Editors --- "Eligibility for newstart allowance: cancellation after enrolment in full-time course of study" [2006] SocSecRpr 37; (2006) 8(3) Social Security Reporter, Article 14

• SECRETARY TO THE DEWR v KELLY
• The facts
• The issue
• The law
• Discussion
• Formal decision

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Eligibility for newstart allowance: cancellation after enrolment in full-time course of study

SECRETARY TO THE DEWR v KELLY

(Federal Court of Australia)

Decided: 29th May 2006 by Weinberg J.

The facts

Kelly completed a Bachelor of Environmental Science in July 2004. He was granted newstart allowance (NSA) while he looked for employment. When he failed to find any, he was told by his lecturers that his prospects of finding employment would be significantly increased if he undertook an honours year. He enrolled in the honours course in February 2005.

After enrolment, Centrelink cancelled Kelly’s NSA on the basis that, as he was now undertaking full-time study, he was no longer eligible. Kelly successfully appealed that decision in the SSAT. The Department then appealed to the AAT and, when the appeal failed, to the Federal Court.

The issue

The issue was whether the SSAT and AAT erred in law in finding that Kelly satisfied the activity test for NSA.

The law

Section 593 of the Social Security Act 1991 (the Act) sets out the basic qualifications for the payment of NSA. One of the qualification criteria is satisfying the ‘activity test’.

Section 601(2) of the Act states that a person may satisfy the activity test if the Secretary is of the opinion that the person should undertake a course of vocational study which is likely to improve the person’s prospects of obtaining work.

Section 613 of the Act states that NSA is not payable to anyone enrolled in a full-time course of study unless one or more of the sections contained within s.613(2) is made out.

Section 613(2)(a) states that NSA may be payable for a period during which ‘a person is enrolled in a course that the Secretary required the person to undertake’, and s.613(2)(b) states that NSA may be payable where the person is engaged in a course undertaken under a Newstart Activity Agreement.

Discussion

The AAT considered there were 3 alternative ways in which Kelly remained eligible for the receipt of NSA. First, the AAT considered s.606(5) of the Act which allows for a Newstart Activity Agreement to be varied. As a Newstart Activity Agreement existed between Kelly and Centrelink prior to the cancellation of his NSA, the AAT considered that the agreement should have been varied so that the honours course was accepted as one that would satisfy the requirements of s.601(2).

Secondly, the AAT considered that the honours course should have been one undertaken under a Newstart Activity Agreement pursuant to s.613(2)(b).

Thirdly, the AAT considered that the honours course should have been regarded as a ‘suitable activity’ pursuant to s.606(1)(g).

The Federal Court noted that while it had been open to the Secretary to form the opinion that Kelly should undertake the honours course on the basis that it would improve his prospects of employment, this did not actually occur. Nor, the Court said, did the Secretary vary an existing Newstart Activity Agreement or enter into a new Newstart Activity Agreement that incorporated the honours course.

Therefore, as the Court stated:

[N]either the SSAT, nor the AAT was entitled to conclude that the conditions under s.613(2) had been met in circumstances where manifestly, they had not. The fact that...the honours course [was] worthwhile, and one that ought to have been the subject of approval under s.601(2) or the subject of a Newstart Activity Agreement under s.606 cannot overcome this fundamental hurdle. (Reasons, p.7).

Formal decision

The Court concluded that as none of the conditions set out in s.613(2) had been met, Kelly was not entitled to receive NSA as of February 2005. The Department’s appeal was allowed.

[J.C.]