Oprea and Secretary, Department of Family and Community Services
[2005] AATA 678
•15 July 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 678
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2004/362
GENERAL ADMINISTRATIVE DIVISION ) Re AUGUSTA SIMONA OPREA Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Associate Professor S D Hotop, Deputy President Date15 July 2005
PlacePerth
Decision
The Tribunal sets aside the decision under review and remits the matter to the respondent for reconsideration in accordance with the direction that the applicant’s claim for parenting payment is to be determined on the basis that the payments made to her pursuant to an income protection insurance policy issued by Asteron Life Limited in the name of “Resolute Ltd Group of Companies” are to be treated as ordinary income and are not to be treated as “compensation”, within the meaning, and for the purposes, of the Social Security Act 1991 (Cth).
..........(sgd S D Hotop).............
Deputy President
CATCHWORDS
SOCIAL SECURITY – parenting payment – applicant became incapacitated for work by reason of bipolar disorder – applicant received payments pursuant to income replacement insurance policy in name of employer – payments constitute compensation – income replacement insurance part of applicant’s salary package – applicant has made contributions towards payments – payments not to be treated as compensation – parenting payment payable to applicant – decision under review set aside.
Social Security Act 1991 (Cth) s 17(1), s 17(2), s 17(2A), s 500I and s 1173
Re Gentley and Secretary, Department of Family and Community Services (2001) 65 ALD 754
Re Macri and Secretary, Department of Family and Community Services [2005] AATA 175
REASONS FOR DECISION
15 July 2005 Associate Professor S D Hotop, Deputy President Introduction
1. Augusta Simona Oprea (‘the applicant’) has applied to the Tribunal for review of a decision of an Authorised Review Officer within Centrelink, dated 14 May 2004, as affirmed by the Social Security Appeals Tribunal on 9 September 2004, to reject her claim for parenting payment on the ground that parenting payment is not payable to her pursuant to s 500I of the Social Security Act 1991 (Cth) (“the Act”).
2. At the hearing the applicant appeared in person without representation, and the Secretary to the Department of Family and Community Services (‘the respondent”) was represented by Mr P Maishman, a Centrelink advocate. The Tribunal had before it the documents (“T documents”) lodged on behalf of the respondent in accordance with s 37 of the Administrative Appeals Tribunal Act 1975 (Cth), and the following exhibits tendered in evidence by the applicant:
· letter from Marshall Hestelow of Resolute Mining Limited, dated 21 December 2004 (Exhibit A1); and
· extract from Department of Family and Community Services Guide to Social Security Law – “4.3.9.30 Income from Personal Injury Insurance Schemes” (Exhibit A2).
Oral evidence was given by Marshall Hestelow.
The Factual Background
3. The essential background facts as found by the Tribunal on the basis of the T documents, and about which there is no dispute between the parties, are as follows.
4. An offer of employment, dated 1 May 1995, was made to the applicant by Goudhurst Pty Ltd. That offer of employment contained, inter alia, the following terms and conditions:
“Remuneration: Salary of $25,000 per annum.
Superannuation: You will be eligible to join the company’s superannuation plan and the company will contribute 5% of your remuneration to the scheme. The company has a Group Salary Continuation Policy for income replacement as a result of sickness or injury that occurs subsequent to completion of the qualifying period.”
The applicant accepted that offer of employment on 4 May 1995.
5. Pursuant to the abovementioned offer of employment, the applicant was employed by the “Resolute Group” of companies from May 1995 to May 2000.
6. On 19 May 2000 the applicant became incapacitated for work by reason of bipolar disorder. She was not at that time receiving a “compensation affected payment”, within the meaning of the Act.
7. On 3 August 2000 Asteron Life Limited (“Asteron”) accepted a claim, made in relation to the applicant, for incapacity payments under an income protection insurance policy (“the policy”) issued by Asteron in the name of “Resolute Ltd Group of Companies”.
8. Monthly payments of $2,185.02 (plus “5% annual escalation”) (gross) have been made to the applicant pursuant to the policy from 3 August 2000, and continue to be made to her subject to ongoing assessment of her condition.
9. On 30 December 2003 the applicant lodged with Centrelink a claim for parenting payment.
10. On 31 December 2003 a Centrelink officer decided to reject the applicant’s claim for parenting payment.
11. By facsimile dated 31 December 2003 a Centrelink officer requested Asteron to provide certain details regarding the policy.
12. By facsimile dated 5 January 2004 Ms C Richter of Asteron provided to Centrelink the requested information about the policy, including the following:
· in answer to the question, “Is there a Centrelink offset clause in relation to this policy? (A Centrelink offset is when you reduce the claimant’s entitlement to policy payments in relation to the rate of Centrelink payment)”, Ms Richter answered, “No”;
· in answer to the question, “Were the policy contributions/premiums paid by…Employer/Employee/Sporting Club/Other?”, Ms Richter answered, “Employer”.
13. On 14 May 2004 an Authorised Review Officer within Centrelink decided that the original decision to reject the applicant’s claim for parenting payment was correct on the basis that the payments made to the applicant pursuant to the policy were to be treated as payments of “compensation” (as defined in s 17(2) of the Act) and, pursuant to s 1173 and s 500I of the Act, parenting payment was not payable to her. That decision was affirmed by the Social Security Appeals Tribunal on 9 September 2004.
The Legislation
14.The relevant provisions of the Act are as follows:
“17(1) In this Act, unless the contrary intention appears:
‘compensation’ has the meaning given by subsection (2);
…
‘compensation affected payment’ means:
…
(b) a parenting payment; or
…
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.
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.
...”
“500I (1) Subject to subsection (2), a parenting payment is not payable to a person if the person’s parenting payment rate would be nil.
…”
“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.
…”
The Issues
15. The general issue in this case is whether the payments made to the applicant pursuant to the policy are to be treated as payments of “compensation” (as defined in s 17(2) of the Act), or whether they are to be treated as ordinary income. It is common ground that, if those payments are treated as payments of “compensation”, parenting payment is not payable to the applicant pursuant to ss 500I and 1173 of the Act, but that, if those payments are treated as ordinary income, parenting payment is payable to her (albeit, at a rate lower than the maximum rate).
16. For the purposes of subss (2) and (2A) of s 17 of the Act, the following matters are not in dispute:
· the payments made to the applicant pursuant to the policy do not fall within paras (a), (b), or (c) of s 17(2), but they do fall within para (d) of s 17(2);
· the payments made to the applicant pursuant to the policy are made “wholly… in respect of lost earnings or lost capacity to earn”;
· subpara (b)(i) of s 17(2A is satisfied in this case.
17. For the purposes of subss (2) and (2A) of s 17 of the Act, the following matters are in dispute and must be determined by the Tribunal:
· whether the applicant’s “lost earnings or lost capacity to earn” result from “personal injury”;
· whether the applicant “has made contributions … towards the payment(s)” made to her pursuant to the policy.
Consideration and Findings
Do the payments made to the applicant pursuant to the policy constitute “compensation” (as defined in s 17(2) of the Act)?
18. The Tribunal agrees that the payments made to the applicant pursuant to the policy are not caught by paras (a), (b) or (c) of the definition of “compensation” in s 17(2) of the Act, but that they are caught by para (d) of that definition in s 17(2) of the Act in that they constitute compensation payments other than the kinds of payments referred to in paras (a), (b) and (c): see Re Gentley and Secretary, Department of Family and Community Services (2001) 65 ALD 754 at 766-767.
19. The Tribunal also agrees that those payments are made “wholly … in respect of lost earnings or lost capacity to earn”, within the meaning of s 17(2) of the Act.
20. The only matter in relation to s 17(2) of the Act, about which there may be some doubt, is whether the applicant’s “lost earnings or lost capacity to earn” result from “personal injury”. In the present case, the applicant’s “lost earnings or lost capacity to earn” result from her condition of bipolar disorder. The question is, therefore, whether bipolar disorder constitutes a “personal injury”, within the meaning of s 17(2) of the Act.
21. The applicant did not strongly dispute that her bipolar disorder condition constitutes a “personal injury”, within the meaning of s 17(2) of the Act, but nor did she concede that proposition. In the Tribunal’s opinion, the phrase “personal injury” in s 17(2) of the Act includes not only physical injury to the person but also any bodily disease, ailment, disorder or impairment, whether physical or mental, suffered by a person. In the Tribunal’s opinion, there is no good reason to interpret the phrase “personal injury” narrowly so as to confine it to physical injury and to exclude physical or mental diseases, ailments or disorders (other than physical injuries simpliciter). Accordingly, the Tribunal finds that the applicant’s mental condition of bipolar disorder is a “personal injury”, within the meaning of s 17(2) of the Act.
22. It follows from the foregoing discussion and findings that the payments made to the applicant pursuant to the policy constitute “compensation”, as defined in s 17(2) of the Act, being compensation payments within the meaning of para (d) of s 17(2) of the Act.
Has the applicant “made contributions … towards the payment(s)” made to her pursuant to the policy?
23. The Tribunal now turns to the decisive issue in this case, namely, whether the applicant “has made contributions … towards the payment(s)” made to her pursuant to the policy, within the meaning of s 17(2A) (a) of the Act. If that issue is determined in the affirmative, it will necessarily follow by reason of s 17(2A) of the Act (it being common ground that subpara (b) (i) of s 17(2A) is satisfied in this case) that the payments made to the applicant pursuant to the policy are not to be treated as “compensation” for the purposes of the Act.
24. According to the evidence before the Tribunal (see paragraph 12 above), the premiums for the policy were paid directly to Asteron by the applicant’s employer. The Tribunal notes, however, that the applicant’s employer had a “Group Salary Continuation Policy for income replacement as a result of sickness or injury”, as specified in the offer of employment accepted by the applicant on 4 May 1995 (see paragraph 4 above). In this connection the applicant tendered in evidence a letter, dated 21 December 2004, from Marshall Hestelow, Finance and Administration Manager, Resolute Mining Limited which states as follows:
“This serves to confirm the [applicant] was employed, on a full-time basis, by the Resolute Group from May 1995 to May 2000. Whilst employed Ms Oprea’s remuneration package was inclusive of ‘income replacement’ insurances. Should Ms Oprea have elected that the insurance not form a part of her package, other components of her package would have been adjusted accordingly.
…”
(Exhibit A1)
25. In his oral evidence Mr Hestelow elaborated on the last above-quoted sentence in his letter. He said that had the applicant, at the time of “establishing” her salary package, indicated that she did not wish the income replacement insurance to be included in her salary package, the salary component of her package would have been adjusted. Asked to estimate what the quantum of that adjustment would have been, Mr Hestelow said that currently the cost of the salary continuance plan represents 1.3% - 1.4% of an employee’s base salary – that is, $325 - $350 in the case of a base salary of $25,000 (as was paid to the applicant). He added that he was unable to say whether the applicant’s salary would have been adjusted upwards to the full extent of 1.3% or 1.4% because there was no precedent for this – that is, no employee had ever elected not to have the income replacement insurance. He confirmed, however, that he regarded the income replacement insurance as a component of an employee’s salary package, and that each employee was entitled to elect whether or not they wished income replacement insurance to be a component of their particular salary package. He agreed that, in the case of the applicant, it would be accurate to say that she had, in effect, purchased her salary continuation payments, given that they were included in her salary package, and, had she not wished to “contribute”, her salary would have been adjusted upwards.
26. Having regard to the evidence of Mr Hestelow, the Tribunal is satisfied that the applicant did make “contributions….towards the payment(s)” made to her pursuant to the policy, within the meaning, and for the purposes, of s 17(2A) (a) of the Act. The Tribunal notes that s 17(2A) (a) in terms does not require that such contributions be made directly to the compensation payer by the recipient of the compensation payment, nor does it make any reference to the quantum of such contributions. In the Tribunal’s opinion, the contributions made by the applicant towards the payments made to her pursuant to the policy comprised the amount by which, according to Mr Hestelow’s evidence, her salary would have been increased had she elected – as she was entitled to do – not to have income replacement insurance included in her salary package.
27. The Tribunal notes the similar case of Re Macri and Secretary, Department of Family and Community Services [2005] AATA 175 where the Tribunal found that “Mr Macri did not contribute to payment of the Group Salary Continuance Policy”, and, accordingly, concluded that para (a) of s 17(2A) of the Act was not satisfied. The Tribunal notes, however, that in Re Macri there was no evidence before the Tribunal, comparable to the evidence of Mr Hestelow in the present case, on the basis of which it might have found that Mr Macri did make contributions towards the relevant compensation payment. In the Tribunal’s opinion, the present case is, primarily by reason of the evidence of Mr Hestelow, distinguishable from Re Macri.
28. Accordingly, the Tribunal finds that the applicant “has made contributions … towards the payment(s)” made to her pursuant to the policy, within the meaning of s 17(2A) (a) of the Act.
Conclusion
29. It necessarily follows from the lastmentioned finding – it being common ground that subpara (b) (i) of s 17(2A) of the Act is also satisfied in this case – that, by reason of s 17(2A), the payments made to the applicant pursuant to the policy are not to be treated as “compensation” for the purposes of the Act, and the Tribunal so finds. It is common ground that, in the event of the Tribunal so finding, those payments are to be treated as ordinary income for the purposes of the Act. That being the case, parenting payment is, the Tribunal understands, payable to the applicant at a rate to be determined by Centrelink.
Decision
30. For the above reasons the Tribunal sets aside the decision under review and remits the matter to the respondent for reconsideration in accordance with the direction that the applicant’s claim for parenting payment is to be determined on the basis that the payments made to her pursuant to the policy are to be treated as ordinary income and are not to be treated as “compensation”, within the meaning, and for the purposes, of the Act.
I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor S D Hotop, Deputy President.
Signed: ….....(sgd N H Wee)................
AssociateDate of Hearing 4 July 2005
Date of Decision 15 July 2005
Counsel for the Applicant In PersonCounsel for the Respondent Mr P Maishman
Centrelink
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