Westerman and Repatriation Commission

[2006] AATA 530

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 530

ADMINISTRATIVE APPEALS TRIBUNAL      Nº V2004/981
  Nº V2004/982

VETERANS'       APPEALS       DIVISION

Re:       ALBERT HENRY WESTERMAN AND

LESLEY DENISE WESTERMAN

Applicants

And:     REPATRIATION COMMISSION

Respondent

DECISION

Tribunal:       Regina Perton, Member

Date:             20 June 2006

Place             Melbourne

Decision:The Tribunal affirms the decisions under review. 

(sgd) Regina Perton

Member

VETERANS' AFFAIRS - recipients of veteran's pension – declaration of income – automatic variation of pension – whether reviewable decision - decision under review affirmed

Veterans’ Entitlements Act 1986 ss 5H, 54, 56B, 56D, 57, 175, 205, 206

Re Carrick and Repatriation Commission [2004] AATA 270

Re Deason and Repatriation Commission (1991) 23 ALD 637

Re Embleton and Repatriation Commission [2002] AATA 161

Re Knight and Repatriation Commission (1993) 18 AAR 370

Re Porritt and Repatriation Commission (AAT 1316, 8 August 1996)

REASONS FOR DECISION

20 June 2006  Regina Perton, Member

1.      Albert Westerman and his wife, Lesley Westerman, received service pension from 30 January 2001.  Mr and Mrs Westerman also receive income from other sources including Mrs Westerman’s part-time job as a school bursar.  The rate of service pension can be affected by a recipient’s assets and income from other sources.  These applications for review arise out of a misunderstanding as to what constitutes income for the purposes of service pension.

2.      On 18 October 2003, Mr and Mrs Westerman were informed that their service pension had been reduced to nil because the amount of income they received from other sources exceeded the prescribed income limits.  On 23 February 2004, the Repatriation Commission informed Mr and Mrs Westerman that they had been overpaid service pension and that they had incurred a combined debt to the Commonwealth of $11,200.34.

3.      Mr and Mrs Westerman submitted that they had not provided incorrect information to the Commission.  They indicated that they did not believe that the portion of Mrs Westerman’s income that had been salary sacrificed into her superannuation fund should have been included as declared income for the purposes of service pension. 

4.      The Repatriation Commission submitted that the Tribunal does not have jurisdiction to consider the applications for review lodged by Mr and Mrs Westerman as the decisions made are not reviewable under the pertinent legislation.

5.      In this matter, the Tribunal will consider whether:

·the Tribunal has jurisdiction to consider the applications for review, in whole or in part;

·the definition of income for the purposes of service pension includes salary sacrificed into superannuation funds;

·the Repatriation Commission’s initial calculation of the pension entitlement was based on an incorrect declaration of income.

HISTORY

6.      Mr and Mrs Westerman lodged a claim for service pension on 30 January 2001.  The grant of service pension was approved on 11 April 2001.  The amount of pension paid as from 30 January 2001 was based on the income declared in the claim form and in an employment report dated 1 March 2001.  At that time, Mrs Westerman was salary sacrificing $19,956 per annum into her superannuation.  However, the amount salary sacrificed was not included in the declared income.  The version of the employment form used at that time did not specifically ask for details of amounts that were being salary sacrificed.  The question in relation to income asked for gross weekly wage (including penalty rates and allowances). 

7.      In the letter dated 11 April 2001 the Repatriation Commission informed Mr and Mrs Westerman of the grant of, and rate of, service pension.  The Commission also advised them that if any of the details of the income and assets listed in the letter were incorrect or had been omitted, they should notify the Department of Veterans’ Affairs (DVA) within 14 days.  Mrs Westerman’s income from her employment was listed under the heading Direct Income at the rate of $598.80 per fortnight.  The figure of $299.40 per week was given as Mrs Westerman’s gross weekly wage in an Employment Report dated 27 February 2001 from the school at which Mrs Westerman worked (Exhibit R1).

8.      In September 2003, DVA undertook a review of clients with earnings in their pension assessment.  DVA wrote to Mrs Westerman asking that she complete and sign an Employment Report within 14 days if she was still working.  The form used by DVA had been revised from the version originally given to the Westermans.  As well as asking about the employee’s weekly wage and gross amount paid to the employee in the last financial year, a specific question had been introduced into the form about salary sacrifice, namely: Are the employee’s current gross earnings reduced or foregone in any way as a result of receiving non-income benefits in lieu of salary/wages (known as “salary sacrifice”)?  The Principal of the school indicated that in the previous financial year Mrs Westerman had been paid $18,679.91 in superannuation in addition to a gross amount of $20,861.00.

9.      On 20 October 2003, Mr and Mrs Westerman were informed that their service pension has been reduced to nil.  The reason cited for the reduction was that  the  income earned by Mrs Westerman had been updated to $39,540.91, being her total earnings for the previous financial year.

10.      On 5 November 2003, DVA wrote to Mrs Westerman stating that it appeared that her pension had been overpaid.  Mrs Westerman was asked to provide copies of group certificates for the 2000/2001 and 2002/2003 financial years.  A DVA file note indicates that Mrs Westerman rang DVA the following day.  She told the DVA that she thought that the problem had arisen due to her salary sacrifice into superannuation.  She stated that she had checked with the assessor when she and her husband claimed service pension and she was told that the salary sacrifice portion would not be assessed.  Mrs Westerman told DVA that she had doubts about that advice and checked with the ATO and their accountant and they confirmed the assessor’s advice.  The DVA officer indicated that DVA’s view was different from the ATO’s view.  Mrs Westerman promptly provided the information DVA sought. 

11.     On 23 February 2004, the Repatriation Commission wrote to Mr and Mrs Westerman informing them that they had each been overpaid $5,600.17.  They were asked to repay the moneys within 28 days or contact the Commission to make other arrangements.  On 26 February 2004, Mr Westerman contacted the Commission stating that he did not think he and his wife had done anything wrong and had consulted their accountant and others to check on the salary sacrifice issue before completing any forms. 

12.     On 18 March 2004, Mr and Mrs Westerman’s solicitor, Mr De Marchi, wrote to the Repatriation Commission.  Mr De Marchi described Mrs Westerman’s health issues and indicated that there had been no evasion or prevarication on the part of our client.  He asked that no further action be taken and that his clients’ debts be waived.  On 25 May 2004, a delegate of the Repatriation Commission indicated that Departmental policy does not allow for waiver of overpayments on those grounds.  The due date for repayment of the total amount was extended to 25 June 2004.  On 25 May 2004, Mr Westerman spoke to the delegate advising that his solicitor’s letter should be viewed as an appeal.  Over the next few months, recovery of the debt commenced by instalments. 

13.     On 10 August 2004, a review was undertaken by a different delegate of the Repatriation Commission.  He determined that the debt stood.  He stated:

…

This Department regularly advises pensioners by letter of their obligations under section 54 of the Veterans’ Entitlement Act 1986 (VEA) to notify the Department of an event or change in circumstances that:

·has occurred, or

·is likely to occur, and

·may affect their entitlement to a pension or benefit.

If a person does not respond to a section 54 notice and this results in reduction in pension, the decision to raise the overpayments is an automatic decision under section 56B of the VEA, which means that the Repatriation Commission has no choice about the action to be taken.  Therefore, such decisions are not reviewable under the VEA.  However, I have checked your file to make sure the decision was correct.

I am satisfied that you were both issued with obligation notices when your service pensions were approved in April 2001, and at regular intervals since then.  However, you did not notify us within 14 days that your income from all sources clearly exceeded $1517.97 per fortnight, or that Mrs Westerman received regular increases in her basic gross earnings (not including salary sacrifice) since April 2001.

If a service pensioner does not meet their obligation to notify of a change in circumstances within 14 days then the pensioner will receive an overpayment for excess pension paid.

…

14.     On 24 August  2004, Mr and Mrs Westerman lodged applications for review with the Tribunal.

JURISDICTIONAL ISSUES

15.     The Repatriation Commission initially submitted that the Tribunal does not have jurisdiction to deal with any aspect of the application as the Tribunal had not been conferred with the statutory power to consider a dispute of this nature.  At a hearing on 29 March 2005 before Senior Member Friedman, Mr Douglass, advocate for the Repatriation Commission, conceded that the Tribunal may have jurisdiction to deal with that part of the debt which arose for the period 31 January 2001 to 11 April 2001.  SM Friedman decided that he had jurisdiction to deal with the matter but left in abeyance the question as to whether he had the power to deal with the whole period or just the initial two and a half months.

16.     The Repatriation Commission provided extensive submissions on jurisdictional matters and cited many cases, some of which are discussed below.  In essence, the Repatriation Commission submitted that there are two means of raising an overpayment where the rate of service pension is higher than that permitted under the Act: it may reduce the service pension by making a determination under s 56D of the Act or, alternatively, it may rely on provisions contained in s 56B, where an automatic rate reduction is supplied in particular circumstances.

17. The Repatriation Commission submitted that the Tribunal does not have jurisdiction to review an automatic rate reduction under s 56B of the Act due to the operation of s 57 and s 175(2) of the Act. Alternatively, the Repatriation Commission submitted that any determination that it had made regarding recovery or waiver of an overpayment, pursuant to s 205 or s 206 of the Act, was not reviewable under s 57 of the Act and, therefore, not open to review by the Tribunal.

18.     Mr De Marchi submitted that the Tribunal has jurisdiction to deal with the whole of the period in dispute.

The Overpayment

19. There is no general right of review of each and every decision made by the Repatriation Commission. Section 57 of the Act sets out which decisions made by the Repatriation Commission are reviewable.

(1)      A claimant who is dissatisfied with a decision of the Commission:

(a)in relation to a claim for a qualifying service determination under section 35B; or

(b)in relation to a claim for a service pension or income support supplement; or

(c)in relation to a request under section 52Y (financial hardship);

may request the Commission to review the decision.

(2)A pensioner who is dissatisfied with a decision of the Commission:

(a)cancelling or suspending a service pension or income support supplement; or

(b)determinating the suspension of a service pension or income support supplement; or

(c)reducing or increasing the rate of a service pension or income support supplement; or

(d)refusing a request for an increase in the rate of a service pension or income support supplement; or

(e)in relation to a request under section 52Y (financial hardship);

may request the Commission to review the decision.

…

20. Section 57 of the Act does not contain any specific provision that entitles a recipient of a pension, who is dissatisfied with a decision of the Repatriation Commission that she/he has been overpaid and must reimburse those payments, to seek review of that decision in the Tribunal. The only provision which it could be argued is relevant is s 57(2)(c), which concerns reducing or increasing the rate of a service pension.  However, a decision to recover payments that have already been made is not a decision reducing or increasing the rate of a service pension or income support supplement.

21.     In Re Knight and Repatriation Commission (1993) 18 AAR 370, Deputy President McMahon, when dealing with an application for review regarding an overpayment of a service pension, said:

...There is certainly no jurisdiction to review a decision to waive any part of the overpayment. In my view there is no jurisdiction to review even whether an overpayment exists. In the present case, the primary and review decisions go no further than this first step. Even if one could infer automatic progression to the next steps (and one can not) there would still be no jurisdiction vested in this Tribunal.

22.     The Tribunal has made many other decisions in relation to whether it is possible to seek a review of a Repatriation Commission decision that a pension recipient has been overpaid and whether the overpayment can be recovered.  In Re Porritt and Repatriation Commission (AAT 1316, 8 August 1996), Senior Member Handley determined that he did not have jurisdiction in relation to overpayments, stating (at paragraph 11):

The clear and unambiguous line of authority emerging from the reasons for decisions in applications heard is that this Tribunal cannot review decisions made alleging an overpayment of service pension and/or a decision made to recover service pension allegedly overpaid.

23.     Other decisions where the Tribunal has found there is no jurisdiction to consider overpayments include Re Deason and Repatriation Commission (1991) 23 ALD 637, Re Embleton and Repatriation Commission [2002] AATA 161 and Re Carrick and  Repatriation Commission [2004] AATA 270.

24. The alternative argument dealing with jurisdiction in relation to the overpayment is that the delegate made a decision on the rate of payment pursuant to s 56D rather than the self-operating provisions of s 56B of the Act. On that basis, it is argued that the Tribunal has a right to review that decision. Several Federal Court decisions in social security and immigration law matters were cited. Mr De Marchi also mounted an estoppel argument in relation to the overpayment.

25. The Tribunal is satisfied that the self-operating provisions of s 56B are applicable in this case. The Tribunal does not accept that a delegate made a decision nor that it was reviewed. The text of the letter from an officer of the Repatriation Commission to the Westermans (paragraph 13) reinforces that view. Hence, there is no need to visit the alternative jurisdictional argument.

26.     The Tribunal finds that it does not have jurisdiction to consider the imposition of and/or waiver of the overpayment.

Rate Of Pension Payment

27.     There is no dispute that the Tribunal has jurisdiction to consider whether Mr and Mrs Westerman were paid the correct amount of pension between 30 January 2001 and 11 April 2001.  In essence, this requires the Tribunal to look at whether the salary sacrificed superannuation payments constitute income for the purposes of calculating the correct rate of service pension.  No other aspect of the calculation of income during this period appears to be under challenge.

28.     The terms Income and income amount are defined in s 5H(1) and earned, derived or received in s 5H(2) of the Act:

…

"income" , in relation to a person, means:

(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or

(b)       a periodical payment by way of gift or allowance; or

(c)       a periodical benefit by way of gift or allowance;

but does not include an amount that is excluded under subsection (4), (5) or (8)

…

“income amount" means:

(a)      valuable consideration; or

(b)       personal earnings; or

(c)      moneys; or

(d)       profits;

(whether of a capital nature or not).

…

(2)       A reference in this Act to an income amount earned, derived or received is a reference to:

(a)       an income amount earned, derived or received by any means; and

(b)an income amount earned, derived or received from any source (whether within or outside Australia).

…

29. Section 5H(8) contains a long list of excluded amounts that do not constitute income for the purposes of the Act.  Moneys paid into a superannuation fund are not excluded from the income test.  The definition of income does not state that it is a person’s taxable income that should be declared.  The Tribunal finds that the wrong figure was provided for Mrs Westerman’s earnings from employment. 

30.     Mr and Mrs Westerman gave evidence that they sought advice on whether the superannuation contributions that Mrs Westerman was making by way of salary sacrifice should be included as income for the purposes of applying for the pension.  Unfortunately, it appears that they relied on unsound advice in not declaring the total income figure.  Those persons upon whom they relied  for advice provided incorrect information.  The Tribunal is satisfied that Mr and Mrs Westerman inadvertently rather than deliberately provided the wrong income figure.  Regardless of how or why it happened, the fact remains that the Repatriation Commission paid a higher rate of service pension to Mr and Mrs Westerman than that to which they were entitled during the period from 30 January 2001 to 11 April 2001.  

31.     As stated earlier, the Tribunal does not have jurisdiction to consider whether Mr and Mrs Westerman should be required to reimburse the total amount sought by the Repatriation Commission due to the overpayment of service pension. 

DECISION

32.     The Tribunal affirms the decisions under review.

I certify that the thirty-two [32] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

signed:     Olympia Sarrinikolaou      

Clerk

Date of hearing:  16 August 2005
Final submissions:  5 December 2005

Date of decision:  20 June 2006
Advocate for applicant:               Mr D. De Marchi
Advocate for respondent:            Mr R. Douglass