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

[2016] AATA 305

ZHYL and Secretary, Department of Social Services (Social services second review) [2016] AATA 305 (12 May 2016)

Division	GENERAL DIVISION
File Number(s)	2015/5496
Re	ZHYL
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Mr Conrad Ermert, Member
Date	12 May 2016
Place	Melbourne

The Tribunal affirms the decision under review.

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

Mr Conrad Ermert, Member

CATCHWORDS

SOCIAL SECURITY - Disability Support Pension - partner receipt of employment termination payment - application of income maintenance period - severe financial hardship - whether expenditure is unavoidable or unreasonable - decision affirmed

LEGISLATION

Social Security Act 1991 (Cth)

REASONS FOR DECISION

Mr Conrad Ermert, Member

12 May 2016

INTRODUCTION

1. The Applicant had been residing in Hong Kong since 1998.  At the time his wife was employed with Cathay Pacific.  On 31 December 2014 the Applicant’s wife ceased her employment and received a termination payment which equated to AUD$157,496.30. 

2. On 24 January 2015 the Applicant returned from Hong Kong with his family to reside in Australia.  On 18 February 2015 he lodged a claim for disability support pension (DSP) with Centrelink.  Centrelink is the service provider for the Secretary, Department of Social Services (the Respondent).

3. On 21 May 2015 Centrelink granted the Applicant a DSP at a reduced rate on the basis that he was subject to an income maintenance period due to his wife’s termination payment.  The Applicant requested a review of this decision.  On 16 June 2015 an Authorised Review Officer (ARO) of Centrelink affirmed the original decision.

4. The Applicant requested a review of the ARO decision.  On 18 September 2015 the Social Services and Child Support Division of this Tribunal affirmed the ARO decision. 

5. This matter is a review of the Tribunal’s first tier decision.

   HEARING

6. At the hearing, the Applicant represented himself and gave evidence on oath.  Mr James Henderson, a solicitor for the Department of Human Services, represented the Respondent.

7. I had before me the documents provided by the Respondent in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T-documents) together with the following Supplementary T-Documents:

   ·ST1 – Computer Screen print: Country of Residence;

   ·ST2 – Computer Screen print: Immigration Advised Movements;

   ·ST3 – A Guide to Australian Government Payments;

   ·ST4 – Guide to Social Security Law, Instruction 4.10.3;

   ·ST5 – Guide to Social Security Law, Instruction 4.3.4.10; and

   ·ST6 – Guide to Social Security Law, Instruction 4.3.4.40.

8. For the Applicant I took into evidence:

   ·Exhibit A1 – a letter to the Tribunal  from the Applicant dated 2 February 2016; and

   ·Exhibit A2 – a copy of a quote from Victorian Alterations, Additions & Renovations (VAAR) relating to work on the Applicant’s house.

9. For the Respondent, I had for consideration the Respondent’s Statement of Facts and Contentions dated 28 January 2016.

   LEGISLATION

10. The legislation relevant to this matter is contained in the Social Security Act 1991 (the Act).

11. Section 117 of the Act provides that the rate of a person’s pension is calculated in accordance with the Pension Rate Calculator at the end of section 1064 of the Act.  Modules of section 1064 contain the provisions relating to a person’s ordinary income.  Module F provides for the application of an income maintenance period if the person or their partner has received a termination payment.  Module F also outlines the process of calculating the duration of the income maintenance period.

12. In the Respondent’s Statement of Facts and Contentions, the Respondent submits that the income maintenance period in the case of the Applicant has been correctly calculated from 31 December 2014 to 20 February 2018 inclusive.  The Applicant accepts the correctness of this calculation.

13. The only issue in contention is whether the period of the income maintenance period can be reduced.

14. Section 1064-F11 of Module F of the Act provides:

    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.

15. In the Respondent’s Statement of Facts and Contentions, the Respondent accepts that the Applicant is currently in severe financial hardship as his liquid assets are less than twice the fortnightly amount that would be payable if the income maintenance period did not apply, as provided for in section 19C(3) of the Act.

16. The issue I must decide is whether the Applicant is in severe financial hardship because he has incurred unavoidable or reasonable expenditure.

    EVIDENCE

17. In his evidence, the Applicant said that in previous years he enjoyed a good life and had a lot of money.  He has given his money away and derives no income from his previous assets.  He said that his medical condition prevents him from working.  He said his home mortgage is fully paid and he owns his car.  However, he had to borrow $300 to pay school fees for his children.  He said he had nothing further to add to his statement.

18. In answer to questions from Mr Henderson, the Applicant said he had a lot of expenses for his house before he returned from Hong Kong.  He said the tenant was not subject to a property condition report and, apart from the cost of a broken window, the tenant received back his rental bond.  The Applicant agreed that all the tenancy issues had been resolved by the time he returned to Australia.

19. When asked why he had built a second bathroom in the house, the Applicant said that the builder had told him the cost of renovations were almost the same as building new rooms.  Asked about the need for an extra bedroom, the Applicant said he had it built as a favour for a friend.  He said he wanted a room for each of his sons and an extra one for visitors to stay. 

20. The Applicant agreed that costs for the new kitchen, the second bathroom and the extra bedroom accounted for the majority of the $85,000 shown in the VAAR quotation.  The Applicant contended that the new kitchen and bathroom were essential to live in the house but the extra bedroom was desirable. 

21. Mr Henderson asked whether there were any contract obligations requiring the Applicant to pay off his home loan.  The Applicant said his wife panicked.  Because he needed treatment for his condition, the Applicant’s wife decided they needed the security of a house unencumbered by a mortgage.  The Applicant agreed that it had been their choice to pay off the balance of the home loan. 

22. The Applicant said the monthly mortgage repayments had been about $800 to $1,000.  He agreed that he and his wife currently receive a total of about $1,600 to $1,700 per fortnight.

    TRIBUNAL CONSIDERATIONS

23. The Respondent accepts that, from the termination payment of $157,496.30, an amount of $67,291.69 constitutes unavoidable or reasonable expenditure within the meaning of the Act.  That leaves an amount of $90,204.61, which is well in excess of the prescribed severe financial hardship test of $1,288.

24. The Applicant’s evidence was that the major payments from his wife’s termination payments were the $85,000 spent on rebuilding and renovating his house, and the $62,000 spent in the early settlement of their home loan. 

25. The Applicant described the expenditure on renovating the kitchen and installing a new bathroom as essential.  However, he offered no evidence that the family could not have lived in the house without these works.  He agreed that the addition of another bedroom was desirable.  From the evidence, I am not satisfied that the expenditure on the home building and renovations was unavoidable or reasonable in his precarious financial circumstances at the time.

26. The Applicant’s evidence was that the early repayment of the home loan was a result of his wife’s panic and was not a contractual requirement.  I am not satisfied that this expenditure was unavoidable or reasonable. 

27. From the evidence, I am not satisfied that the Applicant incurred unavoidable or reasonable expenditure that has resulted in him being in severe financial hardship.  Had the Applicant not expended $147,000 on avoidable and unreasonable payments, he would not be in his current financial difficulties.  In his final submissions, the Applicant acknowledged that he would not have made these decisions were he not affected by his medical condition.   

28. As a consequence, I find that I cannot reduce the Applicant’s income maintenance period by exercising the discretion in section 1064-F11 of the Act. 

    DECISION

29. I affirm the reviewable decision.

I certify that the preceding 29 (twenty -nine) paragraphs are a true copy of the reasons for the decision herein of Mr Conrad Ermert, Member.

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

Associate

Dated 12 May 2016

Date(s) of hearing	29 April 2016
Applicant	In person
Advocate for the Respondent	Mr James Henderson, Department of Human Services