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

[2017] AATA 1057

Wightman and Secretary, Department of Social Services (Social services second review) [2017] AATA 1057 (30 June 2017)

Division:GENERAL DIVISION

File Number(s):      2016/4848  

2016/4849

Re:Douglas Wightman

Caryl Wightman

APPLICANTS

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Egon Fice, Senior Member

Date:30 June 2017  

Place:Melbourne

The decision under review is affirmed.

........................[sgd]................................................

Egon Fice, Senior Member

AGE PENSION – rate of payment - entitlement subject to income and assets test -  failure to comply with guidelines for lodging information about income streams from superannuation fund - whether legislative provisions dealing with asset-test exempt income were correctly applied - actuarial certificate not provided within statutory time limit - no discretion existed to extend time – decision affirmed

Legislation

Social Security Act 1991, ss 9A, 55, 1064, 1118,
Administrative Appeals Tribunals Act 1975, ss 34J, 43
Legislation Act 2003, s 8

Secondary Materials

Social Security (Actuarial Certificate – Lifetime Income Stream Guidelines) Determination 2012

REASONS FOR DECISION

Egon Fice, Senior Member

30 June 2017

1. Mr and Mrs Wightman are pensioners. In 2016 they were both in receipt of the Age Pension pursuant to Chapter 2, Part 2.2 of the Social Security Act 1991 (the Social Security Act). Mr and Mrs Wightman also receive retirement income from the Wightman Family Superfund.

2. The rate of Age Pension to which Mr and Mrs Wightman were entitled is subject to the income and assets test. However, some income streams received by persons eligible for Age Pension payments are exempt from the income and assets tests and are commonly referred to as an asset-test exempt income stream. Section 9A of the Social Security Act relevantly provides:

   (1) An income stream provided to a person is an asset-test exempt income stream for the purposes of this Act if:

   (aa)subject to subsection (1AA), the income stream’s commencement day happens before 20 September 2007; and

   (a)it is an income stream arising under a contract, or governing rules, that meet the requirements of subsection (2) and the Secretary has not made a determination under subsection (4) in respect of the income stream; and

   (b)subject to subsections (1B), (1C) and (1D), the Secretary is satisfied that in relation to an income stream, provided by a class of providers specified by the Secretary for the purposes of this paragraph, there is in force a current actuarial certificate that states that the actuary is of the opinion that, for the financial year in which the certificate is given, there is a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules; and

   (c)the Secretary is satisfied that the requirements of subsection (2) are being given effect from the day income stream commences to be paid.

   Note: For paragraph (b), financial year means a period of 12 months commencing on 1 July: see the Acts Interpretation Act 1901.

3. Section 9A(1B) of the Social Security Act makes provision for guidelines relating to actuarial certificates. In addition, s. 9A(1C) places a time limit for the period in which an actuarial certificate remains in force. The problem for Mr and Mrs Wightman is that despite a number of requests from Centrelink, they failed to comply with the guidelines for lodging information about their income streams from their superannuation fund within the time required and therefore the Secretary (Centrelink) made a decision on 8 February 2016 to convert their self-managed Superfund income stream to an asset tested income stream thereby reducing their Age Pension rate from 1 January 2016.

4. In a letter dated 1 March 2016 Associate Director of Dixon Advisory, on behalf of Mr and Mrs Wightman, requested a review of Centrelink’s decision to reduce their Age Pension rate. That decision was reviewed by an Authorised Review Officer (ARO) who determined, on 22 March 2016, that the decision was correct. Mr and Mrs Wightman then sought further review by the AAT, Social Services & Child Support Division (AAT 1). The AAT 1 decision was handed down on 9 August 2016, affirming the ARO’s decision.

5. On 12 September 2016 Mr and Mrs Wightman lodged applications with this Tribunal seeking review of the AAT 1 decision.

6. The parties in this matter agreed to the review being conducted and determined without a hearing in accordance with s. 34J of the Administrative Appeals Tribunals Act 1975 (the AAT Act). I am satisfied that the issues for determination on review of the decision of AAT 1 can be adequately determined in the absence of the parties.

7. The only issue before me in this matter is whether the legislative provisions dealing with asset-test exempt income were correctly applied. The facts are not in dispute.

   RATE OF AGE PENSION

8. The rate of age pension payable to a person qualified to receive that pension is calculated as stated in s. 55 of the Social Security Act. It provides:

   A person’s age pension rate is worked out:

   (a)if the person is not permanently blind – using Pension Rate Calculator A at the end of section 1064 (see Part 3.2); or

   (b)if the person is permanently blind – using Pension Rate Calculator B at the end of section 1065 (see Part 3.3).

9. Section 1064 (1) relevantly provides:

   (1) The rate of:

   (a)age pension; and

   …

   is, subject to subsection (2), to be calculated in accordance with the Rate Calculator at the end of this section.

10. The Pension Rate Calculator A establishes 12 steps in its Method Statement for the calculation of the rate of pension payable to an eligible person. Step 8 requires a person’s income to be taken away from the maximum payment rate producing what is described as the income reduced rate. Step 9 requires calculation of the assets test using Module G. It is located at s. 1064-G1. Having worked out the reduction for assets, Step 10 requires a reduction for assets to be made from the maximum payment rate producing what is described as the assets reduced rate. The lower of the two (income reduced rate or assets reduced rate) is described as the provisional annual payment rate. The final rate of pension payable to an eligible person may then be subject to further adjustments for special employment and remote area allowance.

11. Not all assets are taken into account when determining the value of a person’s assets for the purpose of the Age Pension. Those excluded are set out in s. 1118 of the Social Security Act. That section provides for a number of assets to be excluded including, relevant to this matter:

    …

    (d)the value of any asset-test exempt income stream of the person, other than a partially asset-test exempt income stream;

    (da) half of the value of any partially asset-test exempt income stream of the person;

    …

12. I have set out above at [2] the meaning of asset-test exempt income stream. Section

    
    

    9A(1)(b) of the Social Security Act refers to the requirement that there be in force a current actuarial certificate. Section 9A(1B) provides for the Secretary to make guidelines regarding actuarial certificates. It provides:

    The Secretary may determine, in writing, guidelines to be complied with when determining whether an actuarial certificate is in force and what constitutes a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules.

13. The current guidelines are titled: Social Security (Actuarial Certificate – Lifetime Income Stream Guidelines) Determination 2012 (the Guidelines). The guidelines are dated 14 December 2012. There can be little doubt that the Guidelines properly fit within the description subordinate or delegated legislation. The Legislation Act 2003 (the Legislation Act) deals with legislative instruments, often referred to as subordinate legislation or delegated legislation. While such instruments are not laws made by the Parliament, the provisions in the enabling Act, which form the foundation for those instruments, are passed by the Parliament. Furthermore, delegated legislation is subject to Parliamentary scrutiny and, where necessary, instruments are amended or revoked. The provisions in legislative instruments cannot exceed the powers granted by the enabling Act, nor can they contradict any provisions in that Act. Should that occur, such provisions would be unlawful, often described as ultra vires.

14. Section 8 of the Legislation Act sets out the definition of what is described as a legislative instrument. It provides:

    (1)  A legislative instrument is an instrument to which subsection (2), (3), (4) or (5) applies.

    Note: Instruments that can be legislative instruments may be described by the enabling legislation in different ways, for example as regulations, rules, ordinances or determinations.

    (2)  If a primary law gives power to do something by legislative instrument, then:

    (a)if the thing is done, it must be done by instrument; and

    (b)that instrument is a legislative instrument.

    Example 1: A primary law provides that “The Minister may, by legislative instrument, determine license conditions for the purposes of this section”.

    …

    (3)…

    (4) An instrument is a legislative instrument if:

    (a)the instrument is made under a power delegated by the Parliament; and

    (b)any provision of the instrument:

    (i)     determines the law or alters the content of the law, rather than determining particular cases or particular circumstances in which the law, as set out in an Act or another legislative instrument or provision, is to apply, or is not to apply; and

    (ii)    has the direct or indirect effect of affecting a privilege or interest, imposing an obligation, creating a right, or varying or removing an obligation right.

    …

15. The crucial point in this matter is that the enabling provision (s. 9A(1B) of the Social Security Act) provides that in determining whether an actuarial certificate is in force or a particular income year, there must be compliance with the guidelines. Part 2 of the Guidelines explains the requirements for an asset-test exempt lifetime income stream from a self-managed superannuation fund. The relevant section is 2.1 which provides:

    (1)  Subject to subsection (2), if the provider of an income stream is included in the class of providers specified in section 1.6 then a member or the trustee of the fund must provide an actuarial certificate to the Department of Human Services.

    (2)  The actuarial certificate required to be provided to the Department of Human Services by the person or trustee of the fund under subsection (1) must:

    (a)be prepared in accordance with the Institute of Actuaries of Australia Guidance Note 465;

    (b)be certified no later than 26 weeks after the start of the financial year to which it applies and be provided to the Department of Human Services no later than 3 weeks after the end of that 26 week period;

    (c)specify whether there is a high degree of probability, at the valuation date, of the fund meeting the income stream payments specified under the fund’s trust deed or governing rules; and

    (d)specify an enforced period from 1 July to 30 June of the financial year in which the certification occurs.

16. It is important to observe that the time periods set out in subsection (2) are mandatory. There is no provision in the Guidelines for the exercise of discretion to expand the time requirements, although the Guidelines in fact contain a 3 week extension to the mandatory 26 weeks after the start of a financial year. The 26 week period is mandated in s. 9A(1C) of the Social Security Act which provides:

    If, on 30 June in the financial year, an actuarial certificate referred to in paragraph (1)(b) is in force in relation to an income stream, then paragraph (1)(b) does not apply in relation to the next financial year (the later year) for the period:

    (a)beginning on 1 July for the later year; and

    (b)ending at the earlier of the following:

    (i)     the start of the first day in the later year on which any actuarial certificate is given to the Secretary in relation to that income stream;

    (ii)    the end of the period of 26 weeks beginning on one July of the later year.

    WERE THE MANDATORY TIME LIMITS MET

17. An actuarial certificate is required for each financial year, that is, between 1 July and 30 June. Section 9A(1D) of the Social Security Act provides:

    For the purposes of paragraph (1)(b), if an actuarial certificate is given to the Secretary in a financial year in relation to an income stream, then any actuarial certificate given to the Secretary later in that financial year in relation to that income stream has no effect.

18. However, that requirement is modified by s. 9A(1C) of the Social Security Act. Therefore, where the actuarial certificate was in force for a financial year, a new actuarial certificate need not be provided until the period of 26 weeks beginning on 1 July of the following year has expired. In calendar terms, that means that a new actuarial certificate must be provided by 30 December of that following year. However, the Guidelines extend that period for a further three weeks which would take the date to 21 January of the next calendar year.

19. In a letter dated 4 August 2015 Centrelink wrote to Mr Wightman requesting information about the income stream he was receiving from the Wightman Family Superfund. It also included the following information regarding the life expectancy asset test exempt income stream:

    ·     a copy of the new actuarial certificate for the current financial year. If you do not provide a new valid actuarial certificate by 31 December 2015, the full value of your income stream will be assessed as an asset.

    Actuarial certificates are valid for 12 months from the first day of the ‘in force’ period. The ‘in force’ period is 1 July to 30 June of the year in which the certification occurs.

20. Centrelink wrote a further letter to Mr Wightman on 20 December 2015 requesting information, including a full copy of the current schedule for his and his wife’s income stream products. The information was sought by 3 January 2016. On 8 February 2016 Centrelink explained to Mr Wightman that an actuarial certificate was required to confirm there was a high probability that the fund could meet the income stream payments under the fund’s trust deed or governing rules. The letter explained that the certification was for the period between 1 July and 31 December of the current financial year (2016) and had to be provided to the Department of Human Services by 21 January of that year. Because Mr Wightman had not done so, Centrelink informed him that his income stream had lost its asset test exempt status from 1 January 2016.

21. A detailed statement was finally provided by Mr Timothy Higgins, an actuary, on 31 January 2016. It set out the details for both Mr and Mrs Wightman.

22. In a letter dated 1 March 2016 from Dixon Advisory to Centrelink, Dixon Advisory informed Centrelink that the administration of the Wightman’s self-managed superannuation fund was transferred from MLC to Dixon Advisory in the 2015 income year (which ended on 30 June 2015). However, it was not until 9 February 2016 that Dixon Advisory sent the actuarial certificate to Centrelink. Dixon Advisory also noted that on 16 December 2015 one of their Superannuation Managers contacted Centrelink to provide information about the income stream on behalf of Mr and Mrs Wightman and to enquire about an extension of time to submit the actuarial certificate. According to that Superannuation Manager, Centrelink told her that an extension of the due date to 31 January 2016 would be granted. That statement is supported by a file note made by Centrelink on 17 December 2015 which states:

    Nominee contacted CC TOOWOOMBA on 17 DEC 2015 regarding General Enquiry for Age Pension. Information was obtained via Phone Call. Document created by G4G on 17 December 2015.

    nominee Emma [phone] has req’d extn until end Jan 2016 due to delay in getting the exact figures to complete the reviews.

    nominee has requested that the payts NOT be suspended as the changes are minimal and there is no risk of overpayment – more likely underpayment.  Plse DO NOT suspend.

23. Despite the above request and the statement by the customer services officer at Centrelink not to suspend pension payments, Centrelink, correctly in my opinion, determined that while it was most unfortunate that the actuarial certificate was not provided within the statutory time limit, no discretion existed to extend time. In fact the ARO contacted Dixon Advisory on 22 March 2016 accepting that they were advised that an extension of time could be provided. The ARO apologised stating that Dixon Advisory were provided with the incorrect information although generally, extensions can be provided. The problem in this case, as was correctly pointed out by the ARO, is that the time limits are written into the legislation dealing with this matter. That legislation indicates the time limits are mandatory and there are no provisions for the exercise of discretion.

24. Despite what Dixon Advisory was told by the Centrelink officer, it seems to me that a prudent person engaged to perform the work which Dixon Advisory was on behalf of Mr and Mrs Wightman, would have checked the legislative provisions and not simply relied on the Centrelink officer. While Centrelink clearly attempts to assist all of its customers, it is not permitted to and does not provide legal advice.

    CONCLUSION

25. While the outcome for Mr and Mrs Wightman may be unfortunate, this Tribunal is also bound by the legislative provisions. In fact, in reviewing decisions made by other decision-makers, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the original decision (AAT Act s. 43(1)). The original decision maker did not have discretion to expand the time limitations set out in the Social Security Act and the Guidelines regarding the provision of an actuarial certificate for a financial year. It follows that this Tribunal, effectively standing in the shoes of the original decision maker, also has no discretion to expand the time limits.

26. I find that the decision made by AAT 1 on 9 August 2016 was the correct decision. I affirm that decision.

27.     I certify that the preceding 26 (twenty-six) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member

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Associate

Dated 30 June 2017

Hearing conducted on papers
Advocate for the Applicant	Mr C McCurdy
Representatives for the Applicant	Dixon Advisory Super Pty Ltd
Advocate for the Respondent	Ms A Bramley
Solicitors for the Respondent	Department of Human Services, Freedom of Information & Litigation Branch