SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS and BRISTOW

[2009] AATA 1005

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 1005

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/5413

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

Applicant

And RODNEY BRISTOW

Respondent

DECISION

Tribunal Mr Egon Fice, Member

Date15 December 2009

PlaceMelbourne

Decision The Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 2 October 2009 and instead finds that the respondent is subject to an income maintenance period from 2 July 2009 to 10 March 2010 inclusive.

(sgd) Egon Fice

Member

SOCIAL SECURITY – newstart allowance – income maintenance period – redundancy and termination payment – severe financial hardship – unavoidable or reasonable expenditure -

Social SecurityAct 1991

REASONS FOR DECISION

15 December 2009 Mr Egon Fice, Member      

1.      Mr Bristow was employed by Warragul North Primary School until his employment was terminated in July 2009.  He received a redundancy payment of $15,736.86.  On 13 July 2009 Mr Bristow lodged an application for newstart allowance with Centrelink.  Centrelink administers social security payments on behalf of the Secretary to the Department of Education, Employment and Workplace Relations (the Secretary).  On 27 July 2009 a Centrelink officer determined that Mr Bristow’s claim was subject to an income maintenance period between 2 July 2009 and 11 March 2010.  At Mr Bristow’s request, the Centrelink officer reconsidered that decision and affirmed it. 

2.      Mr Bristow sought a review of the decision by an authorised review officer (ARO).  On 8 September 2009 the ARO decided that Mr Bristow’s income maintenance period should be varied so that it operated between 2 July 2009 and 8 February 2010.  Mr Bristow was dissatisfied with the ARO’s decision and sought a review by the Social Security Appeals Tribunal (SSAT).  On 2 October 2009 the SSAT set aside the ARO’s decision and instead decided that Mr Bristow was subject to an income maintenance period between 2 July 2009 and 11 November 2009.  Dissatisfied with that decision, the Secretary sought review of the SSAT decision by this Tribunal. 

3.      The issues which I must determine are:

(a)whether Mr Bristow is subject to an income maintenance period;

(b)if the answer to (a) is affirmative, the date of commencement of the income maintenance period;

(c)whether the liquid asset test waiting period applies;

(d)the length of the income maintenance period; and

(e)the circumstances under which all or  part of the income maintenance period may not apply. 

THE FACTS

4.      The essential facts in this matter are not in dispute.

Mr Bristow ceased employment with the Warragul North Primary School on 2 July 2009.  He received a redundancy payment of $15,736.86.  Of that sum, $10,438, which covered a period of 24 weeks, was a redundancy amount.  Mr Bristow also received $5,298 for accrued long service leave.  His average gross weekly wage was $428.32 per week.

IS MR BRISTOW SUBJECT TO AN INCOME MAINTENANCE PERIOD

5. Section 1068-G7AH of the Social Security Act 1991 (the Act) provides:

1068-G7AH     If:

(a)a person’s employment has been terminated; and

(b)the person receives a termination payment (whether as a lump sum payment, as a payment that is one of a series of regular payments or otherwise);

the person is taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates.

6.      The expression ordinary income is defined in s 8 of the Act as income that is not maintenance income or an exempt lump sum.  The payment Mr Bristow received is not an exempt lump sum under s 8(11) of the Act, nor is it maintenance income as that term is defined in s 10(1) of the Act.  The expression income is defined in s 8(1) of the Act, as far as it is relevant to Mr Bristow’s case, as an income amount earned, derived or received by Mr Bristow for his own use or benefit.  It is not an excluded amount as that term is defined in s 8 of the Act.

7.      Section 1068-G7AQ of the Act defines a number of terms, including termination payment and redundancy payment.  A termination payment is defined as:

…

(a)a leave payment relating to a person’s employment that has been terminated; or

(b)a redundancy payment.

A redundancy payment is defined simply to exclude a directed termination payment.  Because the Act does not define redundancy, I must give it its ordinary meaning, which is the state or quality of being redundant (the Shorter Oxford English Dictionary).  The Shorter Oxford defines redundant as being superfluous or excessive.  Therefore, a redundancy payment, logically, is a payment made to a person in an employment setting where that person has become superfluous or excessive to the employer’s needs.

8.      It is clear that Mr Bristow received a payment for his redundancy together with a payment for unused long service leave.  Therefore, under the definition of termination payment, both components of that payment constitute a termination payment for the purposes of the Act.  Although the disjunctive or is used in the definition, where both types of payments have been received, both are included under the definition.  I should also mention that the expression leave payment is defined in s 1068-G7AR of the Act; which provides that for the purposes of s 1068‑G7AA to 1068-G7AQ (inclusive) it includes a payment in respect of sick leave, annual leave, maternity leave and long service leave.

9.      In applying the definitions to which I have referred above, I find that Mr Bristow did receive ordinary income for a period equal to the period to which the payment relates.  That period does constitute an income maintenance period. Hence, I find Mr Bristow is subject to an income maintenance period.

DATE OF COMMENCEMENT OF THE INCOME MAINTENANCE PERIOD

10. As far as it is relevant to Mr Bristow’s case, s 1068-G7AKA of the Act provides that subject to s 1068-G7AKC, if a person is covered by s 1068-G7AH, the income maintenance period starts, subject to s 1068-G7AKB, on the day the person is paid the termination payment.

11.     Section 1068-G7AKC provides that if a person to whom s 1068-G7AKA applies is subject to a liquid assets test waiting period, the income maintenance period is taken to have started on the day on which the liquid assets test waiting period started.  Therefore, if Mr Bristow were subject to a liquid assets test waiting period, that period must be taken into account when calculating the total period during which Mr Bristow is not entitled to receive a social security payment.  However, in this case, the Secretary has accepted that Mr Bristow’s liquid assets were less than the maximum reserve, as that term is defined in s 14A of the Act.  He is therefore not subject to a liquid assets test waiting period.  Accordingly, the income maintenance period which applies to him must commence on 2 July 2009, being the day on which he received the termination payment. 

LENGTH OF THE INCOME MAINTENANCE PERIOD

12. Section 1068-G7AH of the Act refers to the period to which the payment relates.  That expression is also defined in s 1068-G7AQ of the Act.  For the purposes of the Act, the expression means;

…

(a)if the payment is a leave payment—the leave period to which the payment relates; or

(b)if the payment is a redundancy payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the redundancy) have received from the employment that was terminated—the period for which the person would have received that amount of ordinary income; or

(c)if the payment is a redundancy payment and paragraph (b) does not apply—the period of weeks (rounded down to the nearest whole number) in respect of which the person would have received ordinary income, from the employment that was terminated, of an amount equal to the amount of the redundancy payment if:

(i)the person’s employment had continued; and

(ii)the person received ordinary income from the employment at the rate per week at which the person usually received ordinary income from the employment prior to the termination.

13.     As I have indicated above, Mr Bristow’s average gross weekly wage was $428.32.  Therefore, the Secretary has divided the termination payment received by Mr Bristow ($15,736.86) by $428.32 in order to determine that the termination payment equates to 36 weeks or 180 working days.  That calculation is correct.  Accordingly, I find that Mr Bristow’s income maintenance period is 180 working days from 2 July 2009.  As the Secretary contended, that period concludes on 10 March 2010.

DOES THE WHOLE OF THE INCOME MAINTENANCE PERIOD APPLY TO MR BRISTOW

14.     Section 1068-G7AM provides:

If the Secretary is satisfied that a person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure while an income maintenance period applies to the person, the Secretary may determine that the whole, or any part, of the period does not apply to the person.

Note 1:For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple) and 19C(3) (person who is a member of a couple).

Note 2:For unavoidable or reasonable expenditure see subsection 19C(4).

Note 3:If an income maintenance period applies to a person, then, during that period:

(a)the allowance claimed may not be payable to the person; or

(b)the amount of the allowance payable to the person may be reduced.

15.     It should be apparent that, in order to reduce the income maintenance period, a person must satisfy the Secretary that they are in severe financial hardship because they have had to incur unavoidable or reasonable expenditure in the course of an income maintenance period.

16.     Section 19C(2) defines the meaning of in severe financial hardship for a person who is not a member of a couple.  Mr Bristow is not a member of a couple.  The section provides:

…

(2)A person who is not a member of a couple and who makes a claim for parenting payment, austudy payment, special benefit, disability support pension, carer payment or one of the following allowances:

(a)newstart allowance;

(b)widow allowance;

(c)mature age allowance;

(d)sickness allowance;

(e)youth allowance;

is in severe financial hardship if the value of the person’s liquid assets (within the meaning of subsection 14A(1)) is less than the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person:

(f)if the person’s claim were granted; and

(g)in the case of a person to whom an income maintenance period applies, if that period did not apply.

17.     The expression liquid assets is comprehensively defined in s 14A(1).  In essence, it means a person’s cash and readily realisable assets.  There are a number of exclusions but these do not affect Mr Bristow’s claim.  The maximum rate of newstart allowance that would be payable to Mr Bristow was increased on 20 September 2009 to $456 per fortnight.  Therefore, for Mr Bristow to be eligible for a reduction in the income maintenance period which would ordinarily apply to him, his liquid assets must have reduced to below $456, as that would be the amount Mr Bristow would be entitled to if an income maintenance period did not apply to him.  Therefore, s 1068-G7AM of the Act can only apply to Mr Bristow if his liquid assets have fallen below $456 because he has incurred unavoidable or reasonable expenditure during an income maintenance period. 

18.     The expression unavoidable or reasonable expenditure is defined in s 19C(4) of the Act which provides:

(4)Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period or is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies, includes, but is not limited to, the following expenditure:

(a)the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:

(i)     if the person is serving a liquid assets test waiting period—that part of the period that the person has served; or

(ii)     if the person is subject to a seasonal work preclusion period—that part of the period that has expired; or

(iii)     if an income maintenance period applies to the person—that part of the period that has already applied to the person;

(b)the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;

(c)school expenses;

(d)funeral expenses;

(e)essential expenses arising on the birth of the person’s child or the adoption of a child by the person;

(f)expenditure to buy replacement essential household goods because of loss of those goods through theft or natural disaster when the cost of replacement is not the subject of an insurance policy;

(g)the costs of essential repairs to the person’s car or home;

(h)premiums in respect of vehicle or home insurance;

(i)expenses in respect of vehicle registration;

(j)essential medical expenses;

(k)any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.

19.     The expression reasonable costs of living is defined in s 19C(5) of the Act which provides:

(5)The reasonable costs of living of a person include, but are not limited to, the following costs:

(a)food costs;

(b)rent or mortgage payments;

(c)regular medical expenses;

(d)rates, water and sewerage payments;

(e)gas, electricity and telephone bills;

(f)costs of petrol for the person’s vehicle;

(g)public transport costs;

(h)any other cost that the Secretary determines is a reasonable cost of living in relation to a person.

20.     Section 19C(6) sets out the amount of reasonable costs of living which are applicable to s 19C(4)(a) for a person who is not a member of a couple.  It provides that the reasonable costs of living must not exceed, in the case of a person to whom an income maintenance period applies, the amount of the allowance that would have been payable to the person during that part of the income maintenance period that has already applied to the person, if the period did not apply to the person.  In other words, the expenditure of reasonable living costs must have occurred during the part of the income maintenance period that has already applied to the person.  Also, the amount of reasonable costs of living must not exceed the newstart allowance that Mr Bristow would have been entitled to but for the application of an income maintenance period.  As I have already said, that amount was $456 per fortnight having increased from $453.30 per fortnight on 20 September 2009.

21.     Mr Hester, a Centrelink advocate, appeared on behalf of the Secretary.  He submitted that only the reasonable living costs expended by Mr Bristow can be taken into account, as opposed to any future expenditure.  That is correct.

22.     Mr Hester also submitted that s 19C(6) of the Act limited the reasonable costs of living to the rate of newstart allowance that would otherwise have been payable.  That is not quite correct.  That section of the Act limits reasonable costs of living to the amount of the newstart allowance which would have been payable to Mr Bristow during that part of the maintenance period which has already applied to him.  Therefore, for example, Mr Bristow’s reasonable costs of living for the first four weeks commencing on the date he lodged his claim for newstart allowance could not exceed $906.60. 

23.     Mr Bristow’s maximum reasonable costs of living for the period 2 July 2009 to 15 December 2009 can be calculated as follows:

2 July 2009 to 19 September 2009 (80 days) x $32.378 = $2,590.24; and

20 September 2009 to 15 December 2009 (the hearing date) (87 days) x $32.571= $2,833.67.

This is a total of $5,523.91.

24.     As at the hearing date, Mr Bristow had spent the following amounts:

(a)$6,000 on credit card repayments;

(b)$516 on motor vehicle registration;

(c)$2,000 to reduce the mortgage on his principal home; and

(d)$788 for Council rates on his principal home.

25.     Mr Bristow’s evidence was that he was required to make payments of $200  per month on his outstanding credit card debt.  As Mr Hester submitted, the repayment of $6,000 against his credit card debts was certainly not an unavoidable or reasonable expenditure.  It does not fall within any of the items of expenditure listed under s 19C(4) or s 19C(5) of the Act.  However, because Mr Bristow was required to pay $200 per month off the credit card, that payment, having been made during the income maintenance period, may well qualify as an unavoidable payment.  Therefore, as Mr Hester submitted, between 2 July 2009 and 15 December 2009 Mr Bristow’s termination payment could be reduced by $1,200 (6 x $200). 

26.     As for the motor vehicle registration expense of $516, while the cost of motor registration does not appear in the items listed in s 19C(4) or s 19C(5), the costs of petrol and essential repairs to a person’s car do appear.  These are items essential to maintain the motor vehicle in running order.  It logically follows that registration of the motor vehicle should be regarded as an unavoidable expenditure as it is expenditure of the same nature.  I am satisfied that this is the case in respect of Mr Bristow’s motor vehicle registration payment. 

27.     Mortgage payments is one of the items listed under s 19C(5) of the Act as a reasonable cost of living.  In other words, any mortgage payments are included in cost of living expenses and are limited in amount by s 19C(6).  As I have indicated above, the maximum allowable to Mr Bristow for cost of living expenses between the date he received his termination payment and the date of the hearing was $5,423.91.  That figure must necessarily include Mr Bristow’s mortgage payments and the additional lump sum payment of $2,000 is not an unavoidable or reasonable expenditure. 

28.     The payment of $788 for Council rates on his principal home is an item which falls under s 19C(5) of the Act.  It is also a sum which is included in the $5,423.91 total of reasonable costs of living for the period in question.

29.     Therefore, in addition to the reasonable costs of living of $5,423.91, the cost of Mr Bristow’s motor vehicle registration together with $1,200 in credit card payments should be regarded as unavoidable or reasonable expenditure.  It follows that Mr Bristow’s income maintenance period could (not should) be reduced by the number of days which equates to $7,139.91 ($1,716 plus $5,423.91) according to the formula in paragraph 13 above.

30.     The problem for Mr Bristow is that his income maintenance period may be reduced only if he is in severe financial hardship because of incurring unavoidable or reasonable expenditure.  That means his liquid assets, after making unavoidable and reasonable expenditures, must have reduced to not more than $456 as of the date of hearing this matter.  As Mr Bristow’s total termination payment was $15,736, and the total of his unavoidable or reasonable expenditure together with his reasonable cost of living for the period was $7,139.91, he must be taken to have liquid assets of at least $8,596.09 remaining.  Expenditure between 2 July 2009 and 15 December 2009, which is not unavoidable or reasonable expenditure, cannot be used to reduce his income maintenance period.  Therefore, Mr Bristow cannot satisfy the requirement in s 1068-G7AM that he is in a position of severe financial hardship.  His liquid assets position would be in excess of the severe financial hardship amount if he had not spent money on matters which were clearly not unavoidable or reasonable expenditure.

CONCLUSION

31.     I have found that Mr Bristow received a termination payment on 2 July 2009 of $15,736.86, which resulted in him becoming ineligible to receive newstart allowance payments until an income maintenance period had expired.  In calculating the income maintenance period, Mr Bristow submitted that the period should be reduced because he was in severe financial hardship due to having incurred unavoidable or reasonable expenditure while that income maintenance period applied to him. 

32.     However, when his expenditure is carefully examined against the statutory criteria which permit a reduction in the income maintenance period, it is clear that Mr Bristow cannot satisfy the requirement in s 10689-G7AM that he has been placed into severe financial hardship because he incurred unavoidable and reasonable expenditure during the period when an income maintenance period applied to him.  That is, the period between 2 July 2009 and 15 December 2009, the date of the hearing.  At no time could it be said that Mr Bristow’s liquid assets fell below $456 during that period. 

33.     That would be the case even if I regarded Mr Bristow’s expenditure of $6,000 on credit card repayments and $2,000 to reduce the mortgage on his principal home as unavoidable or reasonable expenditure, which I do not.  Allowing Mr Bristow unavoidable or reasonable expenditure of $1,716 (for motor vehicle registration and part of the credit card repayments), together with the maximum reasonable cost of living $5,423.91, the maximum reduction which can be made at 15 December 2009 from Mr Bristow’s termination payment is $7,139.91.  Quite plainly, this leaves him well above the level required to establish severe financial hardship in accordance with s 19C(2). 

34.     Therefore, no reduction of Mr Bristow’s income maintenance period is possible.  Accordingly, I find that the decision made by the SSAT on 2 October 2009 was incorrect and must be set aside.  Instead, I find that Mr Bristow is subject to an income maintenance period from 2 July 2009 to 10 March 2010 inclusive in respect of his claim for newstart allowance. 

I certify that the thirty-four [34] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr Egon Fice, Member

Signed:  Dianne Eva
  Clerk

Dates of Hearing  15 December 2009
Date of Decision  15 December 2009
Advocate for the Applicant       Mr M Hester, Legal Services Centrelink 
Advocate for the Respondent   Mr R Bristow, Self-Represented