Editors --- "Newstart allowance: unemployed or underemployed; whether actively seeking and willing to undertake paid work" [2012] SocSecRpr 30; (2012) 14(4) Social Security Reporter, Article 2

• KHAN and SECRETARY TO THE DEEWR
• Background
• The issue
• The legislation
• Consideration of the evidence
• Formal decision

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Newstart allowance: unemployed or underemployed; whether actively seeking and willing to undertake paid work

KHAN and SECRETARY TO THE DEEWR

(2012/641)

Decided: 24th September 2012 by M.D. Allen.

Background

In May 1997 Khan started a business originally as a partnership with his wife and later it was incorporated. By 2010 the business had lost several important accounts and was no longer generating enough income to pay Khan a wage. He began to look for employment. Despite applying for many jobs he was unable to find work and on 12 September 2011 he contacted Centrelink regarding an intention to claim newstart allowance. On 29 September 2011 he lodged a claim. Pursuant to subsection 13(1) of the Social Security (Administration) Act 1999, his claim for newstart allowance was deemed to have been made on 12 September 2011. On 29 November 2011, in answer to a query by Centrelink, Khan stated that he was working 60 hours per week in his company. His claim for newstart allowance was rejected on the basis that he was self-employed.

He sought review of this decision and it was affirmed by the authorised review officer and then the Social Security Appeals Tribunal. He sought further review by the AAT.

The issue

The issue for the Tribunal to determine was whether Khan was unemployed and therefore qualified for newstart allowance.

The legislation

Section 593 of the Social Security Act 1991 (the Act) states:

(1) Subject to sections 596, 596A, 597 and 598, a person is qualified for a newstart allowance in respect of a period if:

(a) the person satisfies the Secretary that:

(i) throughout the period the person is unemployed;

Subsection 601(1) of the Act states:

Subject to subsections (1A) and (5), a person satisfies the activity test in respect of a period if the person satisfies the Secretary that, throughout the period, the person is:

(a) actively seeking; and

(b) willing to undertake;

paid work in Australia, other than paid work that is unsuitable to be undertaken by the person.

Consideration of the evidence

On 21 January 2012 Khan told the authorised review officer that he had been actively seeking work, but was still trying to build his business as he had not found other work. If he got a job he would sell his database and close his business.

He told the Tribunal that an officer of Centrelink had advised him to answer the question of how many hours he worked in his business by reference to how many hours he had worked in the pre-ceding week. In the week preceding his 29 November 2011 letter to Centrelink, he had worked 60 hours in his business as he had been closing his rented office and moving files and equipment to a room in his flat where he resided with his wife and children. At the time of the Tribunal hearing he estimated that his business occupied him for 15 to 20 hours a week.

Khan told the Tribunal that he was maintaining his business because he obtained certain advantages by writing off some expenses to the business but also because it was the only activity available to him. If he were to obtain full time employment he would either close the business or run it as a part time activity. His main business activity was sending out accounts and this occupied about 20 hours spread over two to three days.

The Tribunal noted that there had been many decisions of the Tribunal and the Federal Court regarding the distinction between unemployed and underemployed and quoted from the decision of Graham J in Secretary, Department of Employment and Workplace Relations v Joss [2006] FCA 884; (2006) 152 FCR 541 at page 547 paragraph 35:

It may well be that viewed as a question of fact and degree and having regard to the intensity with which a person applies him or herself to a particular enterprise, one may conclude that a person is not self-employed at all. But, once it be found that the person is self-employed it seems to me impossible to conclude that such a person was, at the same time, unemployed.

The Tribunal also referred to the decision of Te Velde and Director-General of Social Services [1981] AATA 87; (1981) 3 ALN N111 at N114 quoted by Graham J at 152 FCR 544:

Whilst the concept of ‘work’ normally connotes some activity pursued as a means of earning one’s livelihood, the absence of evidence that the activity is effective in producing a livelihood may not be critical in deciding whether the activity qualifies as ‘work’: see Clear v Smith (1981) 1 WLR 399. A self-employed person, in particular, may be engaged full-time in activities intended to earn him a living, but which, despite his diligent efforts, fail to do so. Thus in Brabenec and Director– General of Social Services (1981) 3 ALN No 39, a self-employed miner engaged unsuccessfully in full-time prospecting for opals was held not to be ‘unemployed’ within the meaning of the Act. As the Tribunal commented in that case, the opal miner was no more ‘unemployed’ than any person setting himself up on his own in a profession, trade or business ...

The Tribunal considered what was required to satisfy the activity test (as per subsection 601(1) of the Act) and E-reference 001.03630 of Centrelink’s Procedure Manual regarding self-employment:

Self- employed – a person engaged in self-employment may be regarded as un-employed if:

The activity is on a small scale and de-signed to supplement income, rather than as an alternative to wages

...

If net income received from the business does not preclude payment and the customer is able to satisfy Activity Test requirements based on their income and hours worked, then a self-employed customer may receive payment and be considered unemployed.

...

The Tribunal found that as at February 2012 Khan was still applying himself to his business as he ‘still had hopes he could turn it around’. After that, he realised that the business was ‘a non-living thing’. The Tribunal accepted Khan’s evidence that from August 2011 he was looking for full time employment and had it been offered he would have accepted that offer. However the Tribunal found that it was only from 1 March 2012 that Khan was unemployed and actively seeking and willing to undertake paid work.

The Tribunal noted that it should make its decision having regard to the state of affairs existing at the time the Tribunal makes its decision - Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286. It did not accept the submission made on behalf of the Secretary that although Khan had a review in place he could not qualify for newstart allowance until a fresh application had been received.

Formal decision

The decision was set aside and the matter was remitted to the Secretary with the direction that Khan was entitled to the payment of newstart allowance as and from 1 March 2012.