Secretary, Department of Employment Education Training and Youth Affairs v Annear-Walker, Tanya
[1997] FCA 1491
•17 NOVEMBER 1997
FEDERAL COURT OF AUSTRALIA
Social Security - AUSTUDY - whether student entitled to standard or away-from-home living allowance - parental income test - construction of AUSTUDY Regulations 86, 86(2A)
Student Assistance Act 1973
AUSTUDY Regulations
SECRETARY, DEPARTMENT OF EMPLOYMENT EDUCATION TRAINING AND YOUTH AFFAIRS V TANYA ANNEAR-WALKER
QG 149 OF 1996
JUDGE: BEAUMONT J
PLACE: BRISBANE
DATE: 17 NOVEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 149 of 1996
BETWEEN:
SECRETARY, DEPARTMENT OF EMPLOYMENT EDUCATION TRAINING AND YOUTH AFFAIRS
APPLICANTAND:
TANYA ANNEAR-WALKER
RESPONDENTJUDGE:
BEAUMONT J
DATE OF ORDER:
17 NOVEMBER 1997
WHERE MADE:
BRISBANE
ORDERS:
Application allowed.
Set aside the decision of the Administrative Appeals Tribunal; in lieu thereof, order that the decision of the Social Security Appeals Tribunal be affirmed.
Note the agreement of the parties that there should be no order for costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 149 of 1996
BETWEEN:
SECRETARY, DEPARTMENT OF EMPLOYMENT EDUCATION TRAINING AND YOUTH AFFAIRS
APPLICANTAND:
TANYA ANNEAR-WALKER
RESPONDENT
JUDGE:
BEAUMONT J
DATE:
17 NOVEMBER 1997
PLACE:
BRISBANE
REASONS FOR JUDGMENT
BEAUMONT J:
INTRODUCTION
On 8 March 1995 Miss Tanya Annear-Walker, the present respondent, lodged an application for AUSTUDY assistance in respect of full-time study at the James Cook University of North Queensland for the year 1995. The claim was rejected by a delegate of the Secretary of the Department of Employment, Education, Training and Youth Affairs (“the Department”) on the basis that her parents’ combined taxable income for the 1993/94 financial year was too high for a living allowance to be paid. Miss Annear-Walker appealed to the Social Security Appeals Tribunal, which affirmed the delegate’s decision. She then appealed to the Administrative Appeals Tribunal (“the Tribunal”), which set aside the decision under review and substituted a decision that the parental income in relation to Miss Annear-Walker for the 1995 academic year should be treated as $36,179. The matter was then remitted to the Department to give effect to the Tribunal's decision.
The Secretary of the Department, the present applicant, now appeals to this Court, on a question of law, from the decision of the Tribunal. The issue for determination by the Tribunal and the question of law for this Court, there being no dispute as to the facts, was whether the application, in the present circumstances, of the parental income test in the AUSTUDY Regulations, which are made under the Student Assistance Act 1973, means that the living allowance there provided for is not payable to Miss Annear-Walker.
THE LEGISLATIVE SCHEME
By reg 62 it is provided that a student's living allowance is the maximum allowance less any deductions resulting from, inter alia, the parental income test as set out in Part 5 of the Regulations. By reg 84 it is provided that the parental income test is applied in calculating a student's entitlement to the standard or away-from-home living allowance. By reg 85(1) it is provided that the parental income test takes account of the income of a student's parents. Relevantly, by reg 85(2) "Parent" means:
“(a)any natural or adoptive parents with whom the student normally lives...”
By certain exceptions, which are not presently material, parental income for a year of study is defined in reg 86(1) as the amount calculated using the following formula:
“(GPI + FB + NRPL) - DC”
For that purpose, "GPI" is defined to mean the income of the student's parent, or the total income of both of the student's parents, as the case requires. The reference to "FB" is a reference to the value of certain fringe benefits, which are not presently material. The reference in the formula to "NRPL" is a reference to net rental property loss, being the amount by which expenses incurred by the student's parents, or both parents, in relation to a rental property exceed the parent's or parents’ gross income from the property. The reference to "DC" is a reference to the total amount of any deductions for children but this is not presently material.
"NRPL" is further dealt with in reg 86(1A):
"‘rental property’ means a residential or commercial property... for which the parent, or both parents, receive a premium or an amount as rent.”
It is further provided there that if the gross income from the rental property exceeds the expenses incurred in relation to the property, the NRPL is taken to be nil. By reg 86(2), it is provided that the income of a student's parent comprises, relevantly, inter alia, his or her taxable income within the meaning of s 6(1) of the Income Tax Assessment Act 1936. By s 6(1) of that Act it is relevantly provided that "taxable income" means:
“...the amount remaining after deducting from the assessable income all allowable deductions...”
The provisions of reg 86(2A) are central to the present appeal. It is there provided that if under reg 86(2) a parent’s income is determined to be an amount less than zero, the income is disregarded in determining parental income.
THE BACKGROUND FACTS
As has been noted, there is no dispute about the background facts. When she is not studying at university, Miss Annear-Walker resides with her parents. Mr Annear-Walker is a teacher while Mrs Annear-Walker is not in paid employment. Mr and Mrs Annear-Walker purchased a property in Brisbane in 1974. In 1994, it became apparent that the house required substantial repairs. For this purpose, Mr and Mrs Annear-Walker borrowed a total of $45,000. Of the amount borrowed, the sum of $27,000 was treated by the Commissioner of Taxation as an allowable deduction.
The carrying out of the repairs to the property meant that there was no rental income from the property for about nine months. In the result, in the application for AUSTUDY, Mr Annear-Walker's taxable income was shown as $36,179 before his negative gearing adjustment. His negative gearing amount, arising from the repairs carried out to the rented property, was shown as $13,783. In the case of Mrs Annear-Walker, her taxable income was shown as $3,944 before the negative gearing adjustment of $13,783.
Ultimately, the formula in reg 86 was translated by the Department as follows:
“GPI ($22,396 + NIL) + NRPL ($13,783 + $13,783)
= parental income of $49,962”
THE REASONING OF THE SOCIAL SECURITY APPEALS TRIBUNAL
Before this tribunal, Mr Annear-Walker argued on behalf of the present respondent that it was wrong that the net rental property loss of $13,783 should, in his wife's case, be added to a nil figure representing taxable income. He submitted that his wife’s actual income situation for that year was a loss amounting to $9,839, that is, after the rental property loss was applied. Mr Annear-Walker also argued that the parental income tax used by the Department should only apply to his salary. He submitted that the parental income test should be based on only one of the parents’ incomes, namely his, as he was the sole provider for the family.
As I indicated earlier, the Social Security Appeals Tribunal affirmed the decision of the delegate of the Secretary, essentially on a literal application of the provisions of the Regulations. This tribunal noted that reg 85(1) required that the parental income test take account of both of the student's parents. That is, that the definition of "Parent" in reg 85(2) is a cumulative one and clearly contemplates that a student may have more than one parent. Thus, this tribunal said that the explanation of the term "GPI" in reg 86(1) is no more than a recognition that a student may have just the one parent, or more than one parent, having regard to the definition in reg 85.
This tribunal went on to say that that definition does not, in the case of Miss Annear-Walker, draw distinctions between persons who are sole providers, and those who are not. It construed the Regulations to provide that, relevantly in this case, the notion of "GPI" focused attention on one item only, namely, the parents' taxable income as defined in s 6(1) of the Income Tax Assessment Act 1936.
THE REASONING OF THE ADMINISTRATIVE APPEALS TRIBUNAL
As has been noted, the Tribunal took a different view of the matter. The Tribunal said:
“In relation to Mrs Annear-Walker, I think that... regulation 86(2a) applies, so that her income is to be disregarded, and because that regulation applies to disregard her income... I am satisfied that the GPI should be calculated on the basis that there is an amount of $22,396 taxable income in relation to Mr Annear-Walker, and there is an NRPL of $13,783 in relation to Mr Annear-Walker, but there is no taxable income in relation to Mrs Annear-Walker, so therefore the factor is nil for her, and there is no NRPL in relation to Mrs Annear-Walker. I would therefore decide that the parental income calculated in accordance with regulation 86 is $36,179.
The Tribunal’s decision will be to set aside the decision under review, and substitute a decision that the parental income in relation to the applicant for the 1995 academic year is $36,179, and the matter will be remitted to the respondent to give effect to the Tribunal’s decision.”
THE SECRETARY’S GROUNDS OF APPLICATION
In his grounds of application for judicial review, the Secretary of the Department contends that the Tribunal erred in applying reg 86(2a) so as to disregard the NRPL in relation to Mrs Annear-Walker, when calculating parental income under reg 86(1). The Secretary further contends that reg 86(2a) only applies so as to disregard income when calculating the GPI component of reg 86(1). It is then contended on behalf of the Secretary that reg 86(2a) does not apply to disregard the NRPL component of reg 86(1).
CONCLUSIONS ON THE APPLICATION
In my opinion, the language of the legislation, the history of the legislative scheme and its evident object, when taken together, support the conclusion contended for on behalf of the Secretary.
As to the language used, it is apparent on the face of reg 86(2A), that no reference is made to the NRPL, at least in terms. The history of the legislative scheme confirms this. Regulation 86(2a) was inserted into the Regulations in 1992. The explanatory memorandum at the time stated in this regard:
“The amendment will ensure that where one parent's income is less than zero the negative value will not offset the remaining parent's income.”
This object was confirmed in a decision of the Administrative Appeals Tribunal in Jeanette Wilson and James Frederick Wilson v Department of Employment, Education and Training, 19 November 1993. There the Tribunal said:
“23.It is clear from sub-regulation 86 (2a) that the offsetting of one parent’s loss in a particular year of income against the other parent’s taxable income is not permitted by the Regulations. This provision is clear that a negative income is to be regarded, as a nil income. Further, there is no provision for the exercise of a discretion to treat this negative income in any other manner.”
The Tribunal went on to say:
“27.Sub-regulation 86 (2a) does not modify the definition of ‘Gross Parental Income’. It deals with the application of a particular parent’s income in a specific situation. That is, when allowable deductions are larger than assessable income, the taxable income of the parent in question is to be treated as zero.”
I respectfully agree with this reasoning. It confirms that reg 86(2a) was directed to a topic other than the role of the NRPL in the legislative scheme. Moreover, when that scheme is considered as a whole, it will be seen that the NRPL was intended to have an important role as a free-standing integer in the calculation. That being so, I do not see any legitimate role for the application of reg 86(2a), as it were, as a side wind, having the effect of brushing aside the role of the NRPL in the legislation.
On behalf of Miss Annear-Walker, reliance is placed upon the reasoning of Gibbs CJ in Cooper Brookes (Wollongong) Pty Ltd v The Federal Commissioner of Taxation (1981) 147 CLR 297 (at 304 and following). I accept, of course, these general principles of statutory interpretation as they are explained by his Honour. There can be no question of their general validity. But I do not understand how those principles can have any application in the present context. In Cooper Brookes it was necessary to make an implication in a complex legislative framework in order that the legislative scheme could be made workable. This question does not arise here.
If it be accepted, and I am of the view that it should, that the NRPL be regarded as a free-standing integer in the calculation, there is no occasion to consider the possible application to it of an express provision such as reg 86(2a), which in its terms and in its rationale is directed to an entirely different context.
It appears that the Tribunal was of the view that the application of the literal meaning of the Regulations could work an injustice. With all respect, I cannot agree, but in any event, the determination of the question of law before the Court, in terms of the language of the legislation, in terms of the history of the legislative scheme and in terms of its evident object is sufficiently clear. The result is, in my opinion, that there is no scope here for the application of the approach taken in cases such as Cooper Brookes.
Finally, I would add that, although on the approach taken by the Department, with which I am in agreement, one consequence is that the “GPI” of Mrs Annear-Walker will be treated as nil, none of the complications that arose for consideration in Ryan v Commissioner of Taxation, Spender J, 25 July 1997, unreported, arise for consideration here.
ORDERS
I make the following orders:
Application allowed.
Set aside the decision of the Administrative Appeals Tribunal; in lieu thereof, order that the decision of the Social Security Appeals Tribunal be affirmed.
I note that it is agreed between the parties that there should be no order for costs.
I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont
Associate:
Dated: 17 November 1997
Counsel for the Applicant:
Ms A-M Foord Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr M Taylor For the Respondent: Mr Brian Annear-Walker Date of Hearing: 17 November 1997 Date of Judgment: 17 November 1997
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