POWELL and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICE AND INDIGNEOUS AFFAIRS

[2010] AATA 741

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 741

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          Nos 2009/3647-48

GENERAL ADMINISTRATIVE DIVISION		)
Re		EVAN AND SANDRA POWELL

Applicants

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICE AND INDIGNEOUS AFFAIRS

Respondent

DECISION

Tribunal Senior Member RW Dunne

Date3 September 2010

PlaceAdelaide

Decision For the reasons given orally at the hearing of this matter, the Tribunal affirms the decision under review.

..............................................

RW DUNNE
  (Senior Member)

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances – Pension Bonus Scheme – claims for age pension and pension bonus – part age pensions granted – application of assets test – reduced pension bonus payments due to the application of the assets test – decision under review affirmed.

Social Security Act 1991 ss 23(1), 93G, 93H, 93J, 93K

Social Security (Administration) Act 1999 ss41(1), 42, Schedule 2

REASONS FOR DECISION

3 September 2010   Senior Member RW Dunne

Introduction

1.      The applicants, Mr Evan Powell and his wife Mrs Sandra Powell, have requested written reasons for my decision which I delivered orally at the conclusion of the hearing of this matter.  The following is an edited version of my reasons.  However, in order to put my conclusion and findings in context, I will now supplement my oral reasons by referring to certain background facts which were not in contention, and to the relevant legislative scheme. 

2.      Mr Powell turned 65 years of age (age pension age) on 31 December 1999.  Mrs Powell turned 62 ½ years of age (age pension age) on 24 February 2004.        Mr and Mrs Powell both applied for age pension and pension bonus on 19 July 2007.  The respondent (“Centrelink”) determined that, based on their initial low rate of age pension under the Social Security Act 1991 (“Act”) (due to the application of the assets test), reduced pension bonus payments were made to them.  They requested a review of Centrelink’s determination, which was affirmed by an Authorised Review Officer and by the Social Security Appeals Tribunal (“SSAT”).  Mr and Mrs Powell have applied to this Tribunal for a review of the decision of the SSAT.

3. At the hearing before me, Mr and Mrs Powell represented themselves and Mrs Powell gave evidence. Mr A Parker (from the Centrelink Advocacy Branch) appeared for the respondent. I received into evidence the T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Exhibit R1), together with the applicants’ outline of argument (Exhibit A1) and the respondent’s statement of facts and contentions (Exhibit R2).

Issues for the Tribunal

4.      The issues for the Tribunal to determine are:

(a)      Whether Mr and Mrs Powell’s start days for the payment of age pension are correct, and whether the pension bonus payments have been correctly calculated.

(b)      If the pension bonus payments are not correct, whether Mr and        Mrs Powell are eligible for pension bonus top-ups.

Legislation

5. The legislation relevant to this application for review is found within the social security law, in particular, the Act and the Social Security (Administration) Act 1999 (“Administration Act”). In cases such as the present, where Mr and Mrs Powell remain married throughout the relevant period, s 93J(1) of the Act sets out how the amount of a person’s pension bonus is calculated. Section 93J(1) reads:

“93J     Amount of pension bonus

No change in couple status during overall qualifying period

(1)  If:

a)  a person was a member of a couple throughout the person's overall qualifying period; or
(b)  a person was not a member of a couple at any time during the person's  overall qualifying period;
the amount of the person's pension bonus is worked out using the following formula (for rounding up, see subsection (7)):

Annual pension rate x Pension multiple x No. of years in the person’s overall qualifying period

…”

6. The expression “pension multiple” in s 93J(1) is referred to in s 93G of the Act. That section reads:

“93G  Pension multiple

For the purposes of this Division, a person's pension multiple is worked out using the formula:

0.094 x No. of years in the person’s overall qualifying period

…”

7. The expression “annual pension rate” referred to in s 93J(1) is explained in s 93H of the Act. Section 93H, as it applies in the present case, reads:

“93H Annual Pension rate

For the purposes of this Division, a person’s annual pension rate is:

(a)if the person is not permanently blind – the rate that would be the person’s provisional annual payment rate under the method statement in point 1064-A1, ascertained as at the start day for the age pension, if it were assumed that steps 2 and 3 were omitted from that method statement; or

(b)       if the person is permanently blind – the sum of:

(i)the person’s maximum basic rate under Table B in point 1065-B1; and

(ii)the person’s pension supplement worked out under point 1065-BA2; calculated in each case as at the start day for the age pension.”

8. Where a person’s rate of age pension increases within the first 13 weeks of starting to receive age pension because of a decrease in their income and/or assets, the pension bonus may be “topped up” using the highest rate achieved during the 13 weeks. Pension bonus top ups are dealt with in s 93K of the Act. Section 93K(1) provides:

“93K Top up of pension bonus for increased rate of age pension

(1)  The Secretary may determine (a top up determination ) that a person's pension bonus is to be increased if:

(a)  the Secretary makes a determination (a rate determination ) increasing the person's rate of age pension; and

(b)  the rate determination takes effect on a day that is not more than 13 weeks after the start day for the person's pension bonus; and

(c)  the rate determination is made because of a reduction since the start day in either or both of the following:

(i)  the value of the person's assets;

(ii)  the person's ordinary income.”

9. By definition, under s 23(1) of the Act, an age pension is a “social security pension” and a “social security payment”. Pursuant to s 41(1) of the Administration Act, a social security payment becomes payable to a person on the person’s start day in relation to the social security payment. For the purposes of the social security law, a person’s start day in relation to a social security payment is the day worked out in accordance with Schedule 2 of the Administration Act (see s 42 of the Administration Act). Part 2 of Schedule 2 contains general rules for working out the start day in relation to a social security pension. Relevantly, subclause 3(1) of Schedule 2 reads:

“SCHEDULE 2  Rules for working out start day…

Part 2 -- General rules

3   Start day--general rule

(1)  If:

(a)  a person makes a claim for a social security payment; and

(b)  the person is qualified for the payment on the day on which the claim is made;

the person's start day in relation to the payment is the day on which the claim is made.

…”

Background and Evidence

10.     The material facts of this case are not in dispute.  Mr and Mrs Powell agreed that these facts are correctly set out in the reasons for decision of the SSAT.  After Mr Powell reached age pension age on 31 December 1999, he applied for registration as a member of the Pension Bonus Scheme in December 2004.  His registration was accepted and back dated to 31 December 1999.  After Mrs Powell reached age pension age on 24 February 2004, she applied for registration as a member of the Pension Bonus Scheme on 13 May 2004.  Her registration took effect from 24 February 2004.  Mr Powell worked at a rate in excess of 960 hours per year up until his retirement on 31 December 2004, that is, for 5 years.  Mrs Powell worked at a rate in excess of 960 hours per year up until her retirement on 8 December 2006, that is, for 3 years.  They both applied for age pension and payment of pension bonus on 19 July 2007.  Although some uncertainty exists as to when decisions were made regarding Mr and Mrs Powell’s pension bonus claims, after initially being rejected, the claims were paid with effect from 20 September 2007.  Based on their initial low rate of payment of age pension of $70.63 per fortnight, which was due to the assets tests applying to their assessable assets, their annual pension rate was $1,712.10 and their pension bonus payments were $4,023.30 (for Mr Powell) and $1,448.40 (for Mrs Powell).  

11.     In giving her evidence, Mrs Powell said that inaccurate advice had been given to them by Centrelink as to their entitlement to the pension bonus.  When Mr Powell received all the pension bonus information, he did not retain it.  They had purchased an investment property in July 2006 obtaining loan finance, secured by mortgage, from the Adelaide Bank.  The bank required that, in addition to the investment property, their family home be used as security for the loan.  As a result, only a portion of the borrowings could be offset against the value of the investment property for the purposes of the age pension assets test.  When they retired they did not realise that their initial rate of age pension would be so low, because of the assets test, and that this would impact upon the amount of their pension bonus. 

12.     In March 2008, Mr and Mrs Powell arranged to have the mortgage removed from their family home and their age pension then increased.  They were seeking to have their pension bonus paid at a rate commensurate with their rate of age pension after they had arranged for the mortgage to be removed from their family home.  They were paid age pension from 24 January 2008 and were seeking to have this as their pension start day, rather than 20 September 2007, which would entitle them to a pension bonus top-up equivalent to their higher actual rate of age pension. 

13.     Mrs Powell explained that they had met with an Authorised Review Officer and had received the correct advice in relation to their pension bonus entitlement.  Because of the problems that had earlier arisen in relation to their pension bonus, on 17 August 2010, they had applied to the Department of Finance and Deregulation for an Act of Grace payment. 

Consideration

Are the start days for the payment of the applicants’ age pension correct?

14. Mr and Mrs Powell were paid age pension from 24 January 2008. However, they were paid arrears of age pension from 20 September 2007. I note that Part 2 of Schedule 2 of the Administration Act sets out the rules for working out the start day in relation to age pension. In general terms, subclause 3(1) of Schedule 2 provides that, if a person makes a claim for a social security payment (such as an age pension) and they are qualified for the payment when the claim is made, the person’s start day in relation to the payment is the day on which the claim is made. In the case of Mr and Mrs Powell, that day is clearly 20 September 2007.

15. In calculating the annual pension rate for Mr and Mrs Powell, s 93H of the Act is relevant. In reviewing this provision, I am satisfied that the amount of age pension initially granted to both Mr and Mrs Powell was $1,712.10 per annum (comprising basic pension plus supplement) payable from 20 September 2007. To determine the amount of pension bonus payable to Mr and Mrs Powell, having regard to their annual pension rate of $1,712.10, the formula set out in s 93J(1) of the Act is applicable. In their case, the pension bonus calculations are as follows:

Mr Powell – 5 x $1,712.10 x 0.094 x 5 = $4,023.40

Mrs Powell – 3 x $1,712.10 x 0.094 x 3 = $1,448.40

In my view, based on the above calculations, the pension bonus payments made to both Mr and Mrs Powell are correct.

Are the applicants eligible for pension bonus top ups?

16. In relation to pension bonus top up payments, the relevant provision is s 93K(1) of the Act. This section was introduced with effect from 1 January 2008 and it makes provision for making a top-up payment in some circumstances by providing for the calculation of the initial rate of age pension within 13 weeks of the start day. However, s 93K(1) only applies for pension bonus amounts with a start day on or after 1 January 2008. Moreover, s 93K(1) can only apply if the age pension rate of Mr and Mrs Powell increases within 13 weeks of the start day. As Mr and Mrs Powell commenced receiving age pension from 20 September 2007, and there was no increase in their age pension within 13 weeks of that date, the pension bonus top up arrangement is not available to them.

Conclusion

17. For the reasons outlined above, Mr and Mrs Powell’s start days for the payment of age pension are correct. In the circumstances of their case and in applying 93K(1) of the Act, they are not eligible for pension bonus top ups.

18.     Given the findings I have made, I would recommend that Mr and Mrs Powell continue with their application for an Act of Grace payment.  The success or otherwise of their application will, of course, depend upon the decision of the Minister for Finance and Deregulation.

Decision

19.     The Tribunal affirms the decision under review.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member RW Dunne

Signed:         .....................................................................................
  Associate

Date/s of Hearing  3 September 2010
Date of Decision  3 September 2010
Advocate for the Applicant       Self           
Advocate for the Respondent   Anthony Parker
  Centrelink Advocacy Branch