VHTH BZLW and Secretary, Department of Social Services
[2014] AATA 860
•20 November 2014
[2014] AATA 860
Division GENERAL ADMINISTRATIVE DIVISION File Numbers
2014/3568
2014/4560
Re
VHTH
BZLW
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Dr P McDermott RFD, Senior Member
Date 20 November 2014 Place Brisbane The Tribunal affirms the decision under review.
..............................[Sgd]..........................................Dr P McDermott RFD, Senior Member
CATCHWORDS
SOCIAL SECURITY – Newstart Allowance – Income maintenance period – Ordinary income – Termination payment - Financial hardship – Special benefit – Decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth), ss 8, 19C, 643, 729, 1068, 1072
Income Tax (Transitional Provisions) Act 1997 (Cth), s 82.10F
REASONS FOR DECISION
Dr P McDermott RFD, Senior Member
20 November 2014
INTRODUCTION
I have to determine whether Centrelink was correct to suspend the Applicant's Newstart Allowance on the basis that she was subject to an income maintenance period (“IMP”) as well to deny her claim for a special benefit.
The issues for determination by the Tribunal in this case are:
·whether the Applicant is subject to an IMP commencing on 5 March 2014 and ending on 30 October 2014 ; and
·whether the whole or part of the IMP should not apply to the Applicant, due to “severe financial hardship” arising from “unavoidable or reasonable expenditure”[1] incurred by the Applicant during the IMP; and
·whether the discretion to pay a Special Benefit should be exercised in the Applicant's favour.
[1] Subsection 1068-G7AM; s 19C of Social Security Act 1991 (Cth).
BACKGROUND
On or about 5 March 2014 the Applicant was entitled to a termination payment of $29,308 from her previous employer. There is evidence that this gross amount is calculated on the basis that the Applicant was entitled to 130 days of redundancy payment amounting to $22,245; two days of annual leave amounting to $372 and 40 days of long service leave amounting to $6,691. The sum of $27,073.27 (the net amount of the payment) was paid into the applicant's bank account on 4 March 2014.[2]
[2] Exhibit B, page 12.
On 13 March 2014 Centrelink made a decision that an IMP applied in respect of the period 5 March 2014 to 30 October 2014 and that Newstart Allowance would be suspended for that period.
On 17 March 2014 an Authorised Review Officer (“ARO”) affirmed the decision.
On 2 June 2014 the Social Security Appeals Tribunal (“SSAT”) affirmed the continued suspension.On 24 June 2014 the Applicant made a claim for Special Benefit. On 9 July 2014 the claim was rejected. On 30 July 2014 an ARO affirmed the decision to reject the claim. On 12 August 2014 the decision was affirmed by the SSAT.
The Applicant has now sought review of both decisions by this Tribunal.
LEGISLATION
Ordinary Income
Section 643 of the Social Security Act 1991 (Cth) (“the Act”) provides that a person's rate of Newstart Allowance is worked out using the Benefit Rate Calculator B at the end of
s 1068 of the Act. Module G of s 1068 of the Act provides a Method Statement for calculating the effect that a person's ordinary income has on the maximum payment rate.The term “ordinary income” is defined in s 8(1) of the Act to exclude maintenance income or an exempt lump sum. The term “income” as applied to a person is defined in
s 8(1)(a) of the Act to include “an income amount earned, derived or received by the person for the person's own use or benefit”. Section 1072 of the Act providesA reference in the Act to a person's ordinary income for a period is a reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.
Division 1A has no relevance to this application.
Termination Payment
Subsection 1068-G7 of the Act provides:
Subject to points 1068-G7AF to 1068-G7AR (inclusive), if
(a) a person's employment has been terminated; and
(b)as a result the person is entitled to a lump sum payment from the person's former employer;
the person is taken to have received the lump sum payment on the day on which the person's employment was terminated.
Subsection 1068-G7AH of the Act provides:
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.
Subsection 1068-G7AQ of the Act defines “termination payment” as including
(a) a redundancy payment; and
(b)a leave payment relating to a person's employment that has been terminated; and
(c) any other payment that is connected with the termination of a person's employment.
Subsection 1068-G7AQ of the Act provides:
“redundancy payment” includes a payment in lieu of notice, but does not include a directed termination payment within the meaning of s 82-10F of the Income Tax (Transitional Provisions) Act 1997.
Section 82.10F of the Income Tax (Transitional Provisions) Act 1997 (Cth)
(“the Income Tax Act”) provides:(1)A transitional termination payment (or part of such a payment) is a directed termination payment if:
(a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made…
Choice to make payment
(2)An individual may choose, within 30 days after a pre-payment statement about a transitional termination payment is given to the individual under section 82-10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual:
(a) to a complying superannuation plan; or
(b) to purchase a superannuation annuity.
(3) To make the choice, the individual must:
(a) make it in the approved form; and
(b) give the completed form to the payer.
(4)The payer must, immediately after receiving a completed form under subsection (3):
(a)give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and
(b) comply with the direction (or directions) in the form.
The redundancy payment of the Applicant is not a directed termination payment within the meaning of s 82-10F of the Income Tax Act as no part of that payment has been placed in a complying superannuation plan or used to purchase a superannuation annuity.
The termination payment included a payment for annual leave and long service leave, this payment for these types leave comes within the definition of “leave payment” in
s 1068-G7AR of the Act which expressly refers to annual leave and long service leave.Income Maintenance Period
As the Applicant received a termination payment for the purposes of ss 1068-G7AH, 1068-G7AQ and 1068-G7AR of the Act when she ceased employment she is subject to an IMP.
The Applicant was paid the termination payment on 5 March 2014 and the IMP commences on that day in accordance with s 1068-G7AKA of the Act which provides:
The income maintenance period starts, subject to point 1068-G7AKB, on the day the person is paid the termination payment.
Section 1068-G7AKB of the Act has no relevance to this application.
Severe Financial Hardship
Subsection 1068-G7AM of the Act provides for the possibility of not applying all or part of the income maintenance period and states:
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.
The term “severe financial hardship” is defined in s 19C(2) of the Act in respect of a person who is not a member of a couple to require that the value of the person's liquid assets 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. The present maximum rate of Newstart Allowance for a single person per fortnight (including rent assistance) is $643.20. In relation to Newstart allowance the maximum payment rate is the rate “worked out at Step 4 of the Method statement in Module A of the applicable rate calculator” as per s 19C(8)(b).
The term “unavoidable or reasonable expenditure” in relation to a person to whom an IMP applies is defined in s 19C(4) of the Act and includes various items of expenditure which are not relevant to this application. It also includes any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.[3] It does not include any reasonable costs of living other than those referred to in s 19C(4)(a).
[3] Subsection 19C(4)(k) of the Act.
The term “reasonable cost of living” is defined in s 19C(5) and includes, but is 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; and
(h)any other cost that the Secretary determines is a reasonable cost of living in relation to a person.
CONSIDERATION
Maximum Reduction for Reasonable Living Costs
The IMP is from 5 March 2014 to 7 October 2014. This is a period of 31 weeks and the maximum allowable reduction for reasonable living costs is $9,969.60 (31 x $321.60)
(s 19C(6)(c)). The available liquid assets as at the commencement of the IMP were at least $31,265.68, being the $27,083.27 (net) received from the termination payment as well as proceeds from shares totaling $4,182.41. It was common ground that in order to be in severe financial hardship the Applicant would need to have in excess of $25,000[4] of unavoidable or reasonable expenditure during the IMP. There is no evidence of such unavoidable or reasonable expenditure. Indeed there are a number of substantial withdrawals of cash from hotels, on some occasions multiple withdrawals were made on the same day. It is not apparent how these funds were applied.[4] Exhibit A, page 7, paragraph 15.
The Applicant has provided evidence for expenditure of $132.90 to State Penalties Enforcement Registry and $1,106 to Australian Receivables (in relation to Energy Australia). The Applicant has also provided some evidence of a credit card payment of $5,122.95 on 6 March 2014.
It would appear that there was a repayment of a loan to her parents in the amount of $3,900 (plus $10 fee amount); a payment to Lombard Finance in the amount of $4,892.35; hair removal services totaling $361.00; purchases of clothes and cosmetics totaling $635.82; jewellery purchases of $692.95 and electronics purchases totaling $212. If it were assumed that this expenditure was unavoidable or reasonable, the total amount of this expenditure amounts to approximately $17,065.97. While the repayment of credit card debt is commendable, the repayments of more than the required repayment instalment in circumstances could not be regarded as unavoidable or reasonable. There was no evidence that the payment of debt to her parents had to be made. The purchase of jewellery and electronics could not be regarded as unavoidable or reasonable. I am not satisfied that if there is any hardship that this is the result of unavoidable or reasonable expenditure and accordingly there is no basis for any reduction in the IMP.
Special Benefit
Section 729 of the Act prescribes the qualification criteria for special benefit “special benefit is a discretionary benefit and is available only to a person who is not able to get any other income support payment.”[5] I have reviewed the evidence before me and am not satisfied that there are reasons why I should exercise the discretion to grant special benefit when I cannot be satisfied how the liquid assets of the Applicant have been expended.
[5] Section 729(1) of the Act.
DECISION
I affirm the decision under review.
I certify that the preceding 27 (twenty - seven) paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott RFD, Senior Member. .................................[Sgd].......................................
Associate
Dated 20 November 2014
Date of hearing 7 October 2014 Applicant In person Solicitors for the Respondent Joe Guthrie, Department of Human Services
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