 1.09 weeks in lieu of notice. It was assessed that you should have an income maintenance period from 23 May 2019 to 3 July 2019, being 6 weeks. Your DSP was not impacted for the period 23 May 2019 to 24 May 2019 as your record was not updated until after the fortnight payday affecting these dates.
…
All a part of your income maintenance period may only be waived if you are in severe financial hardship because you have incurred unavoidable or reasonable expenditure. Your record shows no discussions concerning financial hardships and I have noted you are working part-time. Therefore I have not addressed the hardship provisions.
On 30 August 2019, the Social Services and Child Support Division of the Tribunal (AAT1) affirmed the decision of the ARO in respect of the IMP and found no grounds on which the IMP could be waivered.
On 10 September 2019, Ms Muir sought a review of the AAT1 decision by this division of the Tribunal as she disagreed with the decision stating in her claim:
I am appealing the review which I received via email today (10/09/2019) dated 30/08/2019
Section 14. Outlines the payments made to me from Fair Entitlements Guarantee 21/05/2018
A total of $2990.27 Which are made up of:
*Missing wage ($235.18)
*Unpaid holidays ($2284.74)
*Payment in Lieu of Notice ($470)
Firstly, my missing wage is not the full amount owing to me, ($235.18) I earned $430.32 gross... The first review w FEG saw my money given back to the company (HAAWIND PTY LTD) due to their shocking booking, I apparently owed the company… Just a taste of what been like getting to this point. It can become so draining even the fight for what is right and the truth becomes too much. This whole process has been so disheartening, upsetting and frustrating, I’ve been reviewed and cross examined and left raw but my truth seems to get lost in the paperwork. I sincerely ask for your help and understanding here.
In a nutshell I worked and earned the majority of this money, I was granted this from FEG (finally) and then was penalised for receiving a lump sum amount which was a breakdown of my wages and holidays I’d already worked for and had not been paid for, including holidays I’d been forced to take over both years for Christmas and I had not been paid for them (4 weeks worth). This is money already worked for and earned but was paid a year later through FEG...
Secondly, unpaid holidays were not all bonus payments of saved up entitlements, these holidays were already taken, 4 weeks of them in fact, and I wasn’t paid for them, I was forced to take a break over the Christmas holidays and both times was not paid.
I have been penalized to earn my wages.
I was penalized for not receiving them from my employer and now I’ve been penalized by having them granted to me in a lump sum, to then live off them w limited support from centrelink.
While I was working and not getting paid, I had to just support my son and I on the Centrelink supplement I received while working which tops my income up. During that time, I had no income coming in. When I got paid the money owed it was a lump sum payment close to the majority of earnings I’d already work for. This is by no means a termination payment.
The payment in Lieu $470.00 (1.09 weeks) and remainder of holidays not already taken is (1.3 weeks)
I agree that this is payment ‘would not otherwise have been made’ THIS is the termination payment.
Section 13.
The first hearing through FEG saw me owe the company and the two other staff that work there (not overpaid wages to me) not overpaid as per notes listed.
Section 14. ‘These payments would not have otherwise been made to her’ I strongly disagree, I earned that money, I had worked a full week and was not paid, (actually 4 weeks at one time) I had earned and accrued holiday pay over the two years, taken a break, (force company closure over Christmas) and not been paid for the 4 weeks of holidays I was forced to take over both years. Both of these payments were money I had already worked for and earned, not saved holidays, waiting for use and/or a bonus payment at the end.
Section 25. Yes, correct my income is $100 per week $200 per fortnight. Please note tho, the significant drop in earnings from the last financial year income 2017/2018 from $21,767.00 to $5,200. Not including Centrelink Disability Support Pension.
Section 26. Credit card debt from not being paid.
I accrued a $2,500 credit card debt over the 2 years of not being paid on time, or correctly. The money I was granted from FEG saw money returned to me for times I had already worked and holidays already taken due to forced closure, and a bonus payment of leave without notice ($470) and the remainder of holidays accrued ($ weekly wage plus penalty rates – 1.3 weeks). This is the termination payment.
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THE ISSUES IN CONTENTION
The issues for determination before the Tribunal are whether:
a)an income maintenance period from 23 May 2019 to 3 July 2019 applies toMs Muir; and
b)if so, whether it can be reduced because of severe financial hardship arising from reasonable and unavoidable expenditure.
RELEVANT LEGISLATION AND ISSUES
The Guide to Social Security Law (the Guide) sets out that an IMP applies where a person has had their employment terminated and has received a termination payment.
The Guide sets out payments from FEG, describing FEG as providing protection for unpaid employee entitlements when people lose their job due to liquidation or bankruptcy of their former employer. The Guide states payments made under FEG represent termination entitlements that would otherwise have been received from the person's employer. These payments are treated as termination payments for the IMP; such as unpaid employee entitlements including unpaid annual leave, long service leave, payment in lieu of notice, and redundancy pay.
Section 1064‑F3 of the Social Security Act 1991 (the Act) states:
If:
(a) a person’s employment has been terminated; and
(b)as a result the person is entitled to a lump sum payment from the person’s former employer; and
(c) the payment, or part of the payment, is a directed termination payment within the meaning of section 82‑10F of the Income Tax (Transitional Provisions) Act 1997;
the payment, or that part, is to be disregarded in working out the ordinary income of the person for the purposes of Module E.
Section 1064‑F5 of the Act states:
If:
(a) a person’s employment has been terminated; and
(b)the person receives a termination payment (whether as a lump sum payment, as a payment that is one of a series of regular payments or otherwise);
the person is taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates.
Section 1064‑F11 of the Act states:
If the Secretary is satisfied that a person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure while an income maintenance period applies to the person, the Secretary may determine that the whole, or any part, of the period does not apply to the person.
Note 1:For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple) and subsection 19C(3) (person who is a member of a couple).
Note 2:For unavoidable or reasonable expenditure see subsection 19C(4).
Note 3:If an income maintenance period applies to a person, then, during that period:
(a) the pension claimed may not be payable to the person; or
(b) the amount of the pension payable to the person may be reduced.
Section 1064‑F14 of the Act states:
In this Module:
“leave payment” includes a payment in respect of sick leave, annual leave, maternity leave and long service leave, but does not include:
(a)       an instalment of parental leave pay; or
(b)       dad and partner pay.
“payment fortnight” means a fortnight in respect of which a disability support pension is paid or would be paid apart from the application of an income maintenance period, to a person.
“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.
“redundancy payment” includes a payment in lieu of notice but does not include a directed termination payment within the meaning of section 82‑10F of the Income Tax (Transitional Provisions) Act 1997.
“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.
THE TRIBUNAL’S CONSIDERATION AND FINDINGS
Evidence before the Tribunal
The evidence before the Tribunal included documents provided by the Respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, referred to as the “T documents”. Ms Muir provided oral evidence at the hearing and in accordance with the Tribunal’s direction submitted additional material in respect of her annual leave.
Income maintenance period
Ms Muir did not dispute that she was subject to an IMP, however she disputed that Centrelink had included the proportion of payment from her FEG that was for leave already taken. Ms Muir had argued at the AAT1 hearing and in her lengthy appeal claim that she had been penalised by the system for receiving this money as a lump sum, when the payment was for money owed not for accrued leaved owing.
Ms Muir stated that during the period she had not been paid by her employer, she was receiving reduced Centrelink payments and had survived by living off her credit card. She assumed that her employer would eventually repay monies owed, not realising the company would be placed into liquidation and she would be paid her outstanding wages as a lump sum through a FEG payment.
Ms Muir strenuously argued that she had been penalised by the system as she had to wait 12 months for the outcome of her FEG claim and when it arrived as a lump sum Centrelink had imposed an IMP. Ms Muir again stressed she accepted that a period of IMP applied to her situation but contended she should not be penalised for the holidays she had been forced to take by her employer in the Christmas period of 2016/2017 and 2017/2018. Ms Muir clearly saw this as money she was owed for time worked and not as accrued annual leave owing.
Ms Muir was arguing that Centrelink should not have included, by her calculation, 12 days of her FEG payment as these represented payment for wages and not accrued annual leave owing. Ms Muir based this on information provided by the Fair Entitlement Guarantees office which indicated that for the both the 2016/17 and 2017/2018 period respectively, she had not been paid for three public holidays and three annual leave days. She contended the monetary equivalent of this amount should not have been included in the IMP calculations in line with Centrelink’s determination not to include the $235.18 wages component of her FEG.
The Respondent contended that Ms Muir was subject to IMP as she had received a FEG payment in respect of entitlements owed by Haawind Pty Ltd on 23 May 2019. The Respondent contended the FEG payment had been calculated appropriately, in accordance with the following components:
·Ms Muir’s weekly wage of $430.32 gross at the time;
and her FEG comprising of:
·payment in lieu of notice $470 representing 1.09 weeks; and
·annual leave of $2,284.74 representing 5.3 weeks.
This resulted in an IMP of 6.3 weeks duration from 23 May 2019.
The Respondent contended that the issue before the Tribunal is whether the IMP had been correctly determined, arguing it had been and that the only way the IMP could be reduced was if severe financial hardship during the IMP was found or if there were unavoidable or reasonable expenses incurred during the IMP.
The Respondent contended that Ms Muir was raising a new point of contention at the hearing and that she had never raised a concern about being penalised for receiving monies she was owed as opposed to accrued leave owing. The Respondent argued vehemently that there was no avenue for this contention to be explored by the Tribunal as it could only look at whether the IMP had been appropriately applied and severe financial hardship considered.
The Respondent contended that if Ms Muir was saying that she was not paid for the periods of leave indicated, there was no evidence that she had not been paid and in any case nothing whatsoever turned on whether or not she was paid as it was up to her to indicate to Centrelink at the time what income she received. Additionally they contended Ms Muir’s DSP had been minimally impacted by any income received at the time.
The Respondent drew the Tribunal’s attention to the Explanatory Memorandum for the introduction of the Social Security Legislation Amendment (Fair Incentives to Work) Bill 2012 which states:
The intention the Income Maintenance Period is to ensure that people who receive a lump-sum payment as part of the termination of their employment use that payment to support themselves for a period before turning to the social security system.
The current definition of termination payment does not reflect accurately the policy intent and leaves it unclear as to the types of payment that may be included as a termination payment. In practice this has been open to unintended interpretation by decision-makers (such as Tribunals) including that certain termination payments are exempt from the Income Maintenance Period for some social security recipients. This has occurred particularly in relation to payments in lieu of notice, where that type of payment has occasionally been found not to be a redundancy payment but a general employee entitlement.
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The new definition of termination payment would include payments that are one of the following;
·redundancy payments (which is a continuation of paragraph (b) of the current definition); and
·leave payments relating to a person’s employment that has been terminated (which is a continuation of paragraph (a) of the current definition); and
·any other payments that are connected with the termination of a person’s employment.
This definition is not exhaustive.
Examples of such termination payments could include:
·payments in respect of untaken long service leave, annual leave, sick leave and other types of personal payment
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The Tribunal found there was no dispute that Ms Muir had received a FEG payment in respect of her termination from Haawind Pty Ltd, and consequently had incurred an IMP which had reduced her DSP payments from 23 May 2019 to 3 July 2019. The Tribunal did not find Ms Muir disputed the imposition of an IMP or that she had introduced a new contention during the hearing. The Tribunal found Ms Muir had consistently argued that her FEG had comprised of monies owing in respect of leave taken and this entitlement should not have been included in the calculation of an IMP.
The Tribunal found that Ms Muir had taken six days of annual leave from the time of her employment until the time of the termination during the forced annual Christmas closedown in the periods 2016/17 and 2017/18, which should be considered wages and not untaken annual leave for the purposes of determining her IMP. The Tribunal did not consider that public holidays should be included in this calculation as these are not considered annual leave. As such, the Tribunal determines that the equivalent of six days should be excluded from the calculation of Ms Muir’s IMP.
Severe financial hardship
Ms Muir indicated that from 3 July 2018 until now she had been supplementing her income to support herself and her son by relying upon her credit card, which was now in debt in excess of $3,500. She said that she had been relying upon the FEG payment to pay down this debt and she was now in severe financial hardship as she had not been able to make this payment. Additionally, during the intervening period of waiting for the FEG payment, she had also been forced to replace her refrigerator to the value of $888 and an oven/stove top to the value of $650.

The Respondent contended that Ms Muir had not been in severe financial hardship during the IMP period as she had liquid assets in excess of her reasonable living costs. Additionally, they contended that her unavoidable expenses were outside of the IMP period and therefore could not be considered unavoidable expenses in accordance with the Act.
The Tribunal was incredibly sympathetic towards Ms Muir’s situation of having to rely upon credit card debt from the time of her termination until the resolution of her FEG payment, which was then compounded by the IMP. The Tribunal could understand Ms Muir’s complete dismay at finally securing a lump sum payment to pay down this debt, only to discover it would be absorbed in an IMP. The Tribunal, looking at the decisions referred to by the Respondent in its argument, could find no correlation with these determinations and Ms Muir’s situation.
However, the Tribunal did not find Ms Muir was suffering severe financial hardship in accordance with the Act. The Tribunal noted the strict definition of severe financial hardship within the Act did not diminish the genuine financial and emotional distress that this entire process had caused Ms Muir and her son.
Additionally, whilst the Tribunal was incredibly sympathetic towards Ms Muir’s plight of incurring unavoidable expenses during the period, she was awaiting the resolution of her FEG entitlement, this did not occur during her IMP period and could not be considered in determining severe financial hardship in accordance with the Act.
DECISION
The Tribunal sets aside the decision under review and remits it to the Secretary to recalculate Ms Muir’s IMP excluding the equivalent of six days from the calculation.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the written reasons for the decision of Ms Anna Burke, AO Member

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Associate
Dated: 3 April 2020

Date of hearing 11 February 2020

Applicant By telephone

Advocate for the Respondent

Solicitors for the Respondent

Mr Brian Sparkes

Services Australia
Freedom of Information & Litigation Branch

[2020] AATA 702

3 April 2020

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