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Social Security Reporter |
Income maintenance period: redundancy and termination payment; severe financial hardship; unavoidable or reasonable expenditure
(2009/1005)
Decided: 15th December 2009 by E. Fice
Bristow’s employment was terminated on 2 July 2009 .He received a redundancy payment of $15,736.86 made up of a $10,438 redundancy amount and $5298 in accrued long service leave. His average gross weekly wage at that time was $428.32.
On 13 July 2009 Bristow lodged an application for newstart allowance (NSA) with Centrelink. On 27 July 2009 a Centrelink officer determined that his claim was subject to an income maintenance period between 2 July 2009 and 11 March 2010. This decision was affirmed by the original decision maker. Bristow sought a review of the decision by an authorised review officer (ARO) who decided that the income maintenance period should operate between 2 July 2009 and 8 February 2010. Bristow sought a review by the Social Security Appeals Tribunal (SSAT) which set aside the ARO’s decision and instead decided that the income maintenance period should operate between 2 July 2009 and 11 November 2009. The Secretary sought review of the SSAT decision by the Tribunal.
The issues were:
a) whether Bristow was subject to an income maintenance period;
b) if so, the date of commencement of the income maintenance period;
c) whether the liquid asset test waiting period applied;
d) the length of the income maintenance period; and
e) the circumstances under which all orpart of the income maintenance period might not apply.
The Tribunal first considered whether Bristow was subject to an income maintenance period.
Section 1068-G7AH of the Social Security Act 1991 (the Act) provides:
If:
(a) a person’s employment has been terminated; and
(b) the person receives a termination payment ...;
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.
Section 1068-G7AQ of the Act defines a number of terms, including termination payment and redundancy payment.A termination payment is defined as:
...
(a) a leave payment relating to a person’s employment that has been terminated; or
(b) a redundancy payment.
The Tribunal noted that the Act does not define redundancy and so gave it its ordinary meaning. It noted that leave payment was defined in s 1068-G7AR of the Act to include a payment in respect of long service leave. The Tribunal concluded that both components of the payment Bristow received constituted a termination payment for the purposes of the Act.
The Tribunal found that Bristow was taken to have received ordinary income for a period equal to the period to which the payment related. That period constituted an income maintenance period and so Bristow was subject to an income maintenance period.
The Tribunal then considered when the income maintenance period should commence. Section 1068-G7AKA of the Act provides that subject to s.1068-G7AKC (the provision relating to whether there is a liquid assets test waiting period) for a person in Bristow’s situation the income maintenance period starts on the day the person is paid the termination payment.
The Tribunal noted that the Secretary had accepted that Bristow’s liquid assets were such that he was not subject to a liquid assets test waiting period and so the commencement date of the income maintenance period was 2 July 2009.
The Tribunal then considered section 1068-G7AH of the Act to determine the correct length of the income maintenance period. It noted that the effect of this section was that the length of the income maintenance period was to be calculated by dividing the total amount Bristow received ($15,736.86) by his average gross weekly wage immediately prior to his termination ($428.32). The Tribunal found that Bristow’s income maintenance period was 36 weeks or 180 working days commencing from 2 July 2009 and so concluding on 10 March 2010.
The Tribunal finally considered whether there was any reason why the whole of the income maintenance period should not apply.
Section 1068-G7AM 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....
Section 19C(2) defines the meaning of in severe financial hardship for a person such as Bristow who is not a member of a couple. The effect of this section was that for Bristow to be in severe financial hardship the value of his liquid assets must be less than the fortnightly amount at the maximum payment rate of the NSA that would have been payable to him if his claim for the NSA was granted and the income maintenance period did not apply (in this case $456).
The expression liquid assets is defined in s.14A(1) and the Tribunal stated that it means a person’s cash and readily realisable assets.Therefore, for Bristow to be eligible for a reduction in the income maintenance period his liquid assets must have fallen below $456 and this must be because he had incurred unavoidable or reasonable expenditure during the income maintenance period.
The Tribunal then considered the definition of the expression unavoidable or reasonable expenditure in s.19C(4) of the Act and of the expression reasonable costs of living in s.19C(5) of the Act. It noted that s.19C(6) sets out the amount of reasonable costs of living which are applicable to s.19C(4)(a) for a person who is not a member of a couple.It provides that the reasonable costs of living must not exceed the amount of the allowance 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.In other words, the expenditure of reasonable living costs must have occurred during the part of the income maintenance period that has already applied to the person.Also, the amount of reasonable costs of living must not exceed the NSA that Bristow would have been entitled to but for the application of an income maintenance period ($456 per fortnight). The Tribunal accepted the Secretary’s submission that only the reasonable living costs already expended by Bristow could be taken into account. The Tribunal then calculated Bristow’s maximum reasonable costs of living for the period 2 July 2009 to 15 December 2009 to be a total of $5423.91.
The Tribunal then considered Bristow’s evidence about the amounts he had spent and the Secretary’s submissions about which of these could be considered under s.19C(4) or (5) of the Act. It accepted a monthly repayment of $200 to his credit card (a total of $1200 for 6 months) could be regarded as unavoidable expenditure but not a lump sum reduction of his credit card debt by $6000. The Tribunal accepted that the motor vehicle registration expense of $516 should be regarded as an unavoidable expenditure. The Tribunal found that his mortgage payments were included in cost of living expenses and were limited to the figure calculated, $5423.91. The payment of $788 for Council rates on his principal home was an item which also fell under s.19C(5) of the Act and so was included in the $5423.91. The Tribunal therefore concluded that Bristow’s income maintenance period could be reduced by the number of days which equates to $7139.91 ($1,716 plus $5423.91)
It then turned to the question of whether the income maintenance period should be reduced and noted this could only occur if he was in severe financial hardship because of incurring unavoidable or reasonable expenditure. That meant his liquid assets must have reduced to not more than $456 at the date of the hearing.As Bristow’s total termination payment was $15,736, and the total of his unavoidable or reasonable expenditure together with his reasonable cost of living for the period was $7139.91, he must be taken to have liquid assets of at least $8,596.09 remaining. Therefore Bristow could not satisfy the requirement in s.1068-G7AM that he was in a position of severe financial hardship.
The decision under review was set aside and the Tribunal substituted a decision that Bristow was subject to an income maintenance period from 2 July 2009 to 10 March 2010 inclusive in respect of his claim for NSA.
[C.E.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2010/14.html