Raams and Secretary, Department of Family and Community Services

[2004] AATA 1357

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1357

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No S2004/248

(a)   GENERAL ADMINISTRATIVE DIVISION		)
Re		PIETER RAAMS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member L Hastwell

Date16 December 2004

PlaceAdelaide

Decision The Tribunal affirms the decision under review that the payments received by the applicant through his Scholarship are to be treated as income for the purpose of calculating his rate of Austudy under the Act

L. Hastwell
  (Signed)
  Senior Member

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances - Austudy – should scholarship payments be treated as income? – exempted scholarships defined - decision affirmed.

The Social Security Act 1991(Cth), ss8, 8(8)(zj), 8(8) (zja), 24A(1), 568, 581 and 1067L

REASONS FOR DECISION

16 December 2004	Senior Member Hastwell
Introduction

1.      The applicant has just completed the second year of his degree of Bachelor of Nursing through the Flinders University Rural Campus.  On 11 February 2004, the applicant accepted an Australian Government Rural and Remote Nursing Scholarship (the “Scholarship”).  He was to receive the sum of $10,000 paid in 20 equal fortnightly instalments throughout 2004.

2.      On 14 February 2004 the applicant lodged a claim for Austudy payments and he was granted payments effective from 3 March 2003.

3.      On 16 March 2003 a decision was made by Centrelink to treat the scholarship payments as income for the purposes of determining his rate of Austudy.  That decision was subsequently affirmed by an Authorised Review Officer on 15 April 2004 and on 23 June 2004 by the Social Security Appeals Tribunal (“SSAT”).

4.      An application to review the decision of the SSAT was lodged on 23 July 2004.

Issues for Determination

5. The issue to be determined by the Tribunal is whether the Scholarship payments are to be treated as income for the purposes of section 8 of the Social Security Act 1991 (the “Act”) such that these payments are treated as income for the purposes of calculating the applicant’s Austudy entitlements.

Documents

6.        The Tribunal had before it the T documents as exhibit A2.  The applicant also tendered as exhibit A1 some background information regarding the nature of the Scholarship he was receiving.  It included information about scholarship guidelines and eligibility criteria.  In that document he also summarised his own concerns about “the impacts of the application of the current legislation as determined by Centrelink”.

Evidence

7.        The applicant represented himself and gave evidence on his own behalf. Mr Kilderry appeared for the respondent. 

8.        The applicant is currently 47 years of age.  He has had a working history that included working for the Department of Social Security at one stage and working in Accounting.  He currently undertakes some casual work for OARS at Renmark as well as being a full time student.  In 2003 he commenced a Bachelor of nursing degree.  His course is a three year course, with the option of doing midwifery at the end of the course which would extend the course for a further period.  He is a student at the Flinders University Rural Campus in the Riverland.  He has always lived in the country.

9.        The applicant has five children under the age of 14 years.  His wife is a full time home maker and parent.  Most of their children are home schooled.  The household income has been low in recent years.  The Scholarship in question is a needs based, rather than an academic based scholarship.  The applicant was required to prove his level of income in the two years to 30 June 2003 and estimate his income to 30 June 2004 as part of the requirements to qualify for the Scholarship.

10.      The Scholarship is awarded by the Royal College of Nursing Australia.  One hundred and ten scholarships per year are granted.  Funds are provided for the scholarships through the Department of Health and Ageing and the Royal College then awards the scholarships to chosen individuals.

11. The applicant pointed out that because his Scholarship payments were treated as income within the definition of income in the Act, this substantially reduced his Austudy entitlements, and so in real terms he received only a $3,000 benefit from the Scholarship and not the intended $10,000 benefit. He considered that this was clearly an unintended consequence of the legislation particularly as the whole point of the Scholarship was to provide some significant and tax free financial assistance to students in remote areas.

12.      He pointed out that for the purposes of the Income Tax Assessment Act 1977 (Cth) the scholarship is treated as a tax free payment.  The anomaly is thereby created whereby an acquaintance who earns too much to qualify for Austudy payments, receives the same scholarship and receives the full tax free benefit of the $10,000 payment, whereas the applicant is effectively penalised because of his low income.

13. The applicant conceded in cross examination that his Scholarship was neither a Commonwealth Education Costs Scholarship nor a Commonwealth Accommodation Scholarship. He also conceded that his Scholarship did not come within the definition of an “approved” scholarship within s 24A(1) of the Act. It was not a scholarship awarded outside Australia and within a category approved by the Minister.

14.      The applicant raised the issue with his local MP.  He was told to take the matter to the Administrative Appeals Tribunal on review before his local member could consider taking the matter further.

15.      The applicant was a very straightforward witness who conceded that the law was against him but felt compelled to take the matter further in the hope that someone would look at ways of remedying the situation.

Legislation

16. Section 8 of the Act defines income as follows:

“"income", in relation to a person, means:

(a)an income amount earned, derived or received by the person for the person's own use or benefit; or

(b)       a periodical payment by way of gift or allowance; or

(c)       a periodical benefit by way of gift or allowance; …”

17. There are a number of exemptions to the definition of income and they are found in s 8(8) of the legislation. Of the numerous exceptions, set out therein, the only relevant exemptions with any possible application in this case are contained in s 8(zj) or s 8(zja) of the Act. The following defined payments are exempted from being treated as income within the meaning of s 8(1).

“ 8 (8)

(zj)a payment of an approved scholarship awarded on or after 1 September 1990;

8 (8)

(zja)     the amount or value of:

(i)a scholarship known as a Commonwealth Education Costs Scholarship; or

(ii)a scholarship known as a Commonwealth Accommodation Scholarship;

provided for under the Commonwealth Scholarships Guidelines made for the purposes of Part 2-4 of the Higher Education Support Act 2003;…”

18.      An approved scholarship within the meaning of s 8(zj) is a scholarship in relation to which a determination under s 24A is in force (see s 8(1) definition “approved scholarship”).

19. Section 24A(1) provides as follows

24A.(1)  The Minister may determine in writing that a scholarship, or a class of scholarships:

(a)       awarded outside Australia; and

(b)not intended to be used wholly or partly to assist recipients to meet living expenses;

Is an approved scholarship, or a class of approved scholarships, as the case may be, for the purposes of this Act.”

20.      To be an approved scholarship, the Scholarship must be awarded outside Australia and specifically approved by the Minister.  The scholarship awarded to the applicant is not within this category.

21. The applicant’s Scholarship does not come within either of the definitions in s 8(8)(zja). It is not a Commonwealth Education Costs Scholarship nor is it a Commonwealth Accommodation Scholarship.

22. The fact that s 8(8) refers to specific categories of scholarships that are excluded from the definition of “income” reinforces the Tribunal’s finding that scholarship payments unless otherwise excluded by legislation, are to be included as “income” for the purposes of s 8(1) of The Act. A payment under the Scholarship can be categorised either as income received by the person for the persons own use and benefit or as a periodical payment by way of an allowance within the definition of “income”.

23. Austudy is paid in accordance with s 568 of the Act. The rate of Austudy is paid in accordance with s 581 which in turn refers to the Austudy payment rate calculator which appears at s 1067L, module D of the Act. That in turn refers back to the definition of “income” as contained in s 8(1) of the Act.

Consideration

24.      The applicant has been the recipient of an Australian Government Rural and Remote Nursing scholarship during the period 11 February 2004 until 19 November 2004.

25.      The applicant qualifies for Austudy due to his low income and his scholarship payments have had the effect of reducing his Austudy payments such that in real terms he receives the benefit of approximately one third only of the awarded scholarship sum in a year.

26. The scholarship payments in this instance are not subject to any exclusion or exemption within the definitions set out in s 8(8) of the Act or within s 24A of the Act.

27. The payment being received by the applicant through his Scholarship is income received by him within the definition of s 8(1) of the Act. For the purposes of calculating his rate of Austudy payment the income is to be taken into account by virtue of s 581 and s 1067-DI of the Act.

28.      The result for the applicant is unfortunate, in that he does not receive the full benefit of the Scholarship and it gives him only marginal assistance with living expenses.  The Scholarship guidelines as summarised in exhibit A1 provide as follows

·One of a range of long-term strategies to increase the number of nurses in remote and rural Australia.

·To increase the number of students with a remote and rural background who enter and complete their study of nursing at a tertiary level.

·Provides financial assistance of $10,000 each year, to a maximum of $30,000 per applicant, during their nursing studies.

·Provides financial support to assist in meeting accommodation, living, and travel costs incurred while studying undergraduate nursing.  The scholarships are not bonded.

29.      If a student receives only marginal financial assistance and not the full financial assistance intended by the Scholarship because of the impact of the Scholarship on benefits otherwise provided for low income families, then the Scholarship is assisting to maintain the family at a modest low income level but is not realistically achieving the goals set out at point 3 of the Scholarship guidelines in exhibit A1.  It is replacing one government benefit, or a large part of a government benefit, with the scholarship payments.  The Tribunal agrees with the applicant’s contention that this does appear to be an anomalous and unintended consequence of the legislation, but unavoidable as the legislation currently stands.

30. For the above reasons the Tribunal affirms the decision under review that the payments received by the applicant through his Scholarship are to be treated as income for the purpose of calculating his rate of Austudy under the Act.

.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Hastwell

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

Date/s of Hearing  14 December 2004
Date of Decision  16 December 2004
Applicant  Applicant in person
Counsel for the Respondent     Mr R Kilderry