Stephens and Department of Family and Community Services
[2001] AATA 108
•20 February 2001
DECISION AND REASONS FOR DECISION [2001] AATA 108
ADMINISTRATIVE APPEALS TRIBUNAL)
Nº V00/1132
GENERAL ADMINISTRATIVE DIVISION)
Re: ALLAN STEPHENS
Applicant
And: SECRETARY TO THE
DEPARTMENT OF FAMILY AND
COMMUNITY SERVICES
Respondent
DECISION
Tribunal: Mrs H.E. Hallowes, Senior Member
Date:14 February 2001
Place:Melbourne
Decision:The decision under review is set aside. The Tribunal remits the matter to the Secretary for reconsideration in accordance with directions that the Secretary treat that part of Mr Stephens's compensation payment, which would end the preclusion period on 1 July 2001, as not having been made in the special circumstances of this application.
(sgd) H.E. Hallowes
Senior Member
DIRECTION
Tribunal: Mrs H. E. Hallowes, Senior Member
Date: 20 February 2001
Place: Melbourne
Direction:Pursuant to section 43AA(1) of the Administrative Appeals Tribunal Act 1975 the Tribunal directs that the Registrar alter the text of the written statement of reasons for the decision, published 14 February 2001, as follows:
by inserting the words "shall be treated" after the word "year" on line 6 of paragraph 32.
(sgd) H.E. Hallowes
Senior Member
SOCIAL SECURITY — claim for parenting payment (single) and carer payment/allowance — compensation affected payment — lump sum compensation payment received after 20 March 1997 — new lump sum preclusion period — income cut-out amount — date income cut-out amount determined — date at which preclusion period calculated — whether to treat part of the compensation payment as not having been made
PROCEDURE — means by which applicant may participate in hearing
Administrative Appeals Tribunal Act 1975 ss.33, 35A, 37
Social Security Act 1991 ss.17, 1165, 1184
Kirkbright v Secretary, Department of Family & Community Services [2000] FCA 1876
REASONS FOR DECISION
14 February 2001 Mrs H.E. Hallowes, Senior Member
On 20 September 2000 Mr Stephens lodged an application for review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 18 August 2000 with the Tribunal. During the course of the hearing the Tribunal asked Ms P. D'Cunha, an advocate with Centrelink, who appeared for the Secretary at the hearing, to provide it with further information, referred to below.
In the documents setting out its reasons for decision the SSAT advised that it affirmed a decision of a delegate of the Secretary made on "8 May 2000", as varied by an authorised review officer ("ARO") on 7 July 2000, to impose a compensation preclusion period from 28 October 1997 to 11 August 2003. It appears from the letter of the ARO, sent to Mr Stephens on 7 July 2000, that the ARO reviewed a decision dated 8 May 1998:
. . . that your compensation lump sum payment of $243,650 precludes you from payment of compensation affected social security payments, including Parenting Payment (PPS) and Disability Support Pension (DSP), for the period 9 May 1998 to 20 February 2004".
The ARO varied the preclusion period to end on 11 August 2003.
The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the documents") ("the AAT Act"), which include copies of the above decisions and reasons for decision of the SSAT. Ms D'Cunha provided Mr Stephens and the Tribunal with a statement setting out the Secretary's facts and contentions. Mr Stephens lives near Creswick, not far from Ballarat in Victoria but he made the trip to Melbourne for the hearing, having made arrangements for his disabled son, whom he normally drives to and from work, to be brought home by someone else. Mr Stephens is also not well. The procedures of the Tribunal are within its discretion (section 33, AAT Act) and the Tribunal tries to assist applicants from rural areas, such as Mr Stephens, by arranging to hear their applications by telephone or video link (section 35A, AAT Act) or by listing the matter to be heard in a town close to their home. The Tribunal does not know why this did not occur in Mr Stephens's case and that, to attend the hearing, Mr Stephens was obliged to travel to Melbourne.
The index to the documents discloses no document dated 8 May 2000. The documents do include a copy of a letter dated 8 May 1998 sent to Mr Stephens by a delegate of the Secretary, who advised:
When a person receives a lump sum payment of compensation, part of the payment is considered to be for lost earnings (economic loss). This amount is then used to calculate a period of time when a person will not be eligible to receive social security payments. This period of time is called the preclusion period and, depending on a person's circumstances, may affect past and/or future payments made to that person.
I have been advised that you are entitled to a lump sum compensation payment of $243,650.00. The preclusion period start date is 9 May 1998 and the end date is 20 February 2004. For information on the method of calculating this preclusion period, please see the back of this page.
This means that during the period 9 May 1998 to 20 February 2004 you and your partner will not be able to receive social security payments, with the exception of payments made for children. If, after 20 February 2004 you again need to receive social security payments you will need to lodge another claim. (emphasis added)
As will be seen later (paragraph 29 to follow), the delegate was not correct with respect to a partner's entitlements following amendments to the Act which came into effect in 1997. Mr Stephens's solicitors were advised by letter of the same date:
I refer to the above person's claim for compensation.
After consideration of the terms of settlement of the claim, it has been determined that, under part 3.14 of the Social Security Act 1991, Centrelink's charge relating to the above compensation id number is Nil.
. . .
The preclusion period is calculated by dividing that part of the lump sum payment deemed to be for economic loss (in most cases this will be 50 per cent of the lump sum) by the amount above which no pension is payable to a single person under the income test (currently $410.00 a week). . . .
It appears from the documents that the Secretary made an estimate of the period Mr Stephens may be precluded from being paid a compensation affected payment (not a social security payment), rather than a decision being made by the Secretary following a claim made by Mr Stephens for a social security payment under the Act. Issues may arise for decision-makers when estimates are made. Many applications for review of a decision have been made to this Tribunal following estimates of income by customers when claiming family allowance/payment, although there should be less volatility in estimates by the Secretary following advice by a customer with respect to the receipt of a compensation affected payment.
The documents include a copy of a claim made by Mr Stephens for parenting payment, signed by him and lodged with Centrelink on 30 September 1999 (although not correctly indexed), in which he disclosed that he and his wife separated on 2 August 1999; that he had two dependent children, and that he owned two motor vehicles, a 1978 Fairlane and a 1976 LTD, with a combined current market value of $5000.00. He further advised that he had received a lump sum compensation payment. By letter dated 26 October 1999, Mr Stephens was advised that his claim for parenting payment had been rejected because of the lump sum compensation payment he had received. His total assets were recorded as $40,440.00 and an annual income of $22,985.20. The evidence before the Tribunal points to Mr Stephens having no income at that time. He was further advised that he could not be paid pension until after 20 February 2004.
On 29 December 1999 Mr Stephens lodged a claim for carer payment/carer allowance. Mr Stephens advised that he had separated from his wife in July 1999 and that he cared for his disabled son Jamie, born 29 August 1974. Jamie was injured in a motor vehicle accident and he has reduced vision, short-term memory loss and he lacks coordination. Mr Stephens cares for Jamie in a house owned by Jamie. Mr Stephens also advised that he cared for his son Adam, born 29 April 1983, who is in receipt of youth allowance and his daughter Ruth, born 25 January 1985, both of whom at the date of hearing attended a secondary college. He now indicated that his only car was the LTD.
In her statement of facts and contentions, Ms D'Cunha advised:
(vii) . . . The family income per fortnight is $861.61. This comprises of $198.17 Family Tax Benefit for daughter Amanda [sic] and $79.50 Carer Allowance for Jamie paid to the applicant, Youth Allowance of $153.90 paid to Adam and $370.04 DSP and $60.00 Mobility Allowance paid to Jamie. In addition the applicant owns 70 acres of land which he has valued at $48000 and a vehicle which could be sold.
. . .
Mr Stephens told the Tribunal at the hearing that his daughter Ruth would turn 16 years in January 2001 when she would be paid youth allowance and his family tax benefit would cease to be payable. Mr Stephens said that Ruth has told him she did not intend to make any of her youth allowance available to him for his living expenses. He indicated to the Secretary in an undated letter that he had bought himself a car and a small utility, costing in total $75,000.00. He advised the Tribunal at the hearing that he has sold his motor vehicle for $18,000.00 and he now relies on Jamie's vehicle to drive Jamie to and from work. He has not put the 70 acres of land which he owns, on the market. It is mortgaged to a bank which is owed $20,000.00. Mr Stephens borrowed $20,000.00 for his married son, John, who is to pay off the loan to the bank. The land is Mr Stephens's "nest egg" to cover his burial expenses. Mr Stephens explained to the Tribunal at the hearing that his father had been killed when he was aged 3 years. As a result of his father's death, he understood that moneys were put in trust for him but no trust funds have been found by the Public Trustee. He has lost his health, having not only silicosis and psoriasis but also low back disease. This is borne out by the further information lodged by Ms D´Cunha following the hearing.
It is not in dispute that, after being paid weekly compensation payments from March 1997, Mr Stephens received a lump sum compensation payment of $244,650.00 on 27 October 1997. Subsections 1165(5) and (6) of the Act provide:
1165(5) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the "new lump sum preclusion period" is the period that:
(a)begins on the day after the last day of the periodic payment period; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
Note: For "periodic payments period" see section 17.
1165(6) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the "new lump sum preclusion period" is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends after the number of weeks worked out under subsections (8) and (b).
The ARO applied subsection (5) in making his decision whereas Ms D´Cunha put to the Tribunal at the hearing that subsection (6) applied. This Tribunal is satisfied that, as Mr Stephens had been paid periodic compensation payments, which ceased to be paid to him on his receipt of a compensation lump sum, it is subsection (5) which applies as he was no longer paid "a reduced payment" although this point could be argued. Subsections 1165(8) and (9) provide:
1165(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amountNote 1: For compensation part of lump sum, see section 17.
Note 2: For income cut-out amount, see section 17.1165(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number.
The index to the documents states that the document marked T24 is a copy of a letter to Mr Stephens granting carer allowance. The Tribunal is satisfied that the documents have been incorrectly marked. One of the documents reproduced at T25 is a computer printout regarding carer allowance as follows:
. . . PO Box 298 Ballarat VIC 3350 ><#REGADD1= 12 Albert Street ><#REGADD2= Ballarat ><#REGADD3= VIC 3350 ><#CSSR= 303 429 047K ><#HOURS = Monday to Friday 8.30 am – 4.30 pm ><#RECNAME= Mr Allan H Stephens ><#CADD1- Rmb 286 ><#CADD2= CRESWICK VIC 3363 ><#CADD3= ><#CADD4= ><#DATE1= 19 January 2000 ><#PHONE= 13 2717 ><PAGINFO>
Your Carer Allowance ><TOPIC>
Immediate payment ><#DATE= 13/12/1999 – 11/01/2000 ><#AMOUNT= 162.63 ><IMMPAY>
Your normal payment ><#DATES= from payday 27/01/2000 ><ONPAY>
Carer Allowance ><#AMOUNT= $ 76.40 ><ONPAYLIN>
Total ><#AMOUNT= $ 76.40 ><ONPAYTOT>
PAYMENT FOR ><MEMBER>
JAMES STEPHENS ><MEMBRLN>
IMPORTANT INFORMATION ><WRITEARR>
We will send you a Health Care Card for Jamie Stephens.
It appears Mr Stephens was granted carer allowance in respect of Jamie. Presumably Mr Stephens was not granted carer payment, as it is a compensation affected payment. Some of the folios indexed at T25 are a copy of the undated letter Mr Stephens wrote to the Secretary, stating that he would like to appeal against the waiting time for a "disability pension". He advised, in part:
. . .
At the moment I am living with my handicapped son, Jamie Russel Stephens, who receives a disability pension.
I have two other dependant children in my care. They are still attending school.
Adam Allan Stephens 16 yrs who receives a youth allowance of $146 fortnightly.
Ruth Victoria Stephens 15 yrs which I received $173 fortnightly.
As I have no income and no settlement money left, we have to live on my son's handicap pension, and the children's money.
. . .
Mr Stephens outlined in the letter how he had spent his "settlement money", including:
I took my family on a holiday to Queensland, to try and save my marriage, my wife had left me four times in the 2yrs that I was waiting for work cover.
The firm refused to pay me work cover for 2yrs and unable to work. I had put a lot of stress on my family. I felt that a holiday might bring the family back together.
He went on to state:
My marriage has since failed. My wife and I now have been separated for 6 months with no chance of reconciliation.
Now I am left with no income and no money, and have to wait until the year 2004 with 2 school children to care for.
And with my disability which is lung disease (since the claim 2 yrs ago my health has deteriorated) also neck and back injuries, so there is no chance of me working again.
I am currently 55 yrs old.
Mr Stephens gave evidence that, before his wife left him, she had persuaded him to withdraw well above what he now knows was an amount of approximately $400.00 per week available to him for living expenses in light of the compensation divisor's affect on the length of his preclusion period. Having worked all his life, all he has to show for his labour is the 70 acres of land still in his name, but now mortgaged to a bank. The Tribunal is satisfied that it will be emotionally destructive for Mr Stephens to have to go down the path of selling his land but that may become necessary.
Mr Stephens told the Tribunal that it was difficult for him to use Jamie's money in order to exist and he did not accept Ms D'Cunha's contention that he was in receipt of regular income and that the Tribunal should look at the income which is coming into the household as a relevant factor in determining whether any part of the compensation payment should be treated as not having been made.
A text on the department's computer dated 17 February 2000, as annotated on 31 March 2000, notes:
. . . Preclusion/Charge calculated done on 08/05/1998.
Preclusion Period from 9 MAY 1998 to 20 FEB 2004. NIL Charge.
(See also paragraph 4 above.)
Thus the divisor used to calculate Mr Stephens's preclusion period remained the divisor in effect as at 20 March 1997, rather than the divisor in effect on 29 December 1999, when he lodged a claim for parenting payment being used, perhaps because of paragraph 1165(5)(a) of the Act (see above). By the end of 1999, the divisor had risen to $422.90.
The additional information provided by Ms D´Cunha included copies of claims for pensions and allowances Mr Stephens had made under the Act before March 1997 when he commenced to be paid weekly compensation payments. A medical report dated 23 October 1995 from Dr J. Fraillon advised with respect to Mr Stephens:
. . . The problem of silicosis is one which is inevitably is [sic] accompanied by deterioration of lung function over the years as scar tissue develops in nodules in the lungs. It appears that he has this nodular form of silicosis already.
He does suffer from asthma which may or may not have been a prior condition. In any case silicosis would worsen any asthmatic condition whenever this developed. He has lung function studies which show this type of airways disease and his condition shows gradual deterioration over the 4 years between my owns [sic] studies done in 1991 and last week. He therefore should never be exposed to the likelihood of a work caused dust injury or the company would be likely to be considered liable for his pulmonary invalidism which seems inevitable.
In January 1996 Mr Stephens's prognosis was described as "poor".
By letter dated 31 March 2000, a delegate of the Secretary advised Mr Stephens, so far as relevant:
. . .
I am writing about your request of 17/02/2000 that I reconsider the decision set out in my letter of 08/05/1998 to preclude you from receiving Centrelink payments because of your compensation lump sum settlement. I have looked at this decision again, taking into account the extra information you gave me on 17/02/2000. I have rechecked that the details are correct and have decided not to change my decision. This means the preclusion period will remain from 9 MAY 1998 to 20 FEB 2004.
. . . [emphasis added]Mr Stephens was asked to provide financial information to the Department of Family and Community Services ("the department"). In advising Mr Stephens of his decision on review the ARO, in his letter of 7 July 2000, went on to outline the effects of the relevant provisions of the Act with respect to Mr Stephens's circumstances. The ARO referred to a claim made by Mr Stephens for parenting payment, which was before the Tribunal, and to a claim with respect to disability support pension, which was not before the Tribunal. No mention was made of Mr Stephens's claim for carer payment. The ARO went on to advise:
. . .
In your case, $121,825 is deemed to be the 'compensation' part of the settlement.
Subsection 1165(8) requires that the period of effect of the $121,825 compensation component be determined by apportioning the sum over a period of weeks by using the income cut-out amount above which no pension is payable to a single person under the ordinary income test.
The cut-out point at the time of the settlement was $403.20 per week.
In your case, the period of effect is a total of 302 weeks (ie $121,825 divided by $403.20).
. . .
No explanation was given by the ARO or the SSAT as to what an "income cut-out amount" is, at least, how it is calculated. The ARO used the amount of $403.20, the income cut-out amount in effect from 1 July 1997 to 20 March 1998 when it became $410.00.
The Tribunal has set out the above history in some detail because it found the index to the documents and the background leading to Mr Stephens's application for review of the decision of the SSAT somewhat confusing. Mr Stephens told the Tribunal he did not understand how the period of preclusion was arrived at, although his main concern at the hearing was his special circumstances.
In Kirkbright v Secretary, Family & Community Services [2000] FC 1876 (decided 21 December 2000) the Federal Court considered the imposition of a lump sum preclusion period under the Act. The applicant had claimed that:
. . . the strict application of the legislation would put him in a worse position than if he had actually earned money during the relevant period rather than received it by way of damages for loss of earning capacity, and that that would be "unjust, unfair and unreasonable".
The Federal Court said that the Tribunal thought that the legislation intended compensation payments to be treated differently to any other source of income and that a compensation recipient should exhaust available funds before claiming social security benefits [p.6]. The Federal Court decided that "the Tribunal was in error in interpreting the legislative intent in that way". At paragraph 22 of her reasons for decision Mansfield J said:
In my view, that misapprehension of the legislative policy has influenced the Tribunal into excluding from consideration unfairness in the strict application of the legislation as possibly demonstrating that special circumstances exist in the applicant's case. Indeed, in my view, s 1184 is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act. That view was effectively expressed by von Doussa J in Smith at 61:
"The arbitrary nature of the provisions of s 152 would have been quite apparent to the legislature. The '50 per cent rule' in s 152(2)(c)(i), and the other provisions to which I have referred, are intended to operate together as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures. As I observed in Banks (at 424) it is in the very nature of an arbitrary provision that it can entail a degree of unfairness in a particular case. The scheme of Pamacorp Treasury XVII recognises that perfect matching of eligibilities by dollar amounts or by periods of time for pension and for payments by way of compensation in respect of an incapacity for work is impracticable. At the same time the legislature must have recognised that from time to time a case may arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about an unreasonable or unjust result which was outside that which could be justified by the practical expediency of the arbitrary nature of the provisions in ss 152 and 153. Section 156 was enacted as part of the scheme under Pt XVII before the '50 per cent rule' was introduced by the Social Security Amendment Act 1988 (Cth), but this is no reason to construe s 156 as having no operation in respect of a case where the '50 per cent rule' produces a clearly unjust result. Before the 1988 amendment there were other provisions in Pt XVII, the strict application of which could operate in an arbitrary way. By its terms the discretion given by s 156 may be exercised where the Secretary (or a body standing in the place of the Secretary on appeal) 'considers it appropriate to do so in the special circumstances of the case'. These are wide words intended, as the Tribunal in Ivovic pointed out, 'to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case'."
Her Honour went on to say, at paragraph 31:
Finally, I mention an argument which was advanced on behalf of the respondent through its counsel namely that the unfairness or injustice by the strict application of the Act cannot qualify as a special circumstance, unless in some way the unfairness or injustice itself arises out of some other special circumstance. In my view, that submission is not supported by authorities. It is a somewhat circuitous proposition. It fails to have regard to the role of s 1184 in the Act and to its plain words. It is but another way of putting the proposition that injustice or unfairness by the strict application of the Act can not of itself amount to a special circumstance for the purposes of s 1184. That is a proposition which, as I have noted, has been rejected by a number of decisions of the Court as far back as Smith and Beadle. It has also been rejected more recently by R D Nicholson J in Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090.
Mr Stephens agreed with most of the findings of fact made by the SSAT and he provided further information with respect to his circumstances to the Tribunal, particular with respect to how his compensation payment moneys had been expended, as outlined above. That evidence was not disputed by Ms D'Cunha.
Mr Stephens has been asked by decision-makers to accept at face value the "income cut-out amount" referred to by the SSAT as the "applicable cut off amount" and the ARO as the "cut-out point" and also that "at the time of the settlement" was the date on which the income cut-out amount should be determined.
"Income cut-out amount" is defined in section 17(1) of the Act as:
the amount worked out using the following formula:
(Maximum basic Pharmaceutical amount ) Ordinary free2 ( rate + for a single person ) + area limit
____________________________________________________________52
where:
"maximum basic rate" means the amount specified in column 3 of item 1 in Table B in point 1064-B1.
The Tribunal has not set out all the other provisions of the Act which must be applied to Mr Stephens's matter as they have been explained to him by the ARO and the SSAT. Suffice is to say that 50 per cent of a compensation lump sum payment is prescribed by the Act as the amount to be apportioned over a number of weeks during which there is no entitlement to be paid a compensation affected payment, that is, the compensation part of the lump sum is the amount recipients of compensation payments are expected to live on for a period of time, and there is no entitlement to compensation affected payments during that time. As Ms D'Cunha said, otherwise, it would be double dipping.
When the Tribunal asked Ms D'Cunha to apply the formula in subsection 17(1) to Mr Stephens's matter, to demonstrate how the sum of $403.20, applied by the ARO was arrived at, she was unable to do so. She explained that the figures which are used are stored in the department's computer. She provided the following table.
Compensation Divisor (CMDV)
Effective Date Amount Effective Date Amount
1 JUL 2000 $543.63 24 APR 1996 $559.20
20 MAR 2000 $428.40 29 FEB 1996 $554.50
20 SEP 2000 $422.90 8 FEB 1996 $555.00
1 JUL 1999 $417.80 16 NOV 1995 $551.30
20 MAR 1999 $416.80 26 OCT 1995 $552.20
20 SEP 1998 $412.70 17 AUG 1995 $548.50
20 MAR 1998 $410.70 27 JUL 1995 $547.60
1 JUL 1997 $403.20 18 MAY 1995 $544.40
20 MAR 1997 $402.20 27 APR 1995 $544.60
27 FEB 1997 $571.90 2 MAR 1995 $543.40
6 FEB 1997 $572.10 9 FEB 1995 $543.20
14 NOV 1996 $569.20 6 DEC 1994 $539.90
24 OCT 1996 $566.70 10 NOV 1994 $541.00
16 AUG 1996 $564.60 18 AUG 1994 $530.70
25 JUL 1996 $563.60 28 JUL 1994 $530.50
17 MAY 1996 $558.40 19 MAY 1994 $529.00
As the definition of "income cut-out amount" was only inserted into the Act under Schedule 12 of Act Nº 84 of 1996, which came into effect on 20 March 1997, the Tribunal was perplexed as to why the figures in the table went back to 19 May 1994 and why there was no consistency in the dates when the amounts changed. Ms D'Cunha explained that the income cut-out amount is normally recalculated every March and September following CPI reviews but she said that it may also be recalculated if one of the other variables in the formula changes. She undertook to provide the Tribunal with a calculation of the income cut-out amount done on 1 July 1997 which was applied to Mr Stephens. Presumably, the figures in the table before 20 March 1997 represent average weekly earnings (originally average male weekly earnings). At no stage did the divisor figure drop below $529.00, in effect in May 1994, until 20 March 1997 when, following the above amendments to the Act, provisions with respect to new lump sum preclusion periods were inserted, affecting the length of preclusion period for those receiving a lump sum compensation payment after 20 March 1997. It is indeed unfortunate for Mr Stephens that his solicitors did not settle his compensation claim before 20 March 1997. At that date the divisor figure with respect to new lump sum preclusion periods became $402.20, being recalculated as $403.20 on 1 July 1997, the figure used to calculate Mr Stephens's preclusion period. There has been a gradual increase in the divisor figure, no doubt reflecting cost of living adjustments until 1 July 2000 when the divisor figure jumped to $552.63, to compensate those on low incomes for the introduction of the goods and services tax ("GST") and the effect of the introduction of that tax on their cost of living.
The Tribunal notes that Mr Stephens had the misfortune to have the second lowest divisor figure applied to his circumstances resulting in a lengthy period of preclusion before he would be entitled to be paid a compensation affected payment under the Act. A distinction is drawn between those receiving a lump sum compensation payment on or after 20 March 1997 and those who received their lump sum compensation payment before that date. Subsection 1165(4) provides with respect to those persons:
1165(4) The number of weeks in the old lump sum preclusion period is the number worked out under the following formula:
compensation part of lump sum
average weekly earnings
Note 1: for "compensation part" of lump sum see section 17.
Note 2: for "average weekly earnings" see section 17.
Section 17 provides, so far as relevant:
17(1) In this Act, unless the contrary intention appears:
"average weekly earnings", in relation to an old lump sum preclusion period, means the amount:(a)estimated as the average total weekly earnings, during a particular month, of all employees (all persons) in Australia; and
(b)last published by the Australian Statistician before the lump sum compensation payment became payable;
The Tribunal has been advised by Ms D'Cunha that average weekly earnings as at 27 October 1997, when Mr Stephens settled his claim, were $583.60. The Tribunal has been advised by the Australian Bureau of Statistics that average weekly earnings in November 2000, when the matter was heard by the Tribunal, were $649.40. It is interesting to reflect on the Australian Bureau of Statistics' figures with respect to average weekly earnings between 1996, when Mr Stephens was no longer able to work, and 1998, as set out below:
AVERAGE WEEKLY EARNINGS, Australia: Original
MALES................................ FEMALES............................ PERSONS..................................
Full-time adult ordinary time earnings Full-time adult total earnings All males total earnings Full-time adult ordinary time earnings Full-time adult total earnings All females total earnings Full-time adult ordinary time earnings Full-time adult total earnings All employees total earnings
DOLLARS
1996 November 727.00 787.90 679.80 611.90 627.50 44.10 685.60 730.20 570.00
1997 February May August November 738.00 740.70 753.60 757.70 791.20 795.80 808.00 815.50 688.70 687.10 693.80 709.30 615.60 620.30 626.90 633.20 628.80 634.80 641.20 648.30 457.80 457.40 460.20 466.10 694.10 696.60 706.60 711.30 732.90 736.80 746.10 753.20 581.60 577.80 582.20 592.70
1998 February 770.00 825.10 715.60 642.00 656.00 470.10 722.30 762.10 597.40
It is apparent from the figures in the table provided by Ms D'Cunha that, if Mr Stephens's preclusion period was to be calculated now, it would lead to a considerable shortening of his preclusion period. The Tribunal further asked Ms D'Cunha to point to the provision in the Act which provides that the calculation must be done on a particular day. Ms D´Cunha later advised the Tribunal that the legislation does not specify the date at which the cut-off amount is to be calculated.
The Tribunal has already commented that the advice given to Mr Stephens on 8 May 1998 did not arise as a result of any claim being lodged by him. Paragraph 1165(1)(a) provides:
1165(1) Where:
(a)a person receives or claims a compensation affected payment; and
. . .
Note 1: For "old lump sum preclusion period" see subsections (3) to (4).
Note 2:A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B).
The section does not provide for decisions to be made when a person is not in receipt of a compensation affected payment nor claiming such a payment. The Tribunal finds that on 9 May 1998, the date referred to in the letter sent to Mr Stephens dated 8 May 1998 (see paragraph 4 above), Mr Stephens had not claimed a compensation affected payment, nor was he in receipt of one.
There must be very little joy for customers who are severely injured, and who are paid lump sum compensation to find that they are precluded from compensation affected payments under the Act for a considerable period of time if their preclusion period is determined when income cut-out amounts were low and at a time when the affect of the introduction of the GST on the cost of living was not compensated for.
When providing the further information the Tribunal had requested, Ms D´Cunha noted that the definition of "average weekly earnings" under subsection 17(1) of the Act provided that the relevant average weekly earnings to determine a preclusion period with respect to an old lump sum preclusion period were those last published by the Australian Statistician "before the lump sum compensation payment became payable". She went on to say that:
It can also be argued that for purposes of consistency, the date at which the income cut-out amount is to be calculated, should be the date of settlement rather than the date of decision of a claim.
Ms D´Cunha provided the Tribunal with the calculations in respect of the income cut-out amount for Mr Stephens as at 15 July 1997 as follows:
CALCULATION OF INCOME CUT-OFF AMOUNT AT 15 JULY 1997
As per subsection (7), income cut-off amount is worked out using the following formula:2(Maximum basic + Pharmaceutical amount + Ordinary free
rate for a single person area limit
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52
= 2($ 9042.80 + $140.40) + 2600
--------------------------------------------------
52
= 2($ 9183.20) + 2600
--------------------------------
52
= $ 18366.40 + 2600
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52
= $ 20966.40
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52
= $403.20
She noted that the sum of $403.20 was the same amount above which no pension could be paid for a single person at that time. She went on to note that errors can occur in calculations done by the department, advising the Tribunal as follows:
CALCULATION OF INCOME CUT-OFF AMOUNT AT 1 JULY 2000
The Social Security (Administration) Act, 1999 came into effect on 20 March 2000.
income cut-out amount is the amount worked out using the formula in subsection (8).17.(8) For the purposes of the definition of income cut-out amount in subsection (1), the formula is as follows:
2(Maximum basic + Pharmaceutical amount + Ordinary free
rate for a single person area limit
-------------------------------------------------------------------------------------
52
= 2($10059.40 + $145.60) + $2756
---------------------------------------------------
52
= 2($ 10205) + $2756
------------------------------
52
= $ 20410 + $2756
--------------------------
52
= $ 23166
-----------
52
= $445.20
This should have been the income cut-off amount as calculated by the legislative formula. However as stated in the Second Reading Speech, the amendment brought in to change the compensation divisor from average weekly earnings to income cut-off amount, was to maintain the income cut-off amount as the amount above which a single person would not receive the pension due to the income test.
In July 2000, the pension income test was amended, such that the taper rate reduced from 50c to 40c in every dollar earned above the free income limit. This change was not accounted for in the income cut-off amount formula for calculating the compensation divisor. As a result the income cut-off amount as calculated by using the formula defined in the current Act, is lower that [sic] the amount at which a single person's pension would cut out due to the income test. The Department of Family & Community Services is currently seeking an amendment to the Act to correct the discrepancy. In the interim, the instructions from the Department are that the income cut-off amount is to be maintained at the higher amount which is the amount above which a single person would not receive the pension, as this is the beneficial assessment.
The Tribunal notes that the figure of $445.20 is different from the figure in the tables (see paragraph 22).
In moving that the Social Security Legislation Amendment (Budget and Other Measures) Bill 1996 be read a second time The Honourable Philip Ruddock, who represented the Minister for Social Security in the House of Representatives, said, amongst other things:
The compensation recovery provisions of both the Social Security Act and the Student and Youth Assistance Act will also be amended from 20 March 1997 to enhance the treatment of lump sum compensation payments by using a single pension cut-out point as the compensation lump sum preclusion period divisor.
For compensation lump sum payments received on or after 20 March 1997, the divisor used to calculate preclusion periods will be changed from the all persons average weekly earnings to the amount above which no pension is payable to a single person under the income test, currently $397 a week. Further, the preclusion period will be applied to the compensation recipient only and not to his or her partner. This means that for lump sums received on or after 20 March 1997, recovery of past payments to partners will not be made, nor will partners be precluded from receiving any future entitlement they may have during their partner's preclusion period.
The fact that partners were not to be precluded from receiving any future entitlement they may have during their partner's preclusion period is of little comfort to a person who does not have a partner. The effect of the insertion into the Act of a new lump sum preclusion period means that, instead of having funds equivalent to average weekly earnings during your preclusion period to support you, you are reduced to living on the rate of single pension payable. Once the Act was amended a person affected by the preclusion period is immediately thrust into the same basket as those being paid compensation affected payments under the Act, albeit, the income cut-out amount includes the ordinary free area.
There are a number of reasons the Tribunal has decided that it should set aside the decision under review and it will remit the matter to the Secretary for reconsideration in accordance with directions that part of Mr Stephens's compensation payment should be treated as if it had not been made. The Tribunal gave consideration as to whether the correct or preferable decision would be that Mr Stephens's preclusion period be recalculated at the date he claimed a compensation payment after receiving his lump sum compensation payment. However, as the Tribunal is satisfied that special circumstances exist in this matter, and having considered what the Federal Court said in Kirkbright with respect to unfairness, it will make its decision under subsection 1184(1) of the Act, which provides:
1184(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a)not having been made; or
(b)not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
It may be technically correct to require the Secretary to recalculate the preclusion period, but the Tribunal will save the Secretary that trouble.
The Tribunal rejects the inference made by Ms D´Cunha in her statement of facts and contentions that the applicant should be provided for by other members of his family. The Tribunal is satisfied that Mr Stephens's circumstances are special for the following reasons. The prognosis with respect to his health is poor. The Tribunal accepts his evidence that, after being paid his lump sum compensation payment, he was persuaded by his wife to withdraw well above the amount of $400.00 per week from his bank account for living expenses. He used some of that money to try and save his marriage and to keep the family together. His wife has now left him and he does not have the benefit of the ameliorating provisions introduced into the Act with respect to couples when income cut-out amounts were introduced as divisors. The GST has been in effect since 1 July 2000, and has increased Mr Stephens's cost of living. This is reflected in the more than $110.00 increase in the compensation divisor as from 1 July 2000. The Tribunal was impressed by the evidence Mr Stephens gave with respect to the three young people in his care. It appears that Adam may now have left home to pursue his education and that Ruth will have control of her youth allowance. For the children's continued development, it is important that Mr Stephens does not become destitute before mid-2003. It appears that administrative error may have occurred when Mr Stephens's preclusion period was calculated using the divisor in effect in July 1997, rather than the divisor in effect when Mr Stephens claimed a compensation affected payment being used.
Mr Stephens has been precluded from being paid a compensation affected payment under the Act since the end of October 1997 and the Tribunal will remit the matter to the Secretary for reconsideration in accordance with directions that that part of Mr Stephens's compensation payment, which would end the preclusion period on 1 July 2001, when he has had to bear the brunt of any increase in his cost of living since the introduction of the GST for one year, as not having been made. The Tribunal presumes that other people whose preclusion periods were calculated before the introduction of the GST, have been similarly affected. That is a matter for the Secretary. The Tribunal accepts that it may be no easy matter for preclusion periods, which have already commenced to run, to be recalculated as unspent periods, would need to be redetermined.
It is for these reasons the decision under review will be set aside.
I certify that the thirty-three [33] preceding paragraphs are a true copy of the reasons for the decision herein of
Mrs H.E. Hallowes, Senior Member(sgd) Catherine Thomas
Personal AssistantDate of Hearing: 14.11.00
Date of Decision: 14.02.01
Solicitor for the Applicant: NIL, IN PERSON
Solicitor for the Respondent Ms P. D´Cunha, Advocate with Centrelink
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