Editors --- "Periodic compensation payments: s.1184K, windfall of $57,000" [2010] SocSecRpr 54; (2010) 12(4) Social Security Reporter, Article 9

• COLEMAN and SECRETARY TO THE DFHCSIA
• Background
• Issues
• Special circumstances
• Formal decision

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Periodic compensation payments: s.1184K, windfall of $57,000

COLEMAN and SECRETARY TO THE DFHCSIA

(2010/718)

Decided: 27th August 2010 by A. K. Britton

Background

Coleman suffered injuries while working as a cleaner and was awarded workers’ compensation payments (currently $640 gross per fortnight) under the Workers’ Compensation Act 1987 (NSW) from 1994. In 2003 she applied for, and was granted, age pension. Coleman advised Centrelink of her financial position and the workers’ compensation payments and Centrelink in turn reduced the amount of age pension payable by treating the compensation payments as ordinary income.

In 2009 Centrelink decided that Coleman’s periodic compensation payments should have been treated as compensation which reduces age pension, a compensation affected payment, on a dollar for dollar basis. In August 2009 the Social Security Appeals Tribunal affirmed the decision which reduced Coleman’s age pension to a nil rate.

Issues

The AAT decided that there were three main issues:

• whether the periodic workers’ compensation should be treated as compensation payments under the Social Security Act 1991(the Act)?

• if so, how does that affect Coleman’s age pension?

• if Coleman’s age pension is to be reduced, should the discretion in s.1184K be exercised to enable some compensation to be treated as not having been made?

Section 17 of the Act defines age pension as a compensation affected payment. Compensation is any payment made wholly or partly in respect of lost earnings or capacity to earn. The insurer Allianz made the payments to Coleman as compensation for lost income within the meaning of the Act.

The AAT noted that Coleman was not receiving a compensation affected payment in 1994 but from grant of age pension the compensation payments were also received and the compensation should have reduced age pension on a dollar for dollar basis. The revised calculation made by Centrelink on 14 August 2009 was correct.

Special circumstances

Coleman had borrowed $120,000 to undertake extensive repairs to her property, which had not been repaired since 1970.The house had been in need of significant work and Coleman had entered into the mortgage on the strength of the incorrect information provided by Centrelink.

The AAT was satisfied that the bulk of the loan money was spent on repairs to the property. Under the terms of the loan Coleman could repay the loan during her lifetime or upon her death. Coleman testified that she would not have entered into the loan arrangement if she had thought that she would not be able to meet the repayments. She did not want to leave her daughter without an inheritance.

Coleman had surgery for a brain tumour which continued to grow. The serious medical condition needed regular ultrasounds, MRI and CAT scans. Coleman was unable to estimate the costs but she understood that the cost of additional treatment, when it was needed, would be significant.

Centrelink argued that Coleman’s circumstances were not ‘special’ because she was receiving compensation payments which were greater than age pension and the object of the policy was to ensure that a person did not receive compensation payments and tax payer support – the so-called ‘double-dip’.

The AAT found that Coleman’s health related expenses were significant but not out of the ordinary. The AAT recognised that the Secretary’s error had left Coleman with a windfall of $57,000 but, nevertheless, she was left in the position of being unable to service the loan which she would not have undertaken if she had known the correct pension rate. Because of her nil age pension rate status some of her recently incurred debts, like property rates, had increased.

The AAT recognised that Coleman was not without choices. She could choose to not repay the loan or she could sell her current residence and buy a smaller property. The AAT found that she had lived at her current home for a long time, moving would be difficult, and that she now found that her income had been halved without warning. Although the Centrelink debt had been waived the AAT granted one further indulgence to allow some breathing space.

Formal decision

The AAT decided to treat the compensation payments from 27 August 2010 to 17 December 2010 as not having been paid.

[M.R.]