Nicola and Secretary, Department of Education, Employment and Workplace Relations

[2008] AATA 134

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 134

ADMINISTRATIVE APPEALS TRIBUNAL      )

)           No 2007/2190

GENERAL  ADMINISTRATIVE   DIVISION		)
Re		GREGORIOS NICOLA

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Dr R. McRae, Member

Date20 February 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) Roderick McRae

Member

SOCIAL SECURITY – income maintenance period – employment redundancy – whether severe financial hardship exists – whether unavoidable of reasonable expenditure was present – payment used to pay outstanding debt

Social Security Act 1991 ss 19C(3) - (4), 14A(1) - (2), 1068-G7AH – 1068-G7AR

REASONS FOR DECISION

20 February 2008 Dr R. McRae, Member       

1.       On 23 February 2007 Mr Gregorios Nicola (the Applicant) applied to Centrelink for Newstart Allowance (NSA) under the Social Security Act 1991 (the Act).  Centrelink acts as the service delivery agency for the Secretary to the Department of Education, Employment and Workplace Relations (the Respondent). 

2.       On that day, 23 February 2007, a Centrelink officer decided to impose an Income Maintenance Period (IMP) to the Applicant’s NSA claim from 31 December 2006 to 10 October 2009 as Mr Nicola had received leave and redundancy payments upon termination of his employment in December 2006.  On 27 February 2007 a Centrelink authorised review officer (ARO) affirmed this decision.  The Applicant then sought review of the decision by the Social Security Appeals Tribunal (SSAT).  On 10 May 2007 the SSAT affirmed the decision.  The Applicant now seeks a review of the SSAT decision by the Tribunal. 

3. It appeared to the Tribunal that the issues for determination on the review of the decision could be adequately determined in the absence of the parties. The parties consented to the review being determined without a hearing. Therefore, pursuant to s 34J of the Administrative Appeals Tribunal Act 1975 (the AAT Act), the Tribunal proceeded to review the decision by considering the documents or other material lodged with, or provided to the Tribunal without holding a hearing. The Tribunal had before it documents lodged by the Respondent pursuant to s 37 of the AAT Act (the T Documents).

4.       The issues for the Tribunal were whether an IMP applies to the Applicant’s NSA claim, and if so, for what duration; and whether there are grounds for the IMP to be reduced.  The Tribunal’s decision is that an IMP applies to the Applicant from 31 December 2006 to 10 October 2009; and that there are no grounds for it to be reduced.  

BACKGROUND

5.       The Applicant is a 63 year old married man, who lives with his wife in their own home.  He worked for the Ford Motor Company of Australia from 16 March 1970 until 31 December 2006, when he ceased employment.  In evidence to the SSAT he said that he planned to work to 65 years of age, but accepted a redundancy package when Ford outsourced the work usually performed.  He elected not to accept an offered position on the Ford assembly line.  He intended to use the received payout to repay his mortgage.  He told the SSAT that he advised Centrelink before he finished his job of his intention to accept the redundancy package and to pay off his mortgage.  He made this contact with Centrelink to also check his entitlements.  He told the SSAT that he telephoned Centrelink again on 8 February 2007 and repeated the same information.  He stated that he was not told about an IMP. 

6.       The Applicant lodged a claim for NSA on 23 February 2007.  Centrelink imposed an IMP from 31 December 2006 to 10 October 2009.  The Applicant’s wife wrote a letter to Centrelink, seeking a review of this decision, which was received on 23 February 2007.  This letter indicated the received payout monies were expended against a home mortgage of $285,797.04, a Westpac Visa card debt of $25, 042.10, a Citibank Credit debt of $15, 779.40, and sundry gifts and expenses.  The letter lamented an inability to survive on the small residual sum. 

7.       On 23 February 2007 the Applicant had two joint savings accounts with his wife with $31,722.00 and $6,025.00 respectively.  The Applicant advised the SSAT that the amounts totalled approximately $26,000.00 at the time of that appeal. 

8.       The Applicant’s Employment Separation Certificate dated 2 February 2007 indicates a final gross payment of $115,061.00, including $36,459.00 for 153 days annual leave, $35,904.00 for 177 days long service leave, $4,033.00 for 20 days of other leave and a redundancy payment of $75,622.00. 

APPLICANT’S CASE

9.       The Applicant’s case is that Centrelink failed to advise him of the IMP and its implications for his finances, so the IMP should not be imposed. 

RESPONDENT’S CASE

10.     The Respondent’s case is that the IMP is imposed as mandated by legislation and is appropriate in the circumstances.

LEGISLATION

11.     Sections 1068‑G7AH to1068‑G7AR of the Act set out the provisions relating to the IMP.  In summary they detail how various types of received employee payments are considered as ordinary income and contribute to an IMP.  Sections relevant to the hearing are:

Certain termination payments taken to be ordinary income

1068‑G7AH    If:

(a)       a person’s employment has been terminated; and

(b)       the person receives a termination payment (whether as a lump sum payment…);

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.

…

Start of income maintenance period—employment terminated

1068‑G7AKA  … the income maintenance period starts, …, on the day the person is paid the termination payment.

Leave payments or termination payments in respect of periods longer than a fortnight

1068‑G7AL     Subject to points 1068‑G7AA to 1068‑G7AE (inclusive), if:

(a)       a person receives a leave payment or termination payment; and

(b)       the payment is in respect of a period greater than a fortnight;

the person is taken to receive in a payment fortnight or part of a payment fortnight an amount calculated by:

(c)dividing the amount received by the number of days in the period to which the payment relates (the “daily rate”); and

(d)multiplying the daily rate by the number of days in the payment fortnight that are also in the period.

Secretary may determine in certain circumstances that the whole or part of an income maintenance period does not apply

1068‑G7AM    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.

…

Single payment in respect of different kinds of termination payments

1068‑G7AP     If a person who is covered by point 1068‑G7AH receives a single payment in respect of different kinds of termination payments, then, for the purposes of the application of points 1068‑G7AG to 1068‑G7AN (inclusive), each part of the payment that is in respect of a different kind of termination payment is taken to be a separate payment and the income maintenance period in respect of the single payment is worked out by adding the periods to which the separate payments relate.

Definitions

1068‑G7AQ    In points 1068‑G7AG to 1068‑G7AP (inclusive):

“payment fortnight” means a fortnight in respect of which … a newstart allowance, … 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 redundancy payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the redundancy) 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 redundancy 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 redundancy 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.

…

termination payment means:

(a)a leave payment relating to a person’s employment that has been terminated; or

(b)       a redundancy payment.

1068‑G7AR    In points 1068‑G7AA to 1068‑G7AQ (inclusive):

“leave payment” includes a payment in respect of sick leave, annual leave, maternity leave and long service leave.

Section 19C(3) and 19C(4) of the Act set out severe financial hardship and provide:

19C(3) Meaning of in severe financial hardship: person who is a member of a couple.  A member of a couple who makes a claim for … :

(a)       newstart allowance;

…

is in severe financial hardship if the value of the couple’s liquid assets … is less than twice the fortnightly amount at the maximum payment rate of the … allowance that would be payable to the person:

(f)        if the person’s claim were granted; and

(g)in the case of a person to whom an income maintenance period applies, if that period did not apply.

19C(4) Meaning of “unavoidable or reasonable expenditure”.Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period … or a person to whom an income maintenance period applies,    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)…; or

(iii)if an income maintenance period applies to the person—that part of the period that has already applied to the person;

(b)the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;

…

(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).

Section 14A(1) and 14A(2) of the Act define liquid assets:

14A  Social security benefit liquid assets test definitions

14A(1) liquid assets, in relation to a person, means the person’s cash and readily realisable assets, and includes:

…

(b)amounts deposited with, …, a bank … by the person (whether or not the amount can be withdrawn or repaid immediately);….

14A(2) … a person’s liquid assets are to be taken to include:

(a)       the liquid assets of the person’s partner; and

(b)       the liquid assets of the person and the person’s partner.

CONSIDERATIONS

12.     The IMP provisions are set out in s 1068-G7AH to s 1068-G7AR of the Act.  Social security claimants who have received payment for particular types of unused leave are taken to have received income in assessing their entitlements.  Such claimants are expected to use leave and redundancy payments to support themselves before being paid the full rate of NSA.  Lump sum leave payments received on termination of employment are considered income since 20 September 1997.  Redundancy payments received after 20 September 2006 are included in the IMP.  There is no maximum length of an IMP. 

13.     The IMP is determined from the date a person is paid the leave entitlement.  For leave payments, the calculation is made by dividing the amount received by the number of days in the leave period for that payment.  This is called the determined daily rate.  The determined daily rate is then multiplied by the number of days in the payment fortnight that are also in the period of leave.  For redundancy payments, the number of weeks is determined by dividing the redundancy payment by the relevant weekly wage and then rounding down this figure to a whole number using a five day working week. 

14.     Section 1068-G7AM of the Act allows for the whole or a part of an IMP not to apply to a claimant.  This discretion can only be exercised if the claimant is in severe financial hardship (as defined in s 19C(3)(a) of the Act) through unavoidable or reasonable expenditure (as defined in s 19C(4) of the Act) during the IMP.  To be considered to be in severe financial hardship a married person’s liquid assets must be less than twice the customer’s fortnightly maximum payment rate.  Section 14A(1)(b) defines liquid assets as including amounts deposited with a bank.  Section 14A(2)(b) provides that the liquid assets include those held jointly with a partner.

FINDINGS

15.     The Applicant was employed by the Ford Motor Company of Australia from 16 March 1970 until 31 December 2006.  The Applicant is a member of a couple. 

16.     The Applicant received a final gross payment of $115,061.00, including $36,459.00 for 153 days annual leave, $35,904.00 for 177 days long service leave and $4,033.00 for 20 days of other leave, and a redundancy payment of $75,622.00 on 31 December 2006. 

17.     There is no evidence of communication between the Applicant and Centrelink prior to 8 February 2007. 

18.     The Applicant lodged a claim for NSA on 23 February 2007. 

19.     The Applicant’s liquid assets at the date of the claim were $37,747.00. 

20.     The maximum payment rate of NSA on 23 February 2007 was $379.80 per fortnight.  The value of the Applicant’s liquid assets were not less than twice the fortnightly amount of the NSA payable if the IMP did not apply. 

21.     The voluntary payment of mortgage and credit card debt is not unavoidable or reasonable expenditure. 

22.     Therefore, the claimant was not in severe financial hardship (as defined in s 19C(3)(a) of the Act) through unavoidable or reasonable expenditure (as defined in s 19C(4) of the Act) during the IMP.

CONCLUSION

23.     The determined IMP is from 31 December 2006 until 10 October 2009. 

24.     The Applicant was not in severe financial hardship at the date of lodgement of the claim for NSA, so the discretion in s 1068-G7AM cannot be exercised to reduce the IMP. 

25.     The Tribunal concludes that the Applicant did not satisfy the requirements necessary to allow for reduction of the IMP. 

DECISION

26.     Accordingly, the decision of the Respondent to impose an IMP from 31 December 2006 until 10 October 2009 on the Applicant was the correct decision.  The Tribunal affirms the decision under review.

I certify that the twenty‑six [26] preceding paragraphs are a true copy of the reasons for the decision of:

Dr R. McRae, Member

(sgd):      Olympia Sarrinikolaou

Clerk

Date of Hearing:  Hearing on the papers

Date of Decision:  20 February 2008

Advocate for the Applicant:                Self‑represented

Advocate for the Respondent:           Mr T. Noonan, Centrelink Legal Services Branch