Editors --- "Income maintenance period: reasonable or unavoidable expenditure" [2012] SocSecRpr 29; (2012) 14(4) Social Security Reporter, Article 1

• NEILSEN and SECRETARY TO THE DEEWR
• Background
• The legislation and issue for determination
• Discussion
• Formal decision

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Income maintenance period: reasonable or unavoidable expenditure

NEILSEN and SECRETARY TO THE DEEWR

(2011/0507)

Decided: 3rd September 2012 by R.G. Kenny.

Background

In April 2011, on ceasing employment with QR National, Neilsen received a termination payment of $60,898.26. He used the monies to purchase a car for $36,524.14 the stated reason for which was to meet the transport and safety needs of his family, and to purchase a dining suite for $4000. He also repaid an outstanding personal loan of $16,556.06 and spent additional monies on the cost of living, expenses in relation to the children, health related items and other household expenses estimated at approximately $7,245.85.

Centrelink decided to impose an income maintenance period (IMP) for the period 20 April 2011 until 11 August 2012 because of the termination payment. The effect of the decision was that Neilsen did not receive newstart allowance during the IMP.

The decision was affirmed by a Centrelink Authorised Review Officer and the Social Security Appeals Tribunal.

He then applied for review by the AAT.

The legislation and issue for determination

It was accepted that the IMP had been correctly calculated in accordance with the requirements of the Social Security Act 1991 (Cth) (the Act).

The issue in dispute was whether the discretion available under s.1068-G7AM of the Social Security Act 1991 (Cth) (the Act) could be exercised in Neilsen’s favour. This discretion enables the whole or part of the IMP not to apply if the recipient is in severe financial hardship because he or she has incurred ‘unavoidable or reasonable expenditure’ while an income maintenance period applies to him or her.

Section 19(C)(3) of the Act defines ‘severe financial hardship’ and, for a member of a couple, states that the couple’s liquid assets must be less than twice the maximum fortnightly rate of the person’s payment.

Section 19C(4) also defines ‘unavoidable or reasonable expenditure’ by reference to a list of specified expenses such as repairs to and replacement of essential whitegoods, school and funeral expenses, essential repairs to a car and home in (4)(b) to (j) followed by the general terms of (k) which reads:

any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.

Section 19C further allows for that expenditure to include ‘the reasonable costs of living’ but it also caps the amount that can be claimed under this head at twice the amount of the payment he or she would have received during the part of the IMP already served (for a member of a couple).

Discussion

The Tribunal rejected Neilsen’s submission that the entire IMP could be the subject of the discretion noting that a precondition was that Neilsen and his partner were in financial hardship as per s.19(C)(3) of the Act. The Tribunal noted that this had not been the case throughout the entire period and only the parts of the period where their liquid assets had fallen below the threshold amount in s.19(C) (3) of the Act could be considered. This was stated to be a few days in May 2011 and the period from 13 October 2011 until 30 May 2012. There was evidence of an increase in liquid assets beyond $857.40 on 31 May 2012 when Mr Neilsen’s partner received a payment from Centrelink of $7,152.93, so that the IMP applied from 31 May 2012. The AAT was satisfied that the major part of the IMP in which severe financial hardship could be considered was from 13 October 2011 until 30 May 2012.

Noting that the vehicle, furniture purchase and loan payment did not fall within the specific matters listed in s.19(C)(4) the Tribunal went on to consider the general terms of s.19(C)

(4)(k) and found that ‘any other costs’ had to be interpreted with the sense of immediacy, urgency or necessity which characterised the specific references to ss.19(C)(4)(a) to (j) such that a failure to meet the expense may result in real detriment to the person concerned.

The AAT also said: ‘The notions of ‘unavoidability’ and ‘reasonableness’ in s.19C(4)(k) of the Act are expressed as alternatives. They are to be assessed having regard to the circumstances in relation to Mr Neilsen’. In considering whether the expenditure was unavoidable or reasonable, the Tribunal was not persuaded by expert reports which had been provided as to Neilsen’s diminished intellectual capacity. Whilst the Tribunal accepted that there may be some basis for the opinions in the reports, it ultimately found that the evidence Neilsen had given on why he had purchased the vehicle and repaid the loan demonstrated capacity for abstract thinking and an ability to deal with the financial aspects of those

transactions.

The Tribunal did not accept that Neilsen’s expenditure could be characterised in circumstances of immediacy, urgency or necessity as he had other options available in respect of the vehicle as was demonstrated by his decision to sell the vehicle one month later and to then conduct his family business without one. He had an agreement with the lending institution regarding the fortnightly repayment of the loan and no demands had been made on him to repay it at a greater rate or finalise the loan. The spending on furniture was avoidable. The Tribunal further noted that whilst the consequence of the sale of the car was to replenish his finances, Neilsen’s ongoing expenditure had far exceeded the statutory maximum allowable cost of living and was neither unavoidable nor reasonable in the circumstances.

The Tribunal went on to find that there was no part of the IMP which should not apply to him because Neilsen’s severe financial hardship did not arise because he incurred unavoidable or reasonable expenditure during the IMP.

Formal decision

The decision under review was affirmed.