Editors --- "Special benefit: whether Dairy Structural Adjustment Program payments are 'income': effect of bankruptcy on entitlement to payments: start date of payments" [2008] SocSecRpr 6; (2008) 10(1) Social Security Reporter, Article 6

• MOLINARO and SECRETARY TO THE DFaCSIA
• Background
• The issue
• Discussion
• Formal decision

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Special benefit: whether Dairy Structural Adjustment Program payments are ‘income’: effect of bankruptcy on entitlement to payments: start date of payments

MOLINARO and SECRETARY TO THE DFaCSIA

(2007/2068)

Decided: 19th December 2007 by B. H. Pascoe

Background

Molinaro had been, for some time, in receipt of quarterly payments of $23,071 payable over eight years in satisfaction of a total entitlement of $738,264 under the Dairy Structural Adjustment Program (DSAP) within the Dairy Produce Act 1986.

On 30 March 2001, Molinaro assigned her rights to the quarterly payments of DSAP to the National Australia Bank as security for a loan of $552,192. The loan funds were applied entirely to discharge various debts owed by Molinaro.

On 19 November 2002, Molinaro was made bankrupt by a sequestration order, following a creditor’s petition. The trustee in bankruptcy found that the DSAP payments would continue to be paid to the bank, post the sequestration order, pursuant to the secured loan.

On 20 March 2003, Molinaro applied for disability support pension (DSP). Although Molinaro met the qualification requirements for the payment, a decision was made to reject the application on the basis that Molinaro’s income, being the DSAP payments, exceeded the permissible limits. This decision was reviewed internally and by the SSAT, before being affirmed by the AAT on 15 December 2004 (Molinaro and Secretary, Department of Family and Community Services [2004] AATA1333, Senior Member Handley). The AAT concluded that the DSAP payments were ‘income’ for the purposes of the Act as they were amounts derived for Molinaro’s own use or benefit. In affirming the decision, the AAT recommended that Molinaro make a claim for special benefit and that such an application be considered favourably by Centrelink.

On 7 September 2005, Molinaro made a claim for special benefit. The claim was rejected by Centrelink on the basis that the DSAP payments were ‘income’ of Molinaro for the purposes of the Act.

Molinaro sought review of Centrelink’s decision. The decision was affirmed by the SSAT. Molinaro then applied to the AAT for a review of the decision.

The issue

The issue before the Tribunal was whether the DSAP payments were ‘income’ of Molinaro for the purposes of the Social Security Act 1991 (the Act).

Discussion

The AAT disagreed with the conclusion of the earlier AAT that the DSAP payments, post Molinaro’s bankruptcy, were ‘income’ of Molinaro for the purposes of the Act.

The AAT concluded that the effect of the bankruptcy changed any rights Molinaro may have had to the instalments of DSAP. The AAT found that the DSAP payments were irrevocably assigned as security to the bank and were no longer an entitlement or asset of Molinaro in the same way as the debt to the bank was no longer a liability of hers as a consequence of the bankruptcy. The AAT concluded that, as from 19November 2002, it could no longer be said that Molinaro continued to derive the instalments of DSAP for her own use or benefit.

The AAT noted that the earlier AAT decision remained in effect, as there had been no appeal against the decision. That decision stood as a decision against entitlement to DSP during the eight years in which the DSAP payments continued. The AAT noted that it would be open to the responsible authority, however, to make a new decision in relation to this matter in light of later and relevant information.

The AAT concluded that special benefit was payable to Molinaro from the date of her claim on the basis that the DSAP payments were not ‘income’ for the purposes of the Act and the earlier AAT decision meant that DSP was not payable to Molinaro.

The AAT further observed that, given its findings, it would be open to Molinaro to lodge a new claim for DSP. The AAT further commented that, if the application was granted, s.15(1) of the Social Security (Administration) Act 1999 should be applied so that she would be taken to have made the claim for DSP on 7 September 2005.

Formal decision

The AAT set aside the decision under review and remitted the matter to the respondent with a direction that Molinaro was entitled to special benefit from the date of her application (7September 2005), unless she made a claim and qualified for DSP, so that s.15(1)of the Social Security (Administration) Act 1999 applied.

[S.O.]