Whiterod and Secretary, Department of Social Services (Social services second review)

[2016] AATA 168

Whiterod and Secretary, Department of Social Services (Social services second review) [2016] AATA 168 (22 March 2016)

Division	GENERAL DIVISION
File Number	2014/3573
Re	Bruce Whiterod
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Senior Member N A Manetta
Date	22 March 2016
Place	Adelaide

The Tribunal affirms the decision under review.

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Senior Member N A Manetta

CATCHWORDS

SOCIAL SECURITY - Age Pension - Pension Bonus Scheme - international agreement with New Zealand - whether applicant's spouse’s entitlement to a New Zealand social security benefit should be taken into account in calculating applicant's pension bonus -  decision under review affirmed.

LEGISLATION

Social Security Act 1991

Social Security (International Agreements) Act 1999

REASONS FOR DECISION

Senior Member N A Manetta

22 March 2016

1. This is an application by Mr Bruce Whiterod for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 27 June 2014.  The SSAT affirmed decisions taken within the respondent’s department that Mr Whiterod’s pension bonus under the Social Security Act, 1991 (the Act) was to be reduced by reference to the New Zealand social security benefit received by his wife, Ms Whiterod.  Mr Whiterod maintains that his pension bonus should be calculated without reference to her New Zealand benefit.  In particular, Mr Whiterod emphasised before me that in his view he had a continuously accruing right to the bonus and that this right could not be affected by any income derived by Ms Whiterod.  At the hearing, Mr Whiterod represented himself; Mr Parker appeared for the Respondent.

   BACKGROUND FACTS 

   Career

2. First, I set out the salient background facts.  Mr Whiterod gave evidence which was not disputed by the Respondent.  He was born in New Zealand in 1943 and emigrated to Australia in 1969 or 1970.  He is an electrical engineer by vocation.  He worked full time in Australia and became an Australian citizen in the 1980s.  In 2003 he returned to New Zealand to care for his ailing mother.  After her death in 2005, he married Ms Whiterod, who is a New Zealander.  They returned to Australia in 2006, and he recommenced his career here as an electrical engineer. 

3. In August 2008 Mr Whiterod turned 65.  He had heard about the age pension bonus scheme and decided to join it.  He understood the scheme provided an incentive for older people who were otherwise qualified to receive an age pension to remain in the workforce.  The deferral of his pension application would see him rewarded with a bonus in due course as a reward for relieving Australian taxpayers of the financial responsibility of supporting him as soon as he had reached the pensionable age of 65.  He understood that he had to work a minimum of 960 hours per year while a member of the scheme and did so.

4. In May 2013, Mr Whiterod ceased work and claimed an age pension and the pension bonus.  He had worked for almost five years from the date of his sixty-fifth birthday. 

   Centrelink’s calculation

5. Centrelink calculated his age pension bonus in the following way.  So far as the calculation is concerned, I do not understand Mr Whiterod to dispute it except at one critical step.  The steps are set out next to bullet points in the authorised review officer’s (ARO’s) decision.[1]  I note that by the time Mr Whiterod claimed his pension bonus, Ms Whiterod had become eligible to receive, and was in receipt of, a New Zealand age pension of $14,584.41 per annum.  The ARO’s letter records as follows:

   [1] Exhibit R1, T3 pp 10-13.

   In calculating the Pension Bonus payable to you at 1 June 2013, I provide the

   following calculations-

   The maximum basic rate of Age Pension including pension supplement $14,843.40pa

   Total combined New Zealand pension  $14,584.61pa

   Therefore, the Pension Bonus payable is –

   ·Work out the annual pension rate plus the Pension Supplement Component for Pension Bonus.  In your case the annual pension rate plus the Pension Supplement Component for Pension Bonus payable to you on 1 June 2013 was $14,843.40.

   ·Subtract 50% of the total combined New Zealand pension $14,584.61 divided by 2 = $7,292.30.

   ·$14,843.40 - $7,292.30 = $7,551.10  Age Pension payable

   ·Work out the overall qualifying period (the total period of accruing membership).  In your case this is 4.8 years (14 August 2008 to 31 May 2013).

   ·Work out the pension multiple by multiplying the overall qualifying period by 0.094.  The pension multiple is 4.8 x 0.095 = 0.451.

   ·The Pension Bonus amount is then calculated by multiplying your annual pension rate ($7,551.10) by the pension multiple (0.451) = $3,405.55.  This is then multiplied again by the Overall Qualifying Period (4.8 years) = $16,346.60.

   ·The amount of Pension Bonus that you were entitled to receive was correctly calculated to be $16,346.60.

6. Mr Whiterod takes issue with the second bullet point only.  He objects to the fact that his wife’s pension (50 per cent of which was attributed to him) was taken into account.  The Secretary contends that it was proper to take it into account.

   CRITICAL QUESTION BEFORE THE TRIBUNAL

7. The critical question before the Tribunal is, therefore, whether Australia’s regulatory regime (including the Act and other legislation) required Ms Whiterod’s New Zealand pension to be taken into account. I now turn now to summarise that regulatory regime. 

   REGULATORY REGIME

   Social Security (International Agreements) Act 1999

8. First, the Social Security (International Agreements) Act 1999 (International Agreements Act) provides, in sub-ss 6(1) and (2) as follows:

   6(1) The provisions of a scheduled international social security agreement have effect despite anything in the social security law.

   6(2) Subsection (1) applies to a provision of an agreement only in so far as the provision is in force and affects the operation of the social security law.

   I note that the effect of s 6 of the International Agreements Act is to require the provisions of the Agreement to be applied notwithstanding anything in the social security law of Australia.

   International Agreement with New Zealand

9. Schedule 1 to the International Agreements Act incorporates an agreement with the New Zealand Government (the Agreement).  Article 13 of the Agreement is headed Calculation of Australian Benefits and is in the following terms:

   1.    Where an Australian benefit is payable to a person, whether by virtue of the Agreement or otherwise, the rate of that benefit shall be determined under the social security law of Australia but when assessing the income of that person, no New Zealand benefit paid to that person shall be regarded as income.

   2.    Subject to paragraph 3, where an Australian benefit is payable, by virtue of this Agreement or otherwise, to a person who is in Australia, the rate of that benefit shall be determined by:

   (a)calculating that person’s income according to the social security law of Australia but disregarding in that calculation the New Zealand benefit or benefits received by that person;

   (b)deducting the amount of the New Zealand benefit or benefits received by that person from the maximum rate of that Australian benefit; and

   (c)applying to the remaining benefit obtained under subparagraph (b) the relevant rate calculation set out in the social security law of Australia, using as the person’s income, the amount calculated under subparagraph (a).

   3.    Where a member of a couple is, or both that person and his or her partner are, entitled to a New Zealand benefit or benefits, each of them shall be deemed, for the purpose of this Article and for the social security law of Australia, to receive one half of either the amount of that benefit or the total of both those benefits, as the case may be.

10. I note that paragraphs [1] and [2] refer to an “Australian benefit” that is payable to a person.  If the International Agreements Act, in combination with the Agreement, is to apply to Mr Whiterod’s circumstances, it can only be because the term “Australian benefit” in Article 13 includes a reference to the age pension bonus.  I note further that, if that is the case, paragraph [3] will operate to deem Mr Whiterod to be in receipt of one half of Ms Whiterod’s New Zealand pension.

11. The Agreement defines benefit as follows, unless the context otherwise requires:

    (b)“benefit”, in relation to a Party, means the benefits as listed and defined in Article 2 and unless otherwise stated includes any amount, increase or supplement that is payable in addition to that benefit or in respect of a person who is eligible for that amount, increase or supplement under the social security law of that Party;

12. I note immediately that I do not believe the context requires a different meaning to be applied in the construction of Article 13; and so, in my opinion, the definition applies.  So far as Australian benefits are concerned, the benefits listed in Article 2, which the definition picks up, are the age pension, the disability support pension, and a carer payment in respect of the partner of a disability support pension recipient. 

13. There is no reference in Article 2 to the age pension bonus; but the definition provides that “benefit” shall include, “unless otherwise stated, any amount, increase or supplement that is payable in addition to that benefit...”.  If the age pension bonus is an amount, increase or supplement payable in addition to the age pension, it will be a benefit for the purposes of the definition in paragraph (b) of paragraph [1] and a benefit for the purposes of Article 13.  Paragraph [2](b) will then authorise the deduction made by the ARO at the second bullet point in the calculation set out at paragraph [5] above.

    CONCLUSION AND REASONS

14. In my opinion, the age pension bonus is an “amount, increase or supplement payable in addition to” the age pension.  The bonus is payable only where the age pension is itself payable.[2]  If a person, at the time of claiming a pension bonus, is ineligible to receive an age pension (because of the applicability of assets and income testing for example) no pension bonus is payable.  In my opinion, as the payment of the pension bonus depends upon the existence of an eligibility to receive the age pension, it is right to describe the bonus as an amount, increase or supplement payable in addition to the age pension. 

    [2] See, generally, Part 2.2A, Division 6 of the Act.

15. In my opinion, this conclusion gains support also from a consideration of the purpose of the Agreement.  Broadly speaking, one of its purposes is to identify particular categories of Australian social security benefit and to apply rules to them which will require their recalculation if benefits are received in New Zealand by the person or his or her partner.  Although it is a distinct benefit under the Act with its own qualification rules, the pension bonus is very closely linked to the age pension and, as I have said, is not payable unless an age pension is also payable.  It seems to me to be the type of benefit that the Agreement was intended to deal with.

16. It follows, in my opinion, that Article 13, when it refers to an Australian “benefit” being payable to a person should be read as including a reference to the pension bonus.  As I have already noted, section 6 of the International Agreements Act requires the provisions of the Agreement to have effect despite anything in the Act. 

    MR WHITEROD’S SUBMISSION

17. Mr Whiterod pressed me with a submission that he enjoyed a continuously accruing right under the pension bonus scheme and that he ought to receive a bonus calculated without reference to Ms Whiterod’s pension, which as I understand his evidence, only became payable to her between the date he joined the pension bonus scheme in 2008 and the date he made his claim for the bonus in 2013.  Had he ceased work earlier than the date of Ms Whiterod’s receipt of her New Zealand pension, he would have received a pension bonus that was not discounted by reference to Ms Whiterod’s future pension entitlement.  The multiplier[3] would have been less, but his overall payment would have been higher.

    [3] Determined, in part, by reference to his years of membership of the scheme.

18. I accept that as a result of supervening events, Mr Whiterod has received a lesser bonus than he would have received had he left the scheme earlier.  Mr Whiterod submitted that this result was illogical and unfair and that his accruing rights to the bonus should not be diminished by supervening events. 

19. I think it is clear, however, that there was no continuously accruing right that entitled Mr Whiterod to any particular amount.  In some circumstances, for example, it is quite clear that an applicant will receive no pension bonus at all on account of supervening events.  A simple example illustrates the point.  If, after a person joins the pension bonus scheme and continues to work for a number of years, he or she receives an annuity under a will, that annuity will be taken into account for the purposes of assessing the person’s entitlement to an age pension.  If the annuity is sufficiently large, it will eliminate the right to an age pension altogether; and, if it does so, it will also eliminate any right to a pension bonus (as the latter depends on an entitlement to an age pension).  Had the person applied for a pension bonus and an old age pension before receipt of the legacy and been otherwise eligible to receive them, the pension bonus would have been calculated without regard to the possible[4] legacy.  The age pension, too, would also have been initially paid without regard to the legacy (although the pension, as an ongoing benefit, would be reduced once the legacy was received). 

    [4] It being open to a testator to change a will at any time.

20. I have chosen the example of an annuity precisely because it does not involve international agreements.  It shows that the pension bonus scheme was not intended to guarantee a person a particular amount of money, but was intended, rather, to offer an incentive to continue to work that may, or may not - depending on the person’s circumstances at the time of claiming the bonus - result in the payment of a sum.  In the example I have given, it cannot be said that there was any continually accruing right to a bonus.  Rather, the bonus only becomes payable when an appropriate claim is made for it, and its level will be determined by, amongst other things, the level of the age pension entitlement at the time the claim is made. 

21. It follows, in my opinion, that Mr Whiterod’s submission is, unfortunately, inconsistent with the scheme of the Act, which does not guarantee any particular amount of pension or bonus.  I have considerable sympathy for Mr Whiterod because he has, no doubt, persevered in his career after the age of 65 with the genuine, but false, expectation of receiving a higher pension bonus that he has received.  In the matter before me, however, the critical legal question is not his expectation, but whether the Agreement, when referring to a “benefit”, was intended to apply not simply to the age pension but also to the age pension bonus.  For the reasons given, I think this consequence was intended. 

    FORMAL DECISION

22. I affirm 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 N A Manetta

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Administrative Assistant

Dated 22 March 2016

Date(s) of hearing	2 April 2015
Date final submissions received	22 April 2015
Applicant	In person
Advocate for the Respondent	Mr A Parker
Solicitors for the Respondent	Department of Human Services