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Social Security Reporter |
Disability support pension: meaning of ordinary income; lump sum payment of arrears of superannuation pension entitlements
(2013/536)
Decided: 1st August 2013 by A.F. Cunningham
The appeals related to the payment of disability support pension (DSP) to Cole. The issue in dispute related to the classification of income received by Cole under the provisions of the Social Security Act 1991 (the Act), namely, the lump sum payment of arrears to Cole on 13 March 2012 from the Retirement Benefits Fund (RBF). There was no dispute about the calculation of income for the relevant period.
A direction to hear and determine the appeals concurrently was made following a request from the parties.
The first appeal was from a decision of the Social Security Appeals Tribunal (SSAT) made on 9 October 2012 which affirmed a Centrelink decision to cancel Cole’s DSP on the basis that her income precluded payment of any rate of DSP.
A second and third appeal was in respect of a subsequent claim for DSP which Cole had lodged on 25 July 2012, following the cancellation of her DSP. Cole had lodged the second appeal against a finding of the SSAT in its decision of 8 January 2013 that the payment she received from the RBF on 13 March 2012 be assessed as income for the purposes of calculating her DSP payments. The Secretary of DFHCSIA (the Secretary) had also lodged an appeal against the decision of 8 January 2013 on the basis of the SSAT’s finding that the lump sum payment should be disregarded as at 26 July 2012 as it had been expended.
Cole told the Tribunal that she had become entitled to a total and permanent invalidity benefit with effect from March 2010 and had elected to commute the maximum amount available being a net payment of $74,785.46 to a lump sum payment to assist with the repurchase of a home. On 13 March 2012 Cole received $29,792.94 (the lump sum payment) which included an arrears payment of her Total and Permanent Incapacity (TPI) pension to which she became entitled from 15 March 2010.
Cole contended that the payment was ‘the first payment of her TPI income stream from the RBF’. She also contended that it represented a return on her superannuation investment and was thus an excluded amount pursuant to section 8(8) of the Act. Subsection 8(8) states that any return on a person’s investment in a superannuation fund is not income for the purposes of the Act.
The Tribunal rejected Cole’s contentions. The Tribunal found that the lump sum payment did not represent the return on her superannuation investment but was an amount calculated on the basis of Cole’s TPI entitlements with effect from 15 March 2010 plus the first of her periodic payments. The Tribunal found that the ‘return’ referred to in subsection 8(8) was not a sum of money paid to the person by way of pension entitlements but that it comprised monies generated or earned by the superannuation investment that remains within the fund and for that reason could not be characterised as income for the purposes of the Act.
The Tribunal noted that the term ‘income stream’ was defined in section 9(1) and included an income stream from a superannuation fund and as such the periodic amounts received by Cole in the form of TPI pension benefits fell within this definition. However the Tribunal found that the accumulation of the arrears of periodic payments did not constitute an income stream. Instead the Tribunal found that the lump sum payment was income within the meaning of section 8 and must be treated as ordinary income as that term is defined as it was not maintenance income or an exempt lump sum as defined in subsection 8 (11).
The Tribunal found that the lump sum payment was most appropriately considered in accordance with the provisions of section 1073 of the Act. This provided that the lump sum is to be divided over a period of 12 months in 52 equal payments commencing on the day of entitlement for the purposes of the ordinary income test, and rejected Cole’s submission that the payment should be treated as a one-off payment of income.
The Tribunal noted that the effect of Cole’s submission would have been that her entitlement to DSP would only have been impacted for the fortnightly period during which the payment was received and that she would have otherwise qualified for DSP for the balance of the year. At paragraph 28, the Tribunal stated that:
such an outcome is not only contrary to the legislative provisions with respect to the income test but is inconsistent with the objectives and purpose of the social security legislation which is to direct income support to those in need. Income support payments are means tested to ensure payments are made only to those who cannot rely on other sources of income and capital.
The Tribunal stated that it did not consider anything unfair or unjust with assessing the lump sum payment as income in accordance with the provisions of section 1073 of the Act, as Cole had been in receipt of DSP at a rate which was not affected by her TPI benefit entitlements during the period that the lump payment, comprising arrears of TPI benefits covered, as they had not at that stage been received by her.
Cole had appealed against the SSAT decision on the basis that the lump sum payment did not constitute ‘ordinary income’ as at 25 July 2012 because it formed part of the first payment of her ongoing RBF life pension and comprised the first in a series of ongoing and related periodic payments. For the reasons set out in the first appeal, the Tribunal rejected Cole’s ground of appeal.
The Secretary had appealed the SSAT decision on the ground that there was no legal basis to the SSAT’s findings that the lump sum payment could be disregarded because it had been expended. The Tribunal agreed.
The Tribunal found that the income test was not affected by any income spent by a person subsequent to its receipt relying on the statement of the Tribunal in its decision Arnold and Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 828 at paragraph 36:
Once it is determined that an amount is ‘income’ for the purposes of the SS Act, it is taken to have been received equally over the weekly period in the 12 months following its receipt: section 1073 (1).
The Tribunal found that the SSAT’s conclusion that the income had been converted into an asset which was exempt in accordance with s.11A of the Act was not sustainable, as this provision was only relevant for the purposes of the assets test not the income test. The Tribunal also found that the SSAT’s consideration of s.1107 of the Act in the context of disposition of income was misplaced as this provision was only relevant in the context of the disposal of ordinary income when no or inadequate considered is received or the Secretary is satisfied that the purpose was to obtain a social security advantage. The Tribunal noted that none of these circumstances applied in this case.
Accordingly, the Tribunal found that the lump sum payment received by Cole on 13 March 2012 which constituted arrears of superannuation entitlements was correctly assessed as ordinary income. Pursuant to the provisions of s.1073 of the Act, the Tribunal held that the income was taken to have been received over a 12 month period commencing on 13 March 2012 and was thus income for the purposes of the income test with respect to the assessment of Cole’s rate of payment of DSP for her claim lodged on 25 July 2012.
The first appeal: The Tribunal affirmed the decision under review.
The second and third appeals: The decision of the SSAT made on 8 January 2013 was set aside and the original decision reinstated.
[G.B.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2013/19.html