Nuccio and Secretary, Department of Family and Community Services

[2004] AATA 299

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 299

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No T2003/122

GENERAL ADMINISTRATIVE  DIVISION		)
Re		IGNAZIO NUCCIO

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Associate Professor B W Davis AM (Part-time Member)

Date19 March 2004

PlaceHobart

Decision The decision under review is affirmed.

[Sgd B W Davis]

Part-Time Member

CATCHWORDS

Social Security - age pension - eligibility - compensation payment - income deduction - international agreement - SSAT.

Social Security Act 1991 and amendments – ss17, 44, 55, 1064, 1173, 1220A and 1221.

Social Security (Administration) Act 1999

Social Security (International Agreements) Act 1999

Agreement on Social Security between Australia and the Republic of Italy.

Sallan and Secretary, Department of Family and Community Services (1999) AATA 539

Crewer and Secretary, Department of Family and Community Services (2001) AATA 509

REASONS FOR DECISION

19 March 2004	Associate Professor B W Davis AM (Part-time Member)
Decision Under Review

1.      The applicant, Mr Ignazio Nuccio, seeks review of a decision made by a delegate of Centrelink on 12 November 2002, subsequently varied and remitted by the Social Security Appeals Tribunal (SSAT) on 23 May 2003, and affirmed by Centrelink on 30 June 2003, to reject the applicant’s claim for age pension due to his compensation income.

Issues

2.      The issues under review are:

(a)Is the applicant receiving compensation as defined in s17 of the Social Security Act 1991 (“the Act”).

(b)If the applicant is receiving compensation as defined in s17 of the Act, does this compensation in combination with other income, result in his rate of age pension being nil?

Legislation

3.      The relevant legislation is the Social Security Act 1991 and amendments, ss14, 44(1), 55, 1064, 1173, 1220A and 1221.

Standard of Proof

4.      As Mr Nuccio cannot come to Australia for a hearing, the matter is to be decided on the papers.   The standard of proof is on the balance of probabilities and to the reasonable satisfaction of the Tribunal.

Background

5.      Mr Ignazio Nuccio, the applicant, was born in Palermo, Italy on 10 August 1937 and claims to have spend nearly six years in Australia between February 1961 and October 1966, working in several States as a boilermaker.   The respondent (Department of Family and Community Services – DFCS) concedes that subject to various statutory tests, Mr Nuccio may meet the criteria to qualify for an Australian age pension.  Mr Nuccio states that when he returned to Italy he was diagnosed with myocardial ischaemia, causing physical invalidity of 30 percent and was granted an allowance by the Italian Workers Compensation Authority (INAIL) to compensate for loss of earning capacity.

6.      The applicant sought an Australian age pension on 9 May 2002, having attained the age of 65 years.   The applicant notified Centrelink that he was in receipt of payments from INAIL of euros 3448 per year and a payment from INPS (the Italian Pension Authority) of euros 13,264.28 per year.

7. Centrelink rejected Mr Nuccio’s claim for age pension on 12 November 2002. It determined that the payment from INAIL was considered to be a compensation payment under s17(2) of the Act and assessed as a direct deduction income under s1173(2) of the Act.

8.      Mr Nuccio sought a review of this decision on 19 November 2002 and following further affirmation by Centrelink and an Authorised Review Officer (ARO), the decision to reject the applicant’s claim for age pension was made on 12 December 2002.   The applicant then applied on 6 February 2003 for review by the SSAT.

9.      On 23 May 2003 the SSAT decided to set aside the decision to reject Mr Nuccio’s claim, with directions to Centrelink to:

(a)Calculate whether any age pension would be payable if all the applicant’s income was treated as ordinary taxable income.   If not, then Centrelink’s decision would be affirmed; and

(b)If recalculation showed the applicant was eligible for some age pension, then Centrelink should further investigate the nature of the INAIL payment the applicant was receiving.

10.     On 20 June 2003 Centrelink determined these matters; concluding that if INAIL payments were treated as ordinary income, the applicant would have been eligible for age pension..   On the same date Centrelink reconsidered whether INAIL payments should be treated as compensation and decided that the payments should be treated as direct deduction compensation income.   If this was the case, the amount of deductions would mean that age pension at nil rate would apply.

11.     Mr Nuccio was advised of these decisions on the same date (20 June 2003) and on 17 July 2003 lodged a request for review with the Administrative Appeals Tribunal.

Facts and Contentions

12.     Mr Ignazio Nuccio has not filed any formal statement of facts and contentions, but in correspondence claims he is eligible for an Australian pension and cannot understand why he has not received it, since compensation payments for injury are not treated as income for Italian taxation purposes.   Mr Nuccio argues that his medical disabilities are such that he has to undergo frequent medical tests and purchase medicines in a situation where his wife and family are solely dependent upon his pension.

13. The respondent agrees the matter centres around characterisation of the payment the applicant receives from INAIL, but argues that under Australian welfare law, compensation payments are treated as income. The Act provides that age pension is not payable, if as s44(1) of the Act provides, the rate payable to a person is nil. Centrelink contends this is the situation in Mr Nuccio’s case.

Analysis

14.     The Tribunal is required to stand in the shoes of the original decision-maker, considering all evidence anew, taking into account statutory provisions and any relevant case determinations.

15. Schedule 2 of the Social Security (International Agreements) Act 1999, sets out provisions of the Agreement on social security between Australia and the Republic of Italy.   Article 4 of the International Agreement provides for equal treatment of the citizens of both countries, in that any claim by an Italian applicant will be dealt with under Australian social security law as if the applicant was an Australian citizen.

16. Mr Nuccio has sought an Australian age pension and the relevant provisions of the Act are ss8, 1072, 1064(1) and 1064-A1, dealing with the definition and meaning of “income” and the method of calculation of pensions. Section 1072 of the Act specifies that a reference to income involves gross ordinary income from all sources and section 4.3.6.10 of the Guide to Social Security Law clearly states that the gross rate of overseas pensions and income is assessed as income for social security purposes. A number of Tribunal decisions have further confirmed that gross income from overseas pensions is “income” for the purposes of social security law, see for example, Sallan and Secretary, Department of Family and Community Services (1999) AATA 539 (20 July 1999) and Crewer and and Secretary, Department of Family and Community Services (2001) AATA 509 (8 June 2001).

17.     What is perhaps more pertinent in Mr Nuccio’s case, is how the compensation payments he receives from INAIL are to be treated in Australian social security law and whether this has an effect on qualification or rate of age pension.

18. Section 17(1) of the Act indicates that age pension is a compensation affected payment, but they key interpretation of this is set out in s17(2) of the Act which reads as follows:

“17(2) Subject to subsection (2B), for the purposes of this Act, compensation means:

(a)      a payment of damages; or

(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)       any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.”

19. Section 17(2A) of the Act operates to exclude some compensation payments to which a recipient has made contributions, from inclusion in s17(2)(d). It provides:

“17(2A) Paragraph (2)(d) does not apply to a compensation payment if:

(a) the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and

(b)       either:

(i)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or

(ii)the agreement does so provide but the compensation payment has been calculated without reference to the provision.”

20.     Applying this to Mr Nuccio’s case, there is documentary evidence, including the applicant’s own statements that:

(a)      payments made by INAIL are in respect of a work injury;

(b)the payments are made on a basis of diminished earning capacity, because of that work injury and are assessed on pre-injury earnings; and

(c)the applicant did not make financial contributions towards the INAIL workers compensation scheme, since they were made by his employer.

In brief, Mr Nuccio cannot meet the provisions of s17(2A) and it is s17(2) which applies.

21. It is now necessary to consider the effect of compensation on the applicant’s claimed age pension. Part 3.14 of the Act at s1173 explains that periodic compensation payments made in respect of a work injury that occurred prior to making a claim for age pension (as a `compensation affected payment’), reduce the age pension on a dollar for dollar basis. In detail it provides that:

“1173(1) If:

(a)      a person receives periodic compensation payments; and

(b)the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and

(c)the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the rate of the person's compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).

1173(2) The person's daily rate of compensation affected payment is reduced by the amount of the person's daily rate of periodic compensation.

1173(3) The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.”

22. In accordance with these provisions Centrelink has calculated the rate of age pension payable to the applicant at the date of his claim. This amounted to $2,075.04 per annum. This is a reduced rate of pension determined by the length of his working life in Australia and calculated without taking into effect any ordinary income. The calculation was made under ss1220A and 1221A1 of the Act.

23.     The annual rate of the applicant’s payment from INAIL was euros 3448.92 and based upon an exchange rate of $1A equals 0.5846 euros, gives an annual rate in Australian dollars of $A5,899.62.

24. As the applicant’s rate of INAIL compensation at the date of his claim for Australian age pension, exceeded his maximum rate of age pension, under s1173(2) of the Act, the applicant’s rate of age pension was nil.

25. In summary, the applicant is receiving compensation as defined in s17(2) of the Act, but this compensation in combination with other income, results in his rate of Australian age pension being nil.

Decision

26.     The decision under review is affirmed.

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor B W Davis A M (Part-time Member)

Signed:  K L Miller (Administrative Assistant)

Date/s of Hearing     Overseas application – matter decided on the papers.

Date of Decision  19 March 2004