Stephenson and Secretary, Department of Social Services (Social services second review)
[2015] AATA 975
•17 December 2015
Stephenson and Secretary, Department of Social Services (Social services second review) [2015] AATA 975 (17 December 2015)
Division
GENERAL DIVISION
File Number
2015/0723
Re
Judith Stephenson
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member R W Dunne
Date 17 December 2015 Place Adelaide The Tribunal affirms the decision under review.
.........................[Sgd]...............................................
Senior Member R W Dunne
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Pension Bonus Scheme – whether allowable gifting threshold was exceeded – whether non-accruing period should be applied – applicant found to be subject to a preclusion period for non-accruing membership – gifts made prior to date of registration – circumstances in which person disposes of assets – reduced pension bonus payment due to application of the assets test – decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth) ss 92A, 92C, 92N, 92P, 92T, 1123, 1124 and 1126AA
CASES
Grey v Pearson (1857) 6 HLC 61
President, etc, of Shire of Arapiles v Board of Land Works (1904) 1 CLR 679
SECONDARY MATERIALS
Statutory Interpretation in Australia 8th edition by Pearce and Geddes
REASONS FOR DECISION
Senior Member R W Dunne
17 December 2015
In this matter, the applicant (Ms Judith Stephenson) applied to this Tribunal for review of a decision of the Social Security Appeals Tribunal (“SSAT”) which was made on 23 January 2015. The SSAT affirmed a decision of an Authorised Review Officer (“ARO”) of the respondent (“Centrelink”) made on 7 November 2014 that the applicant was subject to a 5 year non-accrual period because she had exceeded the allowable gifting threshold, and as such she was only entitled to a reduced pension bonus under the Pension Bonus Scheme (“PBS”).
At the hearing, Ms Stephenson appeared on her own behalf, while Mr A Hay (from the Program Litigation and Review Branch, Department of Human Services) represented Centrelink. I received into evidence the T documents tendered under s 37 of the Administrative Appeals Tribunal Act 1975.[1] I noted the statements of facts and contentions that had been filed and served by the applicant and the respondent.
[1] Exhibit R1.
ISSUES FOR THE TRIBUNAL
The issues to be considered in this case are:
(a)Whether the applicant exceeded the allowable gifting threshold in 2007.
(b)If so, whether a non-accruing period should be applied to the applicant’s Pension Bonus Scheme claim.
LEGISLATION
The Pension Bonus Scheme was created by provisions in the Social Security Act 1991 (“Act”). Section 92A, which is in Part 2.2A of the Act, contains a simplified outline, which reads:
·A person who qualifies for an age pension, but defers claiming that pension may be able to get a single lump-sum pension bonus.
·A person who wants to get a pension bonus must register as a member of the pension bonus scheme. An application for registration cannot be made on or after 1 July 2014.
·To get a pension bonus, a person must accrue between 1 and 5 bonus periods while deferring the age pension.
·Generally, a bonus period runs for 1 year.
·To accrue a bonus period, the person must pass the work test for that period.
·To pass the work test for a year, either the person, or the person’s partner, must gainfully work for at least 960 hours during that year.
·The amount of a person’s pension bonus depends on the number of accrued bonus periods and the person’s annual rate of age pension. A person may get a bigger bonus by accruing more periods.
Section 92C sets out the qualification for pension bonus and relevantly reads:
“92C Qualification for pension bonus
A person is qualified for a pension bonus if:
(a)both:
(i) the person starts to receive an age pension at or after the time when the person makes a claim for the pension bonus; and
(ii) that age pension is received otherwise than because of a scheduled international social security agreement …; and
(b)the person has not received an age pension at any time before making a claim for the pension bonus; and
(c)the person is registered as a member of the pension bonus scheme; and
(d)the person has accrued at least one full-year bonus period while registered as a member of the pension bonus scheme; and
…”
Subdivision B of Part 2.2A contains the classification of membership of the Pension Bonus Scheme. Section 92N and s 92P relevantly read:
“92N Accruing membership
For the purposes of this Part, a person’s membership of the pension bonus scheme at a particular time is accruing unless the person’s membership is non-accruing or post-75 at that time.”
“92P Non-accruing membership—preclusion periods
Disposal preclusion period
(1)For the purposes of this Part, if a person is subject to a disposal preclusion period at a particular time when the person is a member of the pension bonus scheme, the person’s membership of the scheme is non-accruing at that time.
Compensation preclusion period
(2)For the purposes of this Part, if a person is subject to a compensation preclusion period at a particular time when the person is a member of the pension bonus scheme, the person’s membership of the scheme is non-accruing at that time.
…”
Section 92T deals with the accrual of bonus periods. It relevantly reads:
“92T Accrual of bonus periods
Full-year bonus period
(1) The first bonus period that accrues to a person is the full-year period of the person’s accruing membership of the pension bonus scheme:
(a)that began on whichever of the following dates is applicable:
(i) if the person was an accruing member of the pension bonus scheme on the date the person’s registration as a member took effect—the date the registration took effect;
(ii) in any other case—the date on which the person first became an accruing member of the pension bonus scheme; and
(b)for which the person passes the work test.
(2) Each succeeding full-year period of the person’s accruing membership of the pension bonus scheme:
(a)that is specified in the person’s claim for pension bonus; and
(b)for which the person passes the work test;
is a bonus period that accrues to the person.
Part-year bonus period
(3) A part-year period of the person’s accruing membership of the pension bonus scheme is a bonus period that accrues to the person if:
(a)the person passes the work test for that period; and
(b)the person specifies the period in the person’s claim for pension bonus; and
(c)the period begins immediately after the end of a full-year bonus period that accrues to the person; and
(d)the period is the last bonus period that accrues to the person.
…”
Sections 1123, 1124 and 1126AA in Division 2 deal with the disposal of assets. They relevantly provide:
“1123 Disposal of assets
(1) For the purposes of this Act, a person disposes of assets of the person if:
(a)the person engages in a course of conduct that directly or indirectly:
(i) destroys all or some of the person’s assets; or
(ii) disposes of all or some of the person’s assets; or
(iii) diminishes the value of all or some of the person’s assets; and
(b)one of the following subparagraphs is satisfied:
(i) the person receives no consideration in money or money’s worth for the destruction, disposal or diminution;
(ii) the person receives inadequate consideration in money or money’s worth for the destruction, disposal or diminution;
(iii) the Secretary is satisfied that the person’s purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage.
…”
“1124 Amount of disposal or disposition
If a person disposes of assets, the amount of the disposal or disposition is:
(a)if the person receives no consideration for the destruction, disposal or diminution—an amount equal to:
(i) the value of the assets that are destroyed; or
(ii) the value of the assets that are disposed of; or
(iii) the amount of the diminution in the value of the assets whose value is diminished; or
(b)if the person receives consideration for the destruction, disposal or diminution—an amount equal to:
(i) the value of the assets that are destroyed; or
(ii) the value of the assets that are disposed of; or
(iii) the amount of the diminution in the value of the assets whose value is diminished;
less the amount of the consideration received by the person in respect of the destruction, disposal or diminution.”
“1126AA Disposal of assets in income year-- individuals
Disposals to which section applies
(1)This section applies to a disposal (the relevant disposal) on or after 1 July 2002 of an asset by a person who is not a member of a couple at the time of the relevant disposal.
Increase in value of assets
(2)If the amount of the relevant disposal, or the sum of that amount and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000, then, for the purposes of this Act, the lesser of the following amounts is to be included in the value of the person’s assets for the period of 5 years starting on the day on which the relevant disposal took place:
(a)the amount of the relevant disposal;
(b) the amount by which the sum of the amount of the relevant disposal and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000.
…”
BACKGROUND AND EVIDENCE
The factual background to this case is not in dispute and may be briefly stated. In April 2007, the applicant became of pension age, being her 63 birthday. On 5 June 2007, she registered for the Pension Bonus Scheme and deferred claiming age pension. On 14 August 2014, she lodged claim forms for age pension and pension bonus. The respondent granted the payment of age pension and assessed the applicant’s claim for pension bonus in the amount of $6,016.20. This was based on her pension rate at the time and represented 2.345 years of accrued bonus.
The applicant’s husband died in February 2006. They did not have children of their own. Her husband had two daughters from his previous marriage, born February 1960 and August 1962. At the end of 2006, the younger daughter was diagnosed with a terminal illness, motor neuron disease, and died in June 2010. In February 2007, the applicant made a gift of $10,000 to the younger daughter when she returned to Adelaide with her partner and her daughter, so that the family could provide support and to assist with the purchase and modification of a small home here. As a result of the applicant’s financial assistance the younger daughter was able to stay comfortably at home until she died.
The applicant was not a member of the Pension Bonus Scheme at the time the gift was made and was unaware of the gifting rules. The respondent wrote to her on 7 June 2007 advising that she was registered as an accruing member of the Scheme from 16 April 2007. When she was completing her claim for age pension and pension bonus the applicant noted the gifting threshold and non-accruing period penalty that could apply to her. She declared the $10,000 gift to the younger daughter and also provided details of charitable donations that she had made in the 2006/2007 financial year. Although the applicant was only paid $6,016.20 as pension bonus for the 2.345 years, on 4 December 2014, following review of her income and assets, she stated that she received an additional $4,552 pension bonus for the relevant period.
Following the assessment of the applicant’s pension bonus claim, she requested review by the ARO. The ARO affirmed the decision to pay the amount of the pension bonus. Ms Stephenson was subject to a “five year non-accrual period” because she had given away more than $10,000 in the 2006/2007 financial year. Upon further review, the ARO’s decision was affirmed by the SSAT.
In giving her evidence, Ms Stephenson said that the treatment of her claim for pension bonus, involving the application of the gifting threshold and non-accruing period penalty, was unfair. She said that lawfully she should be able to make a gift to her husband’s younger daughter. She said she always acted with honesty and the highest degree of integrity and had never made a dishonest claim or disclosure under any circumstances. She was critical of the comments that the SSAT had made in its decision on 23 January 2015. She said she had not intentionally disposed of assets to increase her age pension or the pension bonus to which she was legally entitled. She believed that the circumstances of her case should be viewed sympathetically and that it would be an absurd result if she was not able to receive the higher pension bonus amount. She said to do otherwise under the law would be a harsh result. Her contention was that, under the “golden rule” of interpretation, applying the literal meaning of the Pension Bonus Scheme legislation would lead to an absurdity if the ordinary sense of the wording was adopted.
CONSIDERATION
Did the applicant exceed the allowable gifting threshold in the 2006/2007 financial year?
On the evidence, the applicant exceeded the allowable gifting threshold of $10,000 in the 2006/2007 financial year. Initially she said she gifted $10,858, comprising $10,000 to her late husband’s younger daughter and $858 in charitable donations. In her statement of facts and contentions, she said that subsequently the charitable gifts figure was reduced to $262. Notwithstanding this, I am satisfied that her total gifting in the 2006/2007 financial year would still have exceeded $10,000.
It was the applicant’s contention that the SSAT’s interpretation of the provisions of the PBS legislation was unduly harsh. From her point of view, the outcome was disproportional and unjust. The result of exceeding the gifting threshold meant that she did not receive her correct pension bonus entitlement. The asset amounts disposed of as a result of the gifting included the amount given to her terminally ill step-daughter. In her statement of facts and contentions, she was critical of the SSAT’s suggestion that she contrived to increase her entitlements by deliberately disposing of assets. However, I note that in paragraph 12 of the SSAT decision, the member stated that her disposal of her assets was in no way a contrivance to increase her pension entitlement.
Should a non-accruing period be applied to the applicant’s Pension Bonus Scheme claim?
The applicant was not a member of the Pension Bonus Scheme at the time she made the gift to her step-daughter and was unaware of the gifting threshold. Nevertheless, I note that the respondent wrote to her on 7 June 2007 advising her that she was registered as an accruing member of the Pension Bonus Scheme. However, when she exceeded the gifting threshold, she became subject to a disposal preclusion period and her membership of the scheme became non-accruing.
Subsection 1123(1) of the Act sets out the circumstances in which a person disposes of assets. This includes a person who engages in the course of conduct that directly or indirectly disposes of all or some of the person’s assets. It also includes a situation where the person receives no (or inadequate) consideration in money or money’s worth for the disposal. If the person receives no consideration for the disposal, the amount of the disposal or disposition is an amount equal to the value of the assets that are disposed of. Where the gifting threshold is exceeded, s 1126AA operates to add an amount to the value of the person’s assets, as otherwise determined. It will first apply when the person’s disposals in the financial year first exceed $10,000 in total. The amount added at that time will be the amount by which the total disposals exceed $10,000. Where there are subsequent disposals in the financial year, this will cause the amount of each subsequent disposal to be added to the person’s assets. Each amount added will be for a period of five years, starting on the date of the first disposal. In the applicant’s case, as the gift of $10,000 was made on 22 February 2007 and subsequent charitable donations were made up to and including 10 April 2007, under s 1126AA some amount was added to the applicant’s assets from 22 February 2007 up to and including 9 April 2012. As the SSAT member indicated, the Act confers no discretion on the respondent to disregard any disposition, for any reason, once the gifting threshold is exceeded. As I have inferred above in paragraph 14 of these reasons, even if the applicant’s charitable donations were reduced, the PBS legislation will apply even if any amount (as little as $1.00) is added under s 1126AA. As the name suggests, during a disposal preclusion period, the person involved is precluded from accruing bonus periods and this makes the person’s membership non-accruing during such a period. In the applicant’s case, this non-accruing period should be (and was) applied to her Pension Bonus Scheme claim.
Ms Stephenson suggested that the circumstances of her case should be viewed by the Tribunal sympathetically. She argued that the “golden rule” of interpretation should apply in her case in reading the gifting threshold wording in the Pension Bonus Scheme legislation. The “golden rule” comes from the English decision of Lord Wensleydale in Grey v Pearson [2] where, in that case, he said:
“I have been long and deeply impressed with the wisdom of the rule, now, I believe, universally adopted, at least in the Courts of Law in Westminster Hall, that in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther.”
[2] (1857) 6 HLC 61 at 106; 10 ER 1216 at 1234.
In Statutory Interpretation in Australia, 8th edition, by Pearce and Geddes (at page 37), the authors suggest that the “absurdity” referred to by Lord Wensleydale was an absurdity appearing on the face of the Act from the words that had been used. They assert, correctly in my view, that his Lordship did not contemplate that the Court would review the policy underlying the Act and modify the language of the Act if it considered the result to be absurd. Put shortly, the golden rule contemplated that a mistake had been made in the wording of the Act; President, etc, of Shire of Arapiles v Board of Land and Works.[3]
[3] (1904) 1 CLR 679 per Griffith CJ at 687.
The applicant might think that, in her case, the result is harsh. However, in my opinion, there is no mistake made in the wording of the Pension Bonus Scheme legislation. It must be read literally in the way its actual wording appears.
CONCLUSION
For the reasons outlined above, I am satisfied that the decision of the SSAT on 23 January 2015 is the correct and preferable decision.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 22 (twenty -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne ........................[Sgd]................................................
Administrative Assistant
Dated 17 December 2015
Date(s) of hearing 8 September 2015 Applicant In person Advocate for the Respondent Mr A Hay Solicitors for the Respondent Department of Human Services
Key Legal Topics
Areas of Law
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Social Security Law
Legal Concepts
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Pension Bonus Scheme
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Allowable Gifting Threshold
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Non-Accruing Period
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