WILLIAMS and SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
[2010] AATA 354
•13 May 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 354
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/0156
GENERAL ADMINISTRATIVE DIVISION ) Re RICHARD WILLIAMS Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Dr K S Levy RFD, Senior Member Date13 May 2010
PlaceLismore
Decision The decision under review is varied as follows:
(1) The income maintenance period runs from 29 June 2008 to 9 August 2009. Mr Williams is entitled to receive Newstart allowance from the day following the expiry of that period i.e. from 10 August 2009.
(2) Mr Williams did not suffer severe financial hardship.
.................[Sgd].................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Benefits, entitlements and allowances – Newstart allowance – Whether an income maintenance period is applicable – If so, for what period does the income maintenance period apply – Whether the applicant is experiencing severe financial hardship – Decision set aside – Income maintenance period applicable – No severe financial hardship.
Social Security Act 1991 (Cth)
Bazzi and Department of Families and Community Services [2000] AATA 794
Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540
Finch and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 745
Flannery v Secretary, Department of Social Security (1987) 78 ALR 431
Latham CJ I Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1994) 69 CLR 389
Re Allman and Federal Commissioner of Taxation (1998) 39 ATR 1081
Rose v Secretary, Department of Social Security (1990) 21 FCR 241
Secretary, Department of Employment and Workplace Relations v Richards [2007] FCA 1710
Secretary, Department of Employment and Workplace Relations v Richards [2008] FCAFC 97
Watson v Secretary, Department of Families and Community Services [2003] FCA 415
REASONS FOR DECISION
13 May 2010 Dr K S Levy RFD, Senior Member INTRODUCTION
1. Richard Williams, now unemployed and bankrupt, applied for newstart allowance following a redundancy. He was qualified for newstart allowance at the time of his original application and remains so qualified.
2. The decision of Centrelink of 31 October 2008 was that a barrier to the commencement of Mr William’s ability to receive the allowance existed and that an income maintenance period applied to the applicant from 29 June 2008 to 10 September 2010. The Social Security Appeals Tribunal (SSAT) affirmed that decision on 7 December 2009. Mr Williams now seeks review of those decisions.
ISSUES
3.The issues for determination are:
(a)Is an income maintenance period (IMP) applicable to the applicant, the applicant’s newstart allowance, and if so, for what period?
(b)Is the applicant experiencing severe financial hardship within the meaning of s 19C of the Social Security Act 1991 (Cth) (the Act)?
EVIDENCE
4. The facts of this matter are not complex and are not in dispute. The applicant worked for New South Wales Rail and its successor statutory authority for 23½ years. He is now in his early 40s, having worked from age 16 until he was 39 years old (approximately) with that employer.
5. Mr Williams left school at age 16, completing Year 10, with what he described as not a strong academic record. He had only one employer since leaving school. He had a boating accident in New Zealand in 2004 and had significant sick leave (approximately 18 months) and a change of duties thereafter. He was made redundant on 28 June 2008 and received a redundancy payment. He is now enrolled in job search and has had only infrequent casual jobs with minimal earnings since his redundancy.
6. Mr Williams currently lives with a friend at Nimbin and since running out of money, has lived with friends, accepted meals where offered and also received food vouchers. He is virtually homeless and penniless. He was declared bankrupt in October 2009.
7. During his working life, he was married with two children. He is now living alone but has tried to maintain contact with his children. During his employment with New South Wales Rail, he worked long hours regularly and was often working in different locations away from home. He lived mainly in rented accommodation during that period. His standard working week was 8 days of work followed by 6 days off. He was home one day per fortnight when working overtime or on projects.
8. He worked regular overtime and as a result, often earned $4,000 to $4,500 per fortnight (gross) including overtime and allowances. In his spare time, he told the Tribunal he had a few beers with dinner at night but there was little else in his life as he worked quite a lot. He was used to having money, to provide for his family and himself week to week without difficulty. He did not need to budget. Mr Williams soon exhausted his redundancy money.
9. Mr Williams was represented by Ms L. McGregor, Solicitor with Legal Aid New South Wales. A copy of the employment separation certificate was obtained from New South Wales Rail on 31 October 2008 (Exhibit 1, Folio 41). It shows Mr Williams received:
Gross payment (redundancy, annual leave, long service leave) $102,964.23
Net payment (less tax and payment in advance) $ 97,224.33
It showed the gross payment was to cover 115 weeks as follows:
Type of payment
Amount
Period covered
(number of weeks)
Redundancy
$86,029.00
96 weeks
Annual leave
$11,290.00
13 weeks
Long service leave
$ 5,498.00
6 weeks
TOTAL
$102,817.00
115 weeks
10. The certificate also showed the average gross weekly wage of Mr Williams was $889.75, which Centrelink used as the basis for calculating the IMP of 115 weeks.
11. I note that Exhibit 4 submitted by the applicant and the respondent’s Statement of Facts and Contentions cite the gross payment as $102,964.23. This is marginally lower than the Employment Separation Certificate amount. I have accepted the marginally higher amount as the gross redundancy payment as both parties have submitted that amount.
12. The applicant told the Tribunal during examination in chief that he spent the redundancy as follows:
Payments to credit cards
· Amex $ 5,861.00
· Virgin $20,000.00
Applicant’s former wife (family support) $ 7,787.00
$14,500.00Motor vehicles (by internet) $10,314.00
Payment to St George for personal loans
(for cars) $19,800.00Total $78,262.00
13. On 17 July 2008, he had $17,000.00 in credit in his bank account. He said it seemed sensible to extinguish credit card debts first. At that time, he still did not have any paperwork about his redundancy.
14. His expenditure pattern since receiving the redundancy payment seems clear. He had $4,718.00 in the bank before his redundancy. With the credit of the redundancy amount of $97,224.34, he had a balance of $101,942.36 at 17 July 2008.
15. On receiving that payment, he quickly paid the debts of $78,262 shown above. With that expenditure and other minor living expenses his balance was reduced to $22,461.76 on 23 July 2008, just one week after the redundancy payment. But the spending pattern continued. In the following two weeks he spent $3,000 to $4,000 per week just making purchases of what appear to be clothes, food and discretionary items. Mr Williams also drove the 700 km round trip to see his children a number of times. These trips cost $300 in fuel as well as expenditure on the children. His (approximate) expenditure for those two weeks was:
23 to 30 July 2008 $4,198.54
31 July to 4 August 2008 $3,184.00
16. By that time, the balance of his St George bank account was $15,079.22.
17. As his bank balance dwindled, Mr Williams also gained further cash by selling assets of some value: a Hino bus - $3,500.00; a Landcruiser - $10,000.00; a boat ‑ $17,000.00 (but paid outstanding amounts owing on it); a caravan - $1,500.00; and a camping trailer - $350.00. This amounted to $32,000.00 (approximately). Mr Williams then survived on this amount and the balance of his redundancy for the next 12 months. He had minimal supplementary income during that period. The applicant said there was $60 every three weeks or $20 per week in other income. It was pointed out in re-examination that he still had $21,000 in debt currently due to the Child Support Agency, about which Mr Williams seemed surprised. This remains a post-bankruptcy debt.
18. In cross-examination, Mr Williams agreed that he had holidays to Hervey Bay ($1,500.00) and Tasmania ($2,000.00). It was put to him that he may have spent more like $10,000.00 on holidays. He said that he had spent money on gifts for his ex-wife and children and that “… he just blew the money away”.
SUBMISSIONS
19. Ms McGregor said that the applicant only had the evidence of the Employer Separation Certificate before the SSAT. Before this Tribunal she referred me to new evidence of group certificates of Mr Williams’ earnings in his final two years of employment with New South Wales Rail. She submitted that based on an earning and spending pattern consistent with his previous earnings, that the redundancy payment could not last for 96 weeks on the basis which it has been calculated (see s 1068-G7AH). She pointed to a great part of the redundancy amount as being used to pay off debts and to pay a loan for the applicant’s ex-wife. She referred me to Finch and the Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 745.
20. Ms McGregor also submitted that the applicant had always worked until his redundancy and it was not unreasonable for him to believe that he would be able to get further work. She said he did not have any understanding of the job market. She emphasised that the amounts expended were not spent recklessly on gambling debts, fast cars and the like. Therefore, his current position should be viewed as being one of a person who is genuinely in severe financial hardship. Ms McGregor referred me to the wider provisions of s 1068 of the Act.
21. Mr Guthrie submitted that the statutory provisions are fairly rigid. He referred to the separation certificate information. He submitted that it was not reasonable for the applicant to make payments to avoid high interest rates on credit cards. These amounts were excessive, as were the amounts spent on vehicles and holidays. A reasonable person in the same circumstances, he said, would not have spent either in the amount or in the manner the applicant did. He also submitted that extra money resulting from the sale of assets was not accounted for.
22. Mr Guthrie referred me to the decision of Bazzi and Department of Families and Community Services [2000] AATA 794 and to the definition of “unavoidable” or “reasonable expenditure” from the Social Security Guide (T/31 and exhibit 1).
CONSIDERATION
23. Before considering the issues of law and the relevant factual matters relevant in this matter, I note that a late submission by the applicant was presented following the hearing. The respondent has objected to me taking into account this late filed material. However, I am prepared to do so: not to do so would be unfair or unjust to the applicant. Its contents are relevant to the statutory interpretation of the essential issue involved in this case, and highlight a provision (which my research had already discovered) not dealt with at the Tribunal hearing.
24. There are also some matters of evidence which had not been available to the applicant immediately after his redundancy and which would have been helpful to the SSAT had it had the benefit of this information.
25. In considering the questions for determination, the relevant statutory provisions of the Act are:
Section 8
…
"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).
…
"ordinary income" means income that is not maintenance income or an exempt lump sum.
Section 19C
…
(2)A person who is not a member of a couple and who makes a claim for parenting payment, austudy payment, special benefit, disability support pension, carer payment or one of the following allowances:
(a) newstart allowance;
(b) widow allowance;
(c) mature age allowance;
(d) sickness allowance;
(e) youth allowance;
is in severe financial hardship if the value of the person's liquid assets (within the meaning of subsection 14A(1)) 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:
(f) if the person's claim were granted; and
(g)in the case of a person to whom an income maintenance period applies, if that period did not apply.
Note: For maximum payment rate see subsection (8).
Meaning of in severe financial hardship: person who is a member of a couple
…
(4)Unavoidable or reasonable expenditure, in relation to a person who is serving a liquid assets test waiting period or is subject to a seasonal work preclusion period, or a person to whom an income maintenance period applies, includes, but is not limited to, the following expenditure:
(a)the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:
(i) if the person is serving a liquid assets test waiting period--that part of the period that the person has served; or
…
(iii) if an income maintenance period applies to the person--that part of the period that has already applied to the person;
…
(5)The reasonable costs of living of a person include, but are 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;
(h)any other cost that the Secretary determines is a reasonable cost of living in relation to a person.
(6)For the purposes of paragraph (4)(a), the amount of reasonable costs of living that a person who is not a member of a couple is taken to have incurred, may not exceed:
…
(c)in the case of a person to whom an income maintenance period applies--the amount of allowance or parenting payment (as the case may be) that would have been payable to the person during that part of the income maintenance period that has already applied to the person, if the period did not apply to the person.
1068-G7AH
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.
1068‑G7AM
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.
Note 1:For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple) and 19C(3) (person who is a member of a couple).
Note 2: For unavoidable or reasonable expenditure see subsection 19C(4).
Note 3: If an income maintenance period applies to a person, then, during that period:
(a) the allowance claimed may not be payable to the person; or
(b) the amount of the allowance payable to the person may be reduced.
Definitions
1068-G7AQ
In points 1068‑G7AG to 1068‑G7AP (inclusive):
…
"period to which the payment relates" means:
(a)if the payment is a leave payment--the leave period to which the payment relates; or
(b)if the payment is a redundancy payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the redundancy) have received from the employment that was terminated--the period for which the person would have received that amount of ordinary income; or
(c)if the payment is a redundancy payment and paragraph (b) does not apply--the period of weeks (rounded down to the nearest whole number) in respect of which the person would have received ordinary income, from the employment that was terminated, of an amount equal to the amount of the redundancy payment if:
(i) the person's employment had continued; and
(ii)the person received ordinary income from the employment at the rate per week at which the person usually received ordinary income from the employment prior to the termination.
"termination payment" means:
(a)a leave payment relating to a person's employment that has been terminated; or
(b) a redundancy payment.
Section 1072
General meaning of ordinary income
A reference in this 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.
Note 1: For ordinary income see subsection 8(1).
Note 2: For other provisions affecting the amount of a person's ordinary income see section 1073AA (work bonus), sections 1074 and 1075 (business income), sections 1076 to 1084 (deemed income from financial assets) and sections 1095 to 1099DAA (income from income streams).
26. In relation to the evidence, the parties were not ad idem on a number of issues. One of these issues is the amount which Mr Williams earned and the central area of disagreement was in the proper treatment of income calculation of the IMP.
27. The applicant gave the impression he was earning considerable overtime. This was the case after his return to full duties following a period of sick leave. The Employment Separation Certificate verifies that the ordinary rate of $889.75 was Mr Williams’ average gross weekly wage. This would equate to $46,280.00 per annum – were he paid only the wages applicable to his trade and level. However, the picture provided by his group certificate was rather different. The Tribunal was provided with group certificates for Mr Williams of $81,323.00 for the financial year 2006/07 and $99,624.00 for the 2007/08 financial year. Clearly, Mr Williams’ actual average earnings were considerably more than the standard ordinary rate, and are explained by his earning significant amounts of overtime.
28. Turning now to the issues for determination, I deal with those below.
Issue 1: Is an IMP applicable to the applicant’s newstart allowance, and if so, for what period?
29. Section 1068-G7AH provides that if a person’s employment has been terminated and they have received a termination payment, then the person is taken to have received ordinary income for a period (the income maintenance period) equal to the periods which the payment relates.
30. The real question here is whether the period of 115 weeks as Centrelink has calculated it, was correct.
31. Ms McGregor raises for consideration whether the gross weekly wage was the appropriate amount. The SSAT, which did not have the benefit of the group certificates provided at this hearing, determined that the information in the Employment Separation Certificate applied. The SSAT also did not consider s 1072 of the Act or recent Federal Court authorities.
32. An inconsistency appears when looking at the annual earnings as shown in the group certificates provided in evidence (which include overtime and allowances such as living out away from home allowance) compared with the amounts shown in the Separation Certificate.
33. The question of how the calculation in the group certificate relates to the definition of “period to which the payment relates” in s 1068-G7AQ then arises. That definition means:
(a)If the payment is a leave payment – the period to which the payment relates; or
(b)If the redundancy is calculated as an amount which equals the amount of ordinary income, the period for which the person would have received the amount of ordinary income; or
(c)If paragraph (b) does not apply – the period of weeks in respect of which the person would have received ordinary income from the employer that was terminated, of an amount equal to the amount of the redundancy payment if:
(i) The persons’ employment had continued; and
(ii)The person received ordinary income … at the rate per week at which the person usually received ordinary income from the employment prior to the determination.
34. It is clear that part of the redundancy which are leave payments relate to paragraph (a) above. This is in respect of an accrued amount of leave (annual leave and long service leave) already entitled or in respect of which the person had worked.
35. In respect of the balance (the redundancy component), it is not in respect of the accrued entitlement – it is for an amount based on an entitlement formula. The redundancy components are itemised in the Employment Separation Certificate which is referred to in s 199 of the Social Security (Administration) Act 1999. The certificate refers to the person’s “average gross weekly wage”. That item (item 6) on the form shows in brackets, “see page 2 – Definition”. The definition on page 2 states:
Average gross weekly wage: This is usually contained in the industrial instrument that applies to that workplace (ie. the appropriate award, workplace agreement or common law contract). Some workplaces include regular overtime and allowance as part of their average weekly wage.
36. But is the amount received “ordinary income”? “Ordinary income” is defined in s 8 of the Act as meaning “income that is not maintenance income or an exempt lump sum”. The term “income” is also defined in s 8 to mean “an income amount earned, derived or received by the person for the person’s own use or benefit …”. In the law of Taxation, “ordinary income” is usually “assessable income” when it is “derived”. One of the major tests used to determine “ordinary income” in taxation law is one which differentiates payments of a capital nature from those of an income nature. This is often determined by the periodicity of the payment. As a general rule, a periodical or regular payment is more likely to be regarded as income (Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540). As an example, workers’ compensation payments are usually assessable as ordinary income where the amount received is in place of income the taxpayer would have earned (Re Allman and Federal Commissioner of Taxation (1998) 39 ATR 1081).
37. Reference to other sources is useful or may be confirmatory as to the breadth of a statutory term even if it is not precisely the same as that used in another statute. The term “income” under the Act is not precisely the same as used in income tax law. In the Social Security Act1991 (Cth), it is concerned with “income maintenance” (see Secretary, Department of Employment and Workplace Relations v Richards [2007] FCA 1710 at [33]). In the present case, it is clear that all amounts are of an income nature and not of a capital nature, except that the sale of the applicant’s vehicles, caravan or boat are assets of a capital nature. These are not business assets but are for personal use only. Therefore, for present purposes, all amounts can be treated as being of an income nature. Equally, the Act has long been viewed by the Courts as remedial legislation and “calls for no narrow or pedantic construction” (Rose v Secretary, Department of Social Security (1990) 21 FCR 241 at 244), cited by the Full Court of the Federal Court in Secretary, Department of Employment and Workplace Relations v Richards [2008] FCAFC 97.
38. Both income definitions in s 8(1) must be met. It must first be income which is “earned, derived or received”. The leave component has clearly been earned. The redundancy component has been “derived”, which is defined in the Macquarie Dictionary, as “to receive or obtain from a source or origin …”. The redundancy has an authority contractually based in employment law. There is no dispute that the total amount in question has been “received”.
39. The amount of income must also be available for the persons “own use or benefit”. This term was extensively dealt with by Collier J in Richards. There, Her Honour said it “necessarily implies rights of ownership of the relevant income amounts by the person receiving them... Income is for the “own use and benefit” of the person once it becomes their property which they can dispose of it at will: cf Flannery v Secretary Department of Social Security (1987) 78 ALR 431 at 436; and Latham CJ I Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389 at 398. “
40. The decision in Richards at first instance was not disturbed on appeal. The Full Court there also confirmed that “income” under the 1991 Act referred to “gross income” (see also Watson v Secretary Department of Families and Community Services [2003] FCA 415 per Finn J). In addition, the Full Court in Richards said “[i]n defining ‘income’ the Act was concerned with what amount was available to a pensioner to meet commitments and outgoings after the pensioner had drawn together the net returns of various sources of income ...” at [37].
41. For the purposes of defining ‘ordinary income’, s 1072 was introduced into the Act by the Social Security and Veterans’ Affairs Legislation Amendment Bill 1995 (Cth). The heading of the section is entitled “general meaning of ordinary income”. This is consistent with the wording of s 1072 and therefore such a meaning should be adopted (Ragless v Prospect District Council [1922] SASR, 299 per Murray CJ at 311). It defines “ordinary income” as 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”. The respondent says there is no legal basis for using any amount other than the “average gross weekly wage determined by the employer”. It seems to me however the amount of “ordinary income” is far wider than the “average gross weekly wage”. The “average gross weekly wage” appears to be a term which is used administratively and is included in the Employment Separation Certificate. The definition of that term on page 2 of the Employment Separation Certificate does not indicate a restrictive meaning and specifically implies that overtime and allowances may be included as a matter of practice.
42. The facts in this case reveal amounts on the group certificates which include overtime. The Full Court in Richards found that the gross ordinary income earned, derived or received in that case was to be determined from the employment contract, including oral terms of the contract. There, it included agreements to deduct amounts for shortfalls in takings or a cashier. In other words, any such agreement did not affect the amount agreed to be paid to the employee. Here, the same principle applies. Apart from the amount agreed to be paid under any award, overtime can be an oral agreement which supplements the principal employment agreement. The employee agrees to do additional work for the employer in return for overtime payments. The fact that this was not an isolated occurrence but had become a regular part of Mr Williams’ employment, indicates overtime income is part of his ordinary income, and is not a specialist allowance or some other narrowly defined amount. As in Richards, the overtime is “integrally related” to the work Mr Williams had contractually agreed to perform.
43. On the evidence of actual ordinary income for the two years immediately prior to Mr Williams’ redundancy ($81,323 and $99,624), the average amount over those two years is $90,473.50. The ordinary income of Mr Williams can be determined to be $1,739.88 per week (on average) for the most recent years of work prior to redundancy. Using this amount seems reasonable – the final year’s earnings may not be representative of Mr Williams’ ordinary income, while the previous year may underestimate ordinary earnings if a longer period of earnings was available. The parties made no representation as to the reasons for the variability in earnings and it would reasonably be expected that overtime varies from year to year. It is clear from the evidence that overtime was significant to the applicant’s earnings.
44. The total redundancy amount is to be used in the calculation. That amount and the average gross weekly amount of ordinary income above are both gross amounts, so the “period to which the payment relates” is $102,964.24 divided by the gross weekly average amount of ordinary income determined above ($1,739.88). That equates to 59.18 weeks.
45. The question now is what is the period which relates to the 59.18 weeks calculated above? As submitted by the Respondent, section 4.3.4.10 of The Guide to Social Security Law provides the date of commencement of an IMP where employment has ceased, is the effective date of the payment for redundancy and related amounts. This will generally be the date the person last worked, or more precisely, the IMP will commence on the day following the last day of paid employment. The IMP therefore runs from 29 June 2008 and would end 59.18 weeks later, or 9 August 2009. In that calculation, as .18 of one week is 1.26 days so given the beneficial nature of the legislation, I have adopted a rounding down to 59 weeks and 1 day exactly as being consistent with the legislative intent. Accordingly, I vary the IMP on this basis.
Issue Two: Is the applicant experiencing severe financial hardship?
46. Another issue is the applicant’s capacity to understand his situation. Ms McGregor submitted Mr Williams was unable to foresee the consequences of his pattern of expenditure. She submitted it is not as the SSAT found, that he “elected not to look”. It was apparent to me that Mr Williams’ limited education and level of astuteness whilst giving evidence, suggested he would be at a severe disadvantage compared to many in the community. I had no reason to doubt that he gave evidence truthfully and I was left in no doubt that Mr Williams was generous in his consideration of his former wife and his children. However, I accept that his insight for budgeting and managing his affairs was impaired to some degree and was well below average. Having said that, I cannot accept the submission that he merely spent money in the quantums shown on “reasonable living expenses as determined by him”.
47. Section 1068-G7AM provides a discretion to the Secretary to reduce the IMP where an applicant is in severe financial hardship. This issue is to be determined by reference to s 19C(2) of the Act. The applicant says the SSAT did not give due consideration to this matter. The respondent on the other hand says it should be interpreted consistently with the nature of the expressions in ss 19C(4)(a) – (j).
48. I note the SSAT stated that the applicant’s pattern of expenditure was because he “elected not to look”. I found the applicant to be a witness of truth and as stated earlier, he had little insight. The applicant’s advocate says on his behalf he spent the money on “reasonable living expenses as determined by him”. I agree this was the case with the exception that much of the discretionary expenditure was not reasonable. It is apparent also that he had little behavioural restraint when it came to financial expenditure.
49. I note he did not have the Employment Separation Certificate for some time after the redundancy. However, even if he had that document, I am satisfied that his judgement would have been little different with respect to paying off credit cards etc. But his expenditure of $3,000.00 to $4,000.00 per week for the month after his redundancy may have been his usual pattern of expenditure but in the circumstances even he should have realised within a relatively short period that it was undisciplined and excessive and could not be sustained. In addition to selling his assets, he need not have spent the money at such a rate and particularly on what must be regarded as non-essential items. Many of those expenses were certainly, within the terms of the Act, not “reasonable” or “unavoidable”.
50. That evidence was not precise in all respects but I accept the applicant as a person who either did not keep any better records or that any such records are now unavailable. The approach referred to me from the decision of Bazzi and Department of Families and Community Services [2000] AATA 794 is adopted here. That is, in assessing reasonableness, an objective test is to be adopted acknowledging that some element of subjectivity is necessary. That reflects the nature of the applicant and his circumstances which mitigate against expecting any further degree of precision in the evidence.
51. I agree with the Respondent that the applicant should be put to at least some degree of proof in accepting claims which are submitted as being reasonable or unavoidable. I adopt that approach in the context of the applicant in his circumstances being unable to provide all relevant evidence supporting some expenditure.
52. Taking into account the evidence (including the submission based on independent evidence of financial statements for the period 5 July 2008 to 4 August 2008) and my findings about Mr Williams honesty, I would regard as reasonable, the following: Child Support Payments of $14,500.00 on 18 July 2008 (as per the applicant’s Statement of Facts and Contentions); expenses entailed in visiting his children on a number of occasions (fuel costs alone being $300.00 per round trip). If one allows some expenses for accommodation and to treat his children to some entertainment and meals for all of them, $500.00 per round trip would be reasonable. Again, for the period involved, he may have done this four or five times. Therefore, $2,500.00 seems a reasonable allowance for such visits; expenses for vehicle maintenance (the Respondent agrees) - an amount of $10,000.00 was allowed by the SSAT, but that seems quite excessive without any supporting evidence. For the period concerned, anything more than $2,000.00 seems to be outside ordinary and reasonable expectation.
53. The SSAT made allowance for credit card debt of $20,000.00. I agree. The principle of reducing debt and thereby reducing his resultant interest expense is also a very sensible principle for the applicant to follow – it is merely the quantum of his expenditure together with his other spending which made the amount of extinguishment of debt as being excessive from an objective point of view.
54. Allowing what the applicant would have earned from NSA for the period, I accept the Respondent’s calculations in that regard. That amounts to $20,216.56 to the date of the hearing of the matter in this Tribunal.
55. All of these reasonable or unavoidable expenses would amount to $57,216.56. Given that the applicant received $97,224.33 in a redundancy payment, a difference of over $40,000.00 is apparent, without taking account of the amounts received from liquidation of the applicant’s other assets. That gap is not adequately supported by verified evidence. It therefore does not comply with the statutory requirements that would justify reducing the IMP.
56. I find therefore that he is not in severe financial hardship.
CONCLUSION
57. In the circumstances, I determine as follows:
(1)The income maintenance period runs from 29 June 2008 to 9 August 2009. Mr Williams is entitled to receive Newstart allowance from the day following the expiry of that period.
(2) Mr Williams did not suffer severe financial hardship.
58. The decision under review is varied to provide that the applicant’s income maintenance period ceased on 9 August 2009.
I certify that the 58 preceding paragraphs are a true copy of the reasons for the decision herein of Dr K S Levy RFD, Senior Member.
Signed: .....................[Sgd]........................................................
Kate Slack, Research AssociateDate/s of Hearing 15 March 2010
Date of Decision 13 May 2010
Solicitor for the Applicant Linda McGregor, Legal Aid New South Wales
Solicitor for the Respondent Joe Guthrie, Departmental Advocate
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