Richards; Secretary, Department of Employment and Workplace Relations

[2006] AATA 412

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 412

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2005/740

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF EMPLOYMENT & WORKPLACE RELATIONS

Applicant

And  KARLA RICHARDS

Respondent

DECISION

Tribunal Deputy President P E Hack SC

Date12 May 2006

PlaceBrisbane

Decision The decision of the Social Security Appeal Tribunal of 18 October 2005 is affirmed.

..................Signed......................

Deputy President  

CATCHWORDS

SOCIAL SECURITY – parenting payment – whether overpayment – meaning of “income” – meaning of “for personal use or benefit” – whether repayment of till shortages from weekly wages should be included in the determination of income

Social Security Act 1991 ss 8, 1068A, 1072, 1237A, 1237AAD

Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35

REASONS FOR DECISION

12 May 2006   Deputy President P E Hack SC

Introduction

1.This case provides another variation on the question of what income is for the purposes of s 8 of the Social Security Act 1991 (the Act). The particular issue is whether a contractual obligation on the part of an employee to make good till shortages should be taken into account in determining what the employee’s income from that employment was. Is the nominal amount – that is, the amount calculated by reference solely to hours and an hourly rate – or the received amount – the amount calculated by deducting the repaid shortfalls from the nominal

2.Subject to the answer to that question a further question of waiver is said to arise.

Background

3.The respondent, Karla Narelle Richards, made a claim for parenting payment in December 2002. The claim was approved. At that time Ms Richards was employed at the Queensport Hotel on a part time basis. In September 2003 Ms Richards left that employment and obtained part time employment with the Wellington Point Hotel managing the TAB agency at that hotel.

4.Ms Richards employment is governed by a certified agreement. The term in issue here is not a term of that agreement. Rather it was an oral term of the agreement between Ms Richards and her employer that she was obliged to make good any shortages in the till. Ms Richards said, and I accept, that a term of this nature was common in her experience in this type of employment setting. Ms Richards’ evidence on this point was not disputed. In any event the material before me includes the employer’s response to a questionnaire sent by Centrelink in January 2006. In answer to a question regarding whether there was any formal agreement regarding the repayment of shortages the answer provided was,

It is a condition of employment in the TAB that all shortages are repaid. This is made [clear] to the employee before they begin their employment and their acceptance of the position is taken as their acceptance of the condition.

5.Ms Richards said that she was not made aware of that condition prior to her employment but she certainly became aware of it and seemingly accepted it at a very early stage. From the material provided by her to the respondent it would appear that as early as 27 September 2003 Ms Richards was obliged to make good a shortfall of $50.00.

6.Following this experience and, it seems likely, prompted by it, Ms Richards says that she attended the Wynnum office of Centrelink and explained the obligation on her to make good any shortages. She said that she enquired “whether it was also something that affected my pension and whether when I rang in my income could I deduct that off my income report.” She says that she was informed, in terms, that she could do so.

7.Centrelink was able to point to the evidence of Ms Hills and a record of a conversation with Ms Richards in August 2003 where the subject of income declarations arose. I accept that a conversation of the nature outlined by Ms Hills took place but that conversation took place prior to Ms Richards’  employment with the Wellington Point Hotel. Thus I do not regard that conversation as having any particular relevance to the issue here. There is no other record that Centrelink has been able to produce of a conversation of the nature that Ms Richards says occurred in October 2003. Nonetheless I am satisfied that it took place and that Ms Richards was told that when she was obliged to make good till shortfalls she was obliged to declare the wages after making good the shortfall when she declared her income from her employment to Centrelink on a regular basis. I have no reason to doubt Ms Richards evidence and I regard her as being an honest and reliable witness. In reaching that conclusion it seems to me that it was logical that she would take up the issue with Centrelink in October 2003 shortly after the first occasion that she was obliged to make good a shortage.

8.On a regular basis thereafter Ms Richards notified Centrelink of the amount of her earnings. She says that in light of the conversation that she had in October 2003 she reduced the amount of wages declared by an amount of $40.00 a fortnight, presumably on the basis of averaging amounts that she was obliged to make good.

9.On the material before me I am satisfied that in the period from September 2003 to June 2004 Ms Richards made good till shortages on eight occasions in the total sum of $1,746.50. The largest of these instances by far was an amount of $1,300.00 which was the shortage on 8 January 2004. The shortage there arose as a consequence of a fraud perpetrated upon the TAB for Ms Richards was, perhaps surprisingly, held responsible. In the next financial year that ending 30 June 2005 Ms Richards made good shortfall on at least eleven and perhaps twelve occasions in the total sum of $807.75.

10.In April 2005 Ms Richards employer provided to Centrelink details of the wages that had been paid to her in the period 20 September 2003 to 9 April 2005. The amounts provided indicated that Ms Richards had been paid something in the order of $30,600.00 however on the declarations of income that Ms Richards had made to Centrelink her income for that period was an amount of $27,761.76.

11.Because parenting payment varies depending upon income Centrelink investigated this discrepancy and concluded that Ms Richards had understated her income and had accordingly been overpaid by an amount of $1,341.87 which it was required to recover. The decision to recover the overpayment was affirmed on internal review by an Authorised Review Officer on 27 June 2005 the Authorised Review Officer considered, but determined not to waive recovery under ss 1237A and 1237AAD of the Act.

12.Ms Richards sought a review of that decision by the Social Security Appeals Tribunal. On 18 October 2005 that Tribunal decided to set aside the decision and remitted the matter to the Secretary with a direction that the respondent’s income for the purposes of determining parenting payment entitlement should exclude amounts paid to make good till shortages. That Tribunal did not consider the question of waiver of the debt.

13.The Secretary of the Department of Employment and Workplace Relations, being dissatisfied with the decision of the Social Security Appeals Tribunal, seeks a review of that Tribunals decision.

14.I add for completeness two things. The first is that in June 2005, apparently following prosecution for criminal conduct, the person responsible for the shortage of $1,300.00 in January 2004 made good that loss to the Hotel which in turn paid the sum of $1,300.00 to Ms Richards in mid June 2005. The other matter to be noticed is that the debt of $1,341.87 has been repaid by Ms Richards.

The Legislation

15.The starting point is s 1068A of the Act which, in the respondent’s circumstances, requires the rate of parenting payment to worked out in accordance with the rate calculator at the end of the section. The detail of the calculation is not material however module E requires the calculation of “ordinary income”. By virtue of s 1072 of the Act that is taken to be,

A reference to the persons gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under division 2 or 3.

16.     No question of a reduction under division 2 or 3 arises.

17.Ordinary income as defined by s 8 of the Act as meaning income that is not maintenance income or an exempt lump sum. Income is defined, also by s 8, as meaning,

(a) an income amount earned, derived or received by the person for the persons 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; … [emphasis added]

There are some exceptions to this that are not relevant in the present circumstance.

18.     Income amount means,

(a) valuable consideration; or

(b) personal earnings; or

(c) monies; or

(d) profits;

(Whether of a capital nature or not).

Discussion

19.As it seems to me, the critical issue for determination is whether Ms Richards ordinary income was the nominal amount calculated by reference to a number of hours at an hourly rate or the actual rate that is the nominal amount less any shortfall that Ms Richards had to make good. In my view the employment contract between Ms Richards and the Hotel was one where Ms Richards wages were determined by reference to three factors – the number of hours worked in a week, an hourly rate and any till shortages. It is unnecessary for present purposes to determine whether it was lawful for the employer to oblige Ms Richards to make good the shortfall, rather the question is whether in circumstances where she did make good the shortfall her gross ordinary income was the nominal amount or the actual amount.

20.In Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 at page 42 French J said,

The definitions of “income” and “income amount” in the Social Security Act indicate that like their statutory predecessors they are of wide application. This meets the public policy requirement that “public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide” – Read v Commonwealth (1988) 167 CLR 57 at 69 (Brennan J ).

His Honour went on to make the point that the concept of income in the Act is entirely different from that embodied in the comparable provisions of the Income Tax Assessment Act1936. In that case his Honour was concerned with the treatment for the purposes of the Act of an amount of money received under an industry deregulations scheme. In return for the payment the respondent in that case covenanted not to engage in the business of milk distribution or milk vending and to repay the sum on demand if a demand was made within three years after the signing of an agreement. The Administrative Appeals Tribunal held that the payments were not income.

21.     At pages 43-44 his Honour said,

The definition of “income” extends to income amounts “received” by a person. There is no requirement in the Act that such amounts are received in exchange for anything. They may therefore extend to gifts. This is reinforced by the extension of the definition of “income” to “a periodical payment by way of gift or allowance”.

There is no requirement in the definition for the payment received to constitute a net gain. Absent such a requirement a payment of money received by a person for that person’s own use or benefit is a payment of an income amount.

22.In my view the key to the present issue is to ask whether the amounts that went to making up the shortfall in the till were amounts that were received to Ms Richards own use or benefit. That is so I consider because the definition of gross ordinary income in s 1072 of the Act incorporates the s 8 definition of income relevantly an amount earned, derived or received by a person for the persons own use or benefit. Thus s 1072 looks at income earned, derived or received for the use or benefit of the person in issue. It is in my view not to the point that s 1072 goes on to speak of “without any reduction”. To treat the amounts of shortfall in this way simply recognises the reality that those sums were not received by Ms Richards for her own use or benefit. There was at best a nominal receipt but given that Ms Richards used those sums to satisfy her contractual obligation to make good shortfalls it could not be said that in any real sense she earned, derived or received those sums or that she had the use or benefit of them.

23.The Secretary was unable to identify any benefit to Ms Richards from these amounts beyond the benefit of retaining her employment. I do not think, with respect, that that could be seen as a benefit of the type contemplated by the definition of income in s 8.

24.It follows that in my view the decision of the Social Security Appeals Tribunal was correct and ought to be affirmed.

25.Given that the matter has been remitted to the Secretary for reconsideration it is appropriate that I make a further finding in relation to the “refund” of the $1300.00.

26.If, as I conclude, amounts not paid to Ms Richards in order to make good shortfalls are not to be considered for the purposes of determining her ordinary income it would follow that in the instance where Ms Richards was able to recover the amount that was not originally paid to her that latter receipt must be regarded as being income at the time of the receipt. Thus when the matter is reconsidered and recalculated it ought to be on the basis that in mid June 2005, in addition to what other wages may have been declared by Ms Richards at that time, she received as well a further amount of $1300.00 which answers the description of ordinary income.

27.I should also add for completeness that I do not regard any different conclusion as being warranted in the instance in January 2004, where Ms Richards was obliged to make good a shortfall of $1300.00 her evidence was that on that occasion she was not able to make good the loss and repaid that amount by amounts of $100.00 per week deducted from her wages thereafter. In my view the proper analysis of that transaction was that at the time of the shortfall Ms Richards incurred a liability to her employer which reduced her entitlement to receive income by the amount of the shortfall. Given that she did not have the capacity or the income to meet that obligation her employer, in effect, loaned that sum to her and obliged her to repay it in weekly instalments.

Waiver

28.It is I think inappropriate because under s 1237A the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error. At this stage it is not known whether there will be a debt once the matter is reconsidered in accordance with the direction made by the Social Security Appeals Tribunal nor is it known what effect there will be on the overpayment question once the amount of $1300.00 is treated as being income for the purposes of the Act in the hands of Ms Richards.

29.The same is true in relation to s 1237AAD. That section operates if the Secretary is satisfied, inter alia, that the debt did not result wholly or partly from a knowing false statement. Where it is unclear whether there will be a debt, the amount of that debt and the period to which the debt is attributable it is not possible for me to be satisfied of the matters required by s 1237AAD.

30.I make it clear though, that I have not considered whether the present case is a proper case for the application of the waiver provisions rather in my view the Secretary ought to consider the application of those provisions once it is determined whether there is an overpayment and the amount of it. If it transpires that there remains a debt and the Secretary considers that it is not a proper matter for waiver Ms Richards will have her rights to seek internal and external review of that decision.

Conclusion

31.     The decision of the Social Security Appeals Tribunal is affirmed.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC.

Signed:         .....................................................................................
  Leisa Pendle, Associate

Date/s of Hearing  5 May 2006
Date of Decision  12 May 2006
Advocate for the Applicant       Mr R McQuinlan
Counsel for the Respondent     Mr C Coulsen
Solicitor for the Respondent     Welfare Rights Centre