Editors --- "Age pension: attribution of one-off casual income; determination of income assessment period" [2011] SocSecRpr 20; (2011) 13(3) Social Security Reporter, Article 1

• PRIESTLEY and SECRETARY TO THE DFHCSIA
• Background
• The issue
• The law
• Secretary’s submissions
• Consideration
• Relevance of Department Guide
• Decision

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Age pension: attribution of one-off casual income; determination of income assessment period

PRIESTLEY and SECRETARY TO THE DFHCSIA

(2011/185)

Decided: 22nd March 2011 by DP. Jarvis

Background

Mr and Mrs Priestley were married age pensioners employed as polling officers on a casual basis by the Electoral Commission of South Australia at the State Election held on 20 March 2010 for which they received a payment of $382.85 which included a meal allowance of $14.85. Their age pensions were calculated in accordance with the rate calculator at the end of s.1064 of the Social Security Act 1991 (the Act).

From 20 September 2009 there was a one-off increase in the rate of pensions, including the age pension, as well as an indexation increase. In addition, changes were made by the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009 (the 2009 Amending Act) to the method by which the rate of certain social security payments, including the age pension, was to be calculated. One of the changes related to the amount by which employment income affected the rate of pension payable. Income over a statutory ‘free’ area reduced the pension rate by 50 cents in the dollar; rather than by 40 cents in the dollar as had previously been the case. The 2009 Amending Act included transitional provisions which were intended to protect the position of existing pensioners who were receiving a pension prior to 20 September 2009. It required pensions to be calculated using both the new method (to produce the new rate of pension) and a transitional rate method. If the new rate of pension was higher than the transitional rate, from that time onwards the new rate would apply, instead of the transitional rate. As a result of the manner in which Centrelink attributed the Priestleys’ earnings, the new rate method produced a slightly higher rate of pension and was applied from then onwards to assess their pension.

The issue

The issue before the Tribunal was whether the Priestleys’ age pensions were correctly calculated at the transitional rate which involved determining whether their earnings with the Electoral Commission had been correctly attributed to the relevant period.

The law

Section 55(a) of the Act provides that a person’s age pension is worked out by using the Rate Calculator A at the end of s.1064. Relevantly, s.1064-E1 provides for how to work out the amount of the ordinary income on a yearly basis. Following amendments to the Social Security Act in 2009, this required regard to be had to ss.1073A, 1073B and 1073C which contained the rules for determining the period to which employment income should be attributed in order to calculate the rate of age pension.

Section 1073A of the Act provides for the attribution by the Secretary of lump sum employment income, in certain circumstances, over a period not exceeding 52 weeks at the discretion of the Secretary. It provides as follows:

1073A Employment income attribution over a period for social security pensioners

(1) Employment income:

(a) that is a lump sum amount either:

(i) in respect of a period greater than a fortnight; or

(ii) resulting from remunerative work although not in respect of any particular period; and

(b) that is earned, derived or received, or is taken to have been earned, derived or received, by a person:

(i) who is receiving a social security pension; and

(ii) whose rate of payment of that pension is worked out with regard to the income test module of a rate calculator in this Chapter; is taken to have been earned, derived or received over such period, not exceeding 52 weeks, as the Secretary determines.

(2) The person’s employment income for the period determined by the Secretary is to be reduced to a fortnightly rate rounded to the nearest cent (rounding 0.5 cents downwards).

Section 1073B applies to employment income earned, derived or received, or taken to have been earned, derived or received, during the whole or part of a particular instalment period of a person. Section 1073C provides for how to work out the person’s income, when s.1073B applies, on a fortnightly or yearly basis.

Secretary’s submissions

The Secretary submitted that Centrelink had correctly attributed the Priestleys’ income from the Electoral Commission to each day of the instalment period in which it was received, by dividing the total amount received by the number of days in that instalment period as per s.1073B of the Act.

The Secretary also relied upon an extract from paragraph 4.3.3.25 of the Guide (the Guide Extract). This extract provides for the assessment of employment income for pensioners over age pension age from 20 September 2009, in the following terms:

Assessment of employment income for pensioners over age pension age from 20/9/2009

Persons over age pension age receiving a social security pension have their employment income (1.1.E.102) assessed in the instalment period in which it is earned, derived or received. The fortnightly amount of employment income is spread evenly across all days in the instalment period, regardless of which days or the number of days worked. Because a pension rate is calculated as an annual rate, the fortnightly rate of employment income is converted to an annual rate for input to the rate calculation process.

If there is access to the work bonus the rate of ordinary income will be adjusted.

Consideration

The Tribunal took the view that the purposive approach should be adopted in statutory interpretation and referred to CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 and the provisions of ss.15AA and 15AB of theActs Interpretation Act 1901 (Cth). In so doing, it had regard to the Explanatory Memorandum in respect of the Bill to introduce the 2003 amendments (the 2003 Explanatory Memorandum) which comprised ss.1073A, 1073B and 1073C of the Act and in particular the stated purpose behind the employment income attribution rules. In discussing the proposed new s.1073A, the 2003 Explanatory Memorandum had stated that it was intended to provide a specific rule to allow in certain circumstances for pensioners’ employment income to be spread over such period of up to 52 weeks as the Secretary determines. It went on to state that only lump sums that either represent a period greater than a fortnight or that do not represent a period at all but are paid as a result of remunerative work (such as royalties or commissions), may be spread in this way.

Whilst, when first enacted, the employment income attribution rules had not applied to people of age pension age, this was no longer the case following the amendments to the Act in 2009.

Accordingly, the Tribunal went on to consider and found that the Priestleys’ employment income was of the kind provided for in s.1073A (1) based on the particular circumstances of their employment. This was on the basis of the Tribunal’s finding that the lump sum received by the Priestleys resulted from remunerative work that was not in respect of any particular period, in that, although their duties as polling officials were carried out on the day of the election, they were able to do the additional preparatory work required at any time between the date when they received the instruction manual and workbook (1 March 2010) and the date of the election (20 March 2010).

Having found that the employment income attribution rule provided for in s.1073A applied, the Tribunal then considered the exercise of the discretion to deem the income from the Electoral Commission to have been earned, derived and received over a period not exceeding 52 weeks. The Tribunal noted that it was able to undertake this exercise with the benefit of hindsight as the proceedings were heard almost one year after the State Election. Further the Tribunal noted that there was no evidence before it that the Priestleys had received any other employment income during the relevant period.

The Tribunal took account of the evaluative approach which had been taken in Secretary, Department of Family and Community Services v Rolley(200) [2000] FCA 806; 175 ALR 4 and an earlier case of Secretary, Department of Social Security and Moroney and Anor (1998) 52 ALD 655 which adopted a similar approach in relation to casual earnings. The Tribunal noted that the present matter was stronger in its facts than these cases because the Electoral Commission payments were clearly isolated one-off payments. The Tribunal found that it would be consistent with the approach in the 2003 Explanatory Memorandum for their earnings to be spread equally over the period of 20 days which was the number of days given by the Electoral Commission to undertake their preparatory work and the election work (counting the day of receipt of the manual and workbook and the day of the election). On this basis, the Tribunal noted it was common ground that their transitional rate of pension would exceed the new rate. The Tribunal added that a more appropriate exercise of its discretion consistent with the evaluative approach taken inRolley and the principles of good administration of taking into account all relevant facts and circumstances known with the benefit of hindsight as at the date of decision, would be to attribute the Priestleys’ earnings over a longer period. The Tribunal noted that the transitional rate of pension would again exceed the new rate of pension if the earnings from the Electoral Commission were attributed to a period greater than 20 days.

Relevance of Department Guide

In reaching this conclusion, the Tribunal stated that it had not overlooked the Guide Extract but had found that there were cogent reasons not to apply it referring to the principles elucidated in Drake and Minister for Immigration and Ethnic Affairs(No. 2) (1979) 2 ALD 634. In so doing, the Tribunal found that the Guide Extract’s prescriptive provisions did not appear to take into account the circumstances in which the attribution of employment income should be determined pursuant to s.1073A of the Act. The Tribunal also found that the application of the Guide would produce an unjust decision in the circumstances of the present case as it would result in the Priestleys being worse off, notwithstanding that the purpose of the 2009 Amending Act, as revealed by the Explanatory Memorandum, was to ensure that current payment rates were maintained in real terms and that pensioners also benefited from a pension increase.

Although noting that paragraph 4.3.3.30 of the Guide related to employment income received prior to 20 September 2009, the Tribunal found that it did provide helpful guidance on the application of the employment income attribution rules provided for in ss.1073A-1073C of the Act by differentiating between one-off employment income, and earnings at a regular constant rate, and variable income over a period. The Tribunal found it curious that whilst ss.1073A-1073C had not been amended by the 2009 Amending Act, the Guide paragraph

4.3.3.30 was nevertheless confined to pre-20 September 2009 income. The Tribunal speculated that this may have been because lump sum earnings earned, derived or received in circumstances to which s.1073A applied were intended to be dealt with by paragraph 4.3.3.20 of the Guide. That paragraph provided for the income to be treated as a remunerative lump sum and held as income for up to 52 weeks with the period covered by the payment being allocated to appropriate instalment periods and spread evenly throughout the instalment periods. The Tribunal considered that this provision of the Guide was more appropriate to the facts of this present matter than the Guide Extract and noted that the effect would be that the Priestleys’ lump sum earnings would be spread out over at least two, and up to 26, instalment periods.

The Tribunal ultimately decided that the attribution rule in s.1073A of the Act applied to the Priestleys’ case and that the period to which their income from that source should be attributed was not less than 20 days. The Tribunal found it unnecessary to quantify what it considered to be a more appropriate longer period given that the minimum period of 20 days had the result of the transitional rate exceeding the new rate.

Decision

The AAT set aside the decision under review and remitted the matter back to the Department for reconsideration in accordance with the reasons for decision.

[G.B.]