Ren De Liang and Secretary, Department of Social Services
[2015] AATA 97
•23 February 2015
[2015] AATA 97
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/2346
Re
Ren De Liang
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Deputy President J W Constance
Date 23 February 2015 Place Sydney The decision of the Social Security Appeals Tribunal dated 3 April 2014 is affirmed.
..............................[sgd]..........................................
Deputy President J W Constance
Catchwords
SOCIAL SECURITY – age pension – work bonus provisions – whether employment income of partner employment income in recipients hands for purposes of work bonus – decision affirmed
Legislation
Social Security Act 1991 (Cth) ss 8, 8(1B), 55, 1064-E2, 1073AA, 1073AA(6), 1073AA(7)
Cases
Harris v Director-General of Social Security (1985) 57 ALR 729
Secretary, Department of Family and Community Services v Rolley (2000) 175 ALR 4.
REASONS FOR DECISION
Deputy President J W Constance
20 February 2015
INTRODUCTION
Mr Liang has been in receipt of the age pension since 20 September 2011.
On 18 November 2013, a Centrelink officer determined that the rate of pension payable to Mr Liang was reduced to account for income purportedly received by Mr Liang’s partner, Mrs Xie. Mr Liang accepts that Mrs Xie’s income is to be taken into account. However, he argues that before it is, the provisions of the Act relating to the Work Bonus should be applied to reduce Mrs Xie’s income.
An authorised review officer affirmed the initial determination. In turn, this decision was affirmed by the Social Security Appeals Tribunal. The Tribunal found that Mr Liang’s rate of age pension was correctly calculated in accordance with the Social Security Act 1991 (Cth).
Mr Liang has applied to the Tribunal for a review of the decision of the Social Security Appeals Tribunal.
For the reasons which follow, the decision under review will be affirmed.
LEGISLATION
Calculation of the rate of pension
The calculation of a person’s rate of age pension is governed by the Social Security Act 1991 (Cth). In accordance with the Act, the age pension is means tested. Before examining the work bonus provisions, it will be necessary to outline the provisions relating to the calculation of the rate of pension.
Section 55 of the Act provides in part:
A person's age pension rate is worked out:
(a) if the person is not permanently blind--using Pension Rate Calculator A at the end of section 1064 (see Part 3.2);
Section 1064 provides that the rate of age pension is to be calculated by reference to the Rate Calculator in Part 3.2 of the Act. Part 3.2 requires the application of both an income and assets test. The method of calculation to be applied is whichever of the assets test or income test that, when applied, results in the lowest rate of pension.[1]
[1] Social Security Act 1991 (Cth) s 1064 A1.
It is accepted that Mr Liang and his partner’s assets do not exceed the threshold by which the age pension will be reduced. As such, it is necessary to apply the income test.
The income test
The income test is laid out in Module E of Part 3.2 of the Act. Section 1064-E1 provides in part:
Step 1. Work out the amount of the person's ordinary income on a yearly basis.
Note 1: For the treatment of the ordinary income of members of a couple see point 1064-E2.
...
Step 2. Work out the person's ordinary income free area (see point 1064-E4 below).
Note: A person's ordinary income free area is the amount of ordinary income that the person can have without any deduction being made from the person's maximum payment rate.
Step 3. Work out whether the person's ordinary income exceeds the person's ordinary income free area.
Step 4. If the person's ordinary income does not exceed the person's ordinary income free area, the person's ordinary income excess is nil.
Step 5. If the person's ordinary income exceeds the person's ordinary income free area, the person's ordinary income excess is the person's ordinary income less the person's ordinary income free area.
Step 6. Use the person's ordinary income excess to work out the person's reduction for ordinary income using points 1064-E10 to 1064-E12 below.
The definition of ‘employment income” and “ordinary income”
Section 8 of the Act is the general definition section. It provides, in part:
"employment income " , in relation to a person, means ordinary income of the person that comprises employment income under subsection (1A) and includes ordinary income that is characterised as employment income of the person because of the operation of subsection (1B).
...
(1A) A reference in this Act to employment income , in relation to a person, is a reference to ordinary income of the person:
(a) that is earned, derived or received, or that is taken to have been earned, derived or received, by the person from remunerative work undertaken by the person as an employee in an employer/employee relationship; and ...
...
(1B) For the avoidance of doubt, if:
(a) a person is treated, for the purposes of working out the person's ordinary income, as having earned, derived or received any ordinary income that was in fact earned, derived or received, or taken to have been earned, derived or received, by the partner of the person; and
(b) that ordinary income would be characterised as employment income in the hands of the partner if the partner were not a member of a couple;
then, for the purposes of this Act, that ordinary income is to be similarly characterised in the hands of the person.
When a pensioner is a member of a couple
Section 1064-E2 provides:
If a person is a member of a couple, add the couple's ordinary incomes (on a yearly basis) and divide by 2 to work out the amount of the person's ordinary income for the purposes of this Module.
It is accepted that Mr Liang and Mrs Xie together are members of a couple. Applying section 1064-E2, it is necessary to combine each of their ordinary incomes.
FACTS
Mrs Xie earned income from the same employment in the period October 2013 to February 2014. Her earnings varied throughout this period. In calculating her ordinary income on a yearly basis, the Federal Court has made it clear that the focus is not to be on the aggregate amount of income earned throughout the year but on the rate of income.[2]
[2] The Full Court of the Federal Court considered the calculation of ordinary income “on a yearly basis” in Secretary, Department of Family and Community Services v Rolley (2000) 175 ALR 4. The Court stated, referring to the High Court’s decision in Harris v Director-General of Social Security (1985) 57 ALR 729 that “ordinary income on an annual basis” should be constructed in the same way as the High Court’s construction of “annual rate of income” under the 1947 Act.
Mrs Xie’s annual rate of income is not in dispute. She earned an average of $400 per fortnight and the parties agree that this should be treated as her annual rate of income.
There are other calculations to be made but these are not in dispute.
THE ISSUE
The only issue in dispute is whether the work bonus provisions apply to reduce the amount of Mrs Xie’s employment income which is added to the income of Mr Liang before the rate of his age pension is calculated.
CONSIDERATION
The law relating to the application of the work bonus is set out in section 1073AA of the Act. It provides, in part:
Work bonus
(1) This section applies to a person if:
(a) the person's rate of social security pension is calculated in accordance with Pension Rate Calculator A at the end of section 1064 or Pension Rate Calculator C at the end of section 1066; and
(b) the person has reached pension age.
Note: For pension age see subsections 23(5A), (5B), (5C) and (5D).
Employment income greater than or equal to income concession amount
(2) If the person's employment income for an instalment period is greater than or equal to the income concession amount for that period, then, for the purposes of Module E of that Rate Calculator, the amount of the person's employment income for that period is reduced by an amount equal to the income concession amount.
...
The section goes on to provide, in part:
(5) For the purposes of this section, a person's employment income …… includes an amount that is taken to have been earned, derived or received over that period because of subsection 1073A(1).
(6) If the person is a member of a couple, apply this section in relation to the person, and to the person's partner, before applying point 1064-E2 or point 1066-E2 (whichever is relevant).
(7) In working out a person's employment income for the purposes of this section, disregard subsection 8(1B). [Emphasis added]
(8) If:
(a) the person is a member of a couple; and
(b) the person's partner's employment income (within the meaning of section 46AB of the Veterans' Entitlements Act 1986 ) is reduced by one or more amounts (each of which is a reduction amount ) under section 46AA of that Act;
then, in applying point 1064-E2 or point 1066-E2 (whichever is relevant), the ordinary income of the person's partner is to be reduced by an amount equal to the total of the reduction amounts.
Mr Liang argues that the effect of subsection 8 (1B)(a) is that his wife’s employment income should be attributed to him as employment income. He then argues that the work bonus provisions of section 1073AA apply to that income, so reducing the effect that Mrs Xie’s employment income has on the rate of pension payable to him. Section 8(1B)(a) of the Act provides that income received by a person’s partner is treated as income earned by the social security recipient (in this case, Mr Liang).
However Mr Liang’s argument ignores the effect of subsection 1073AA(7) which explicitly excludes the operation of subsection 8(1B) in determining employment income for the purposes of applying the work bonus. Put another way, this means that his wife’s employment income cannot be treated as employment income in his hands. As he has not been in receipt of employment income at any relevant time he is not entitled to the benefit of the work bonus.
Mr Liang referred to subsection 1073AA(6) which operates to provide that the work bonus provisions are to be applied before combining the incomes of a person and that person’s partner for the purposes of the income test. This subsection, however, does not benefit Mr Liang. Mrs Xie was in receipt of newstart allowance during the period in question. Section 1073AA cannot be applied to Mrs Xie’s employment income as she was not in receipt of a pension calculated in accordance with the rate calculators identified in subsection 1073AA(1).
CONCLUSION
The decision of the Social Security Appeals Tribunal that the rate of Mr Liang’s pension for the period in question has been correctly calculated is correct.
DECISION
The decision under review, being the decision of the Social Security Appeals Tribunal made 3 April 2014, will be affirmed.
I certify that the preceding 24 (twenty -four) paragraphs are a true copy of the reasons for the decision herein of Deputy President J W Constance ...............................[sgd].........................................
Associate
Dated 23 February 2015
Date(s) of hearing 2 December 2014 Date final submissions received 2 December 2014 Applicant In person Solicitors for the Respondent D McLaren; Sparke Helmore
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