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Social Security Reporter |
Disability support pension: income maintenance period; calculation and payment in lieu of notice
(2012/36)
Decided: 25th January 2012 by R. P. Handley
Reed worked for QANTAS from 14 June 1989 until 29 June 2010 when he elected to take a voluntary redundancy. Ten days after his employment was terminated he was paid a total of $71,339.14 comprising a redundancy payment of $57,496.77, a payment in lieu of notice of $9,158.76, a payment in respect of rostered days off of $2,104.50 and in respect of long service leave of $2,579.11. Reid’s claim for disability support pension (DSP) made on 26 October 2010 was rejected by Centrelink because of an income maintenance period imposed as a result of the payments received from QANTAS on the termination of his employment. On review the decision was affirmed by the Authorised Review Officer. On further review, the Social Security Appeals Tribunal decided to remit the matter back to the Secretary to the DFHCSIA for reconsideration with the direction that the income maintenance period applied to Reid should be recalculated on the basis that a payment made to him in lieu of notice was not a part of his termination payment.
The issues for the AAT to determine were:
1. Whether the payment received by Reed in lieu of notice formed part of his termination payment?
2. How should the redundancy component of Reed’s termination payment be calculated?
3. When did Reed’s income maintenance period commence?
Section 117 of theSocial Security Act 1991 (the Act) provides for the rate of DSP payable in Reed’s circumstances to be worked out using Pension Rate Calculator A at the end of s.1064. Modules E and F of s.1064 set out how a person’s ordinary income affects the maximum rate at which a person’s benefit is payable, Module F being specifically in respect of DSP. Module F contains provisions specific to lump sum payments arising from termination of employment and certain leave payments.
There was no dispute that Reed’s redundancy payment and his payments in respect of rostered days off and long service leave formed part of his termination payment. The issue in contention was whether the payment in lieu of notice also formed part of his termination payment.
The Secretary argued that because specific notice periods applying in the case of redundancy were stated in the ‘Compulsory Redundancy Agreement’ which was an Annexure to the Enterprise Agreement under which Reid was employed, a payment in lieu of notice on an employee being made redundant should be treated as a termination payment. The Tribunal rejected this argument, stating that this ignored the meaning of the term ‘redundancy payment’. Instead the Tribunal relied on the decisions of Finch and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 745; (2009) 112 ALD 171 andSaad and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 325; (2010) 115 ALD 231, finding that the payment in lieu of notice was neither a redundancy payment within the meaning of that term, nor was it a leave payment but rather it was a payment that the employer must make if the person’s employment is terminated without the person being permitted to serve the period of notice. The Tribunal did not consider that the fact that a longer period of notice was required to be given to an employee who is to be made redundant, changed the nature of a payment made in lieu of that period of notice.
The Tribunal next considered how the redundancy component of Reed’s termination payment should be calculated and, in particular, what constituted Reed’s ‘ordinary income’ for that purpose.
Reed, relying on the Tribunal’s decision in Williams and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 354(Williams), contended that his ordinary income should be taken to be his average weekly gross income determined over a two year period. His average weekly gross income included payments for overtime and shift work that he was required to perform pursuant to the terms of his employment contract.
The Secretary argued that the method of calculation followed in Williams should not be followed on the ground that paragraph (b) of the definition of ‘period to which the payment relates’ in s.1064-F14 requires that the decision maker first consider how the redundancy payment has been calculated. If it is calculated as an amount equivalent to an amount of ordinary income that the person (but for the redundancy) would have received from the employment that was terminated, the period to which the payment relates is the period for which the person would have received that amount of ordinary income.
The Tribunal noted that although Reid was required to perform shift work and overtime as required by QANTAS and this would for other purposes be regarded as part of his ordinary income, it was apparent that the redundancy component of his termination payment had, in accordance with the Enterprise Agreement, excluded shift and overtime payments. Therefore the Tribunal was satisfied that paragraph (b) in s.1064-F14 applied and that the period of 79 weeks (which equated to 395 working days) stated in both Reed’s Employment Separation Certificates was the applicable period.
Reed argued that the applicable income maintenance period commenced on 30 June 2010, being the day after his employment was terminated. Section 1064F-2 of the Act states:
1064-F2 Subject to points 1064-F3 to 1064-F14 (inclusive), if:
(a) a person’s employment has been terminated; and
(b) as a result the person is entitled to a lump sum payment from the person’s former employer;
the person is taken to have received the lump sum payment on the day on which the person’s employment was terminated.
However, the Secretary relied on s.1064-F8 which states:
1064-F8 If a person is covered by point 1064-F5, the income maintenance period starts, subject to point 1064-F9, on the day on which the person is paid the termination payment.
The Tribunal noted that s.1064-F9 was not applicable to Reed’s case. In considering the provisions, the Tribunal opined that it was reasonable to assume that one of the objectives of the provisions, like those elsewhere in the Act, is to prevent ‘double dipping’ – to prevent a person receiving a social security payment, in this case DSP, for a period in respect of which the person has also received a redundancy payment. The Tribunal also referred to the Explanatory Memorandum for the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Bill 2005 which stated that ‘the inclusion of redundancy payments in the calculation of the income maintenance period recognises that the primary purpose of a redundancy payment is to support peoples’ incomes for a period after loss of employment’.
The Tribunal noted that in Reed’s case he was paid redundancy payments for the period after termination of his employment on 29 June 2010, that is, for the period from 30 June 2010. The Tribunal did not consider it determinative that he did not receive the lump sum payments until 9 July 2010 and held that Reed’s income maintenance period commenced on 30 June 2010, the day following his last day of paid employment.
The AAT set aside the decision under review and the AAT substituted the decision that payment of DSP to Reed was subject to an income maintenance period of 431 working days commencing on 30 June 2010.
[G.B.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2012/8.html