Editors --- "Parenting payment: income test: gross income: 'earned, derived or received' - deduction of till shortfalls from wages under employment agreement - disclosure of income" [2008] SocSecRpr 33; (2008) 10(2) Social Security Reporter, Article 15

• SECRETARY TO THE DEEWR v RICHARDS
• Background
• The issues
• Discussion
• Formal decision

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Parenting payment: income test: gross income: ‘earned, derived or received’ - deduction of till shortfalls from wages under employment agreement - disclosure of income

SECRETARY TO THE DEEWR v RICHARDS

(Full Court of the Federal Court of Australia)

Decided: 3rd June 2008 by French, Moore and Lindgren JJ

Background

At all relevant times, Richards was a single parent in receipt of parenting payment and was working at the Wellington Point Hotel. Richards was one of the operators of a TAB agency conducted in the hotel.

Richards’ agreement with her employer provided for the payment of wages at rates specified in a document entitled ‘Certified Agreement’. However, it was also a condition of her employment that Richards would be liable to repay any shortfalls in the till takings at the TAB agency for which she was responsible while working at the hotel. This condition was not contained in the Certified Agreement. It was an oral condition of Richards ‘employment. The shortfalls were deducted from Richards’ wages.

Richards attended a Centrelink office and notified that she had commenced employment at the hotel. She advised Centrelink of the terms of her employment and, in particular, of the requirement to repay any shortfalls in the till takings. She asked Centrelink whether it would be sufficient to declare the income she received less the deductions for the till reimbursements. She was told that it would be and she acted accordingly.

Sometime later, a delegate of the Secretary determined that Richards had been overpaid parenting payment. The delegate concluded that the whole of Richards’ wages were assessable, including amounts repaid to her employer relating to the till shortfalls. The delegate decided that Richards owed a recoverable debt to the Commonwealth.

Richards appealed the decision to the SSAT and was successful. The Secretary then sought review of that decision at the AAT, and was unsuccessful. The AAT found that it was an oral term of Richards ‘employment agreement that she make good any shortages in the till. The AAT held that Richards’ wages were to be determined by reference to three factors: the number of hours worked in a week, an hourly rate, and any till shortfall.

The AAT concluded that Richards had a contractual obligation to make good the shortfalls. The AAT found that it could not be said in any real sense that Richards had earned, derived or received those sums or that she had the use or benefit of them.

The Secretary appealed the AAT’s decision to the Federal Court and was unsuccessful. The primary judge (Collier J) found that the sums representing the TAB till shortfalls did not represent income earned, derived or received by Richards for her own use or benefit.

The Secretary appealed the Court’s decision to the Full Federal Court.

The issues

The question on which this appeal turned was whether the amount of Richards’ wages calculated before any deduction for till shortfalls represented ‘an income amount earned, derived or received’ by her for her ‘own use and benefit’.

Discussion

The Full Court stated that the answer to the question, ‘what was the gross ordinary income earned, derived or received by Richards?’, was to be found in the terms of her employment contract. The Full Court found that the overall effect of the Certified Agreement and the oral term were that (questions of legality aside)Richards had agreed to receive wages set out in the agreement less any shortfall in the till takings.

The Full Court held that the gross income earned, derived or received by Richards was the amount of the wages specified in the Certified Agreement less any shortfall in the till.

The Full Court were critical of the Secretary for having pursued this appeal, commenting (at par 4):

...Ms Richards was pursued through the SSAT to the AAT byway of administrative review and thereafter to a single judge of this Court and to the Full Court for an overpayment which, as the AAT found, was raised in the face of contrary advice which she had been given by the Department. It is difficult to see what principle of general importance to the administration of the 1991 Act was at stake. In any event the appeal fails. Ms Richards’ income, according to the terms of her employment, was variable by reference to shortfall deductions. She did not understate her income in acting according to the departmental advice. There was no overpayment of benefit...

Formal decision

The Full Court dismissed the appeal with costs.

[S.O.]