Sidebottom and Secretary, Department of Social Services (Social services second review) [2019] AATA 4254 (3 October 2019)

Last Updated: 22 October 2019

Sidebottom and Secretary, Department of Social Services (Social services second review) [2019] AATA 4254 (3 October 2019)

Division: GENERAL DIVISION

File Number(s): 2018/7125

Re: David Sidebottom

APPLICANT

And Secretary, Department of Social Services

RESPONDENT

DECISION

Tribunal: Mrs J C Kelly, Senior Member

Date: 3 October 2019

Date of written reasons: 18 October 2019

Place: Sydney

For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal affirms the decision of the Social Services and Child Support Division of this Tribunal dated 6 November 2018.

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Mrs J C Kelly, Senior Member

CATCHWORDS

SOCIAL SECURITY – cancellation of age pension and refusal of new claim for age pension - Applicant exceeded income limit for age pension - proceeds of sale of principal residence deposited in bank account – deeming provisions apply to calculation of income received from deposit – Applicant not receiving age pension immediately before period of absence from Australia - indefinite portability not applicable - no change in circumstances since cancellation - reviewable decision affirmed

LEGISLATION

Social Security Act 1991 (Cth) ss 8, 8(1), 8(2), 9, 23(2), 23(4), 44, 55, 1064, 1076, 1076(2), 1076(3A), 1081, 1082, 1083, 1118, 1118(1B), 1213, 1217

Social Security Administration Act 1999 (Cth) ss 80, 118

CASES

Drake v Minister for Immigration and Ethnic Affairs No. 2 (1979) 2 ALD 634 at 645

SECONDARY MATERIALS

A Guide to Australian Government payments

Guide to Social Security Law Instructions 4.4.2, 4.6.3.80, 7.2.2.60

REASONS FOR DECISION

Mrs J C Kelly, Senior Member


18 October 2019

Background

1. Mr Sidebottom began receiving an age pension on 14 January 2018. When considering leaving Australia permanently, he consulted the Department of Human Service (the Department)’s website. He understood it to clearly state that an age pension was indefinitely portable when moving overseas and there was a grace period of 12 months when selling and buying a principal residence. On that basis he proceeded with his plans and sold his house and moved to the UK on 7 May 2018, where he subsequently purchased a house. Mr Sidebottom deposited the net proceeds of sale of his home into his bank accounts.
2. He says that when he telephoned Centrelink on 7 May 2018 to advise that he was leaving Australia, the officer focused on the sale of his house and took the opportunity to cancel his age pension. The sale had settled on 6 April 2018. Mr Sidebottom’s age pension was cancelled on 7 May 2018 with effect from 6 April 2018. His subsequent claim for the age pension made on the same day was rejected on 25 June 2018. The questions to be decided are whether the cancellation of Mr Sidebottom’s age pension and the rejection of his subsequent claim for age pension were the correct or preferable decisions.
3. The reviewable decision was made on 6 November 2018 by the Social Security and Child Support Division of this Tribunal. The Member made the following key findings:
   • Mr Sidebottom’s deemed income together with foreign pension payments from the UK and the Netherlands has resulted in an annual income in excess of the cut off rate for age pension.
   • From 6 April 2018 his income exceeded the allowable limit for payment of age pension.
   • Because he was not in receipt of age pension immediately before his departure to the UK, indefinite portability could not apply regardless of whether his age pension was suspended or cancelled; and
   • His financial circumstances had not relevantly changed at the time of his new claim for age pension on 7 May 2018, which was therefore correctly rejected.

The regulatory scheme

4. The relevant legislation is contained in the Social Security Act 1991 (Cth) (the Act), and the Social Security Administration Act 1999 (Cth) (the Administration Act). Government policy is set out in the Guide to Social Security Law (the Guide) and where that is relevant, it should be applied in the absence of cogent reasons not to follow such policy, as was held in Drake v Minister for Immigration and Ethnic Affairs No. 2 (1979) 2 ALD 634 at 645.
5. Section 55 of the Act provides that the rate of age pension is worked out using Pension Rate Calculator A at the end of section 1064 of the Act. Module E of the rate calculator in section 1064 sets out how to work out the effect of a person’s ordinary income on a person’s maximum payment rate. The policy document, A Guide to Australian Government payments, sets out the income test limits for a single person to receive a part pension. It states that from 20 March – 30 June 2018, a single person’s income needed to be less than $51,563.20 per year to receive a part pension.
6. Section 8 of the Act sets out the income test definition and relevantly defines “income” as “an amount earned, derived or received by the person for the person’s own use or benefit.” Subsection 8(2) provides that a reference in the Act to “an income amount earned, derived or received” is a reference to “an income amount earned, derived or received by any means” and “an income amount earned, derived and received from any source (whether within or outside Australia).”
7. Division 1B of Part 3.10 of the Act provides for deeming of income from a person’s financial assets. Section 9 of the Act defines financial asset to include a financial investment, which is defined to include deposit money which is defined in subsection 8(1) to mean in relation to a person, a person’s money that is deposited in an account with a financial institution.
8. Subsection 1076(2) of the Act provides:

A person who has financial assets is taken, for the purposes of this Act, to receive ordinary income on those assets, in accordance with this section.

9. Further, section 1076 provides that a person’s financial assets are added together and deemed income is calculated from the total amount. The deeming rates are revised periodically in accordance with sections 1081 and 1082 of the Act. The Tribunal emphasise that the deeming provisions are based in legislation and not in a policy.
10. Module A of the rate calculator establishes the overall rate calculation process. The rate of payment is calculated separately under both the income and assets tests. The test that results in a lower rate of pension is the one that applies.
11. Section 1118 of the Act provides for certain assets to be disregarded in calculating the value of a person’s assets. Subsection 1118(1B) provides that the net proceeds from the sale of a principal home are exempt from the assets test for a period of 12 months if the person intends to use the fund to purchase another home, with the intent to make that home their principal home. That is clearly the case for Mr Sidebottom. However, the principal home sale proceeds that are held in a financial investment are a financial asset for income test purposes, as set out in the Guide at 4.6.3.80 and 4.4.2.
12. The effect of the method statement in subsection 1076(3A) of the Act is that the below threshold rate is applied on the first $50,200 for a single person. The above threshold rate is applied to the balance of the person’s financial assets. Mr Sidebottom’s income exceeded the $50,200 threshold.
13. Section 1083 of the Act provides that any return on a financial asset that a person actually earns, derives or receives is taken for the purposes of this Act not to be ordinary income of the person. That is the actual income earned from the deposits Mr Sidebottom held in his bank accounts are not relevant to this calculation of his income, rather the deeming provisions take effect. That is the legislative outcome.
14. Section 44 of the Act provides that an age pension is not payable to a person if a person’s age pension rate would be nil. Section 80 of the Administration Act provides that if a social security payment is being, or has been, paid to a person who was not qualified for the payment or it was not payable, the Secretary is to determine that the payment is to be cancelled or suspended.
15. Section 118 of the Administration Act provides that an adverse determination in Mr Sidebottom’s circumstances takes effect on the day on which the event or circumstance occurred, that is 6 April 2018. Subsections 23(2) and (4) of the Act provide that a person is taken to be receiving a payment under this Act from the earliest day until the latest day on which the payment is payable to the person.

The cancellation decision

16. The effect of those provisions is that the decision to cancel Mr Sidebottom’s age pension takes effect from the date of change of circumstances, which occurred on the settlement of the sale of his home on 6 April 2018. He was taken to be receiving the age pension until 6 April 2018. Although the cancellation decision was made on 7 May 2018, it took effect as of the date of the change of circumstances.
17. Section 1213 applies to portability of social security payment. It provides for portability if immediately before the period of absence commenced, in this case 7 May 2018, the person was receiving specified social security payments by virtue of section 1217 of the Act, which includes age pension. However, in this case it cannot be said that Mr Sidebottom was receiving age pension immediately before this period of absence, he was not entitled to the pension as of 6 April 2018. The cancellation decision had effect from that date.
18. The definitions of financial asset, financial investment and deposit money mean that the proceeds of sale of Mr Sidebottom’s home held in his bank accounts must be assessed under section 1076. Referring to the legislative provisions above, that means that the deposits held in Mr Sidebottom’s accounts are subject to the deeming rates and not to the actual income that Mr Sidebottom earned on those deposits. Therefore, Mr Sidebottom’s total income including deemed income on 6 April 2018 was in excess of the allowable limit for age pension. Therefore his age pension was reduced to nil and was no longer payable, according to section 44 of the Act.
19. On 7 May 2018, the Department issued a letter advising Mr Sidebottom that his age pension had been cancelled with effect from 6 April 2018. That decision was correct for the reasons given. There is no difference in treatment whether Mr Sidebottom’s age pension had been cancelled or suspended; both would take effect from 6 April 2018. Therefore Mr Sidebottom was not receiving age pension immediately before this period of absence commenced on 7 May 2018. The Tribunal notes that 7.2.2.60 of the Guide relates to post departure reviews and is not relevant in this case.

The 7 May 2018 claim for age pension

20. When Mr Sidebottom made a new claim for age pension on 7 May 2018 his financial circumstances were the same as when the cancellation decision was made and took effect. His total assessable income exceeded the allowable limit. The decision to reject his new claim for age pension which was made on 25 June 2018 was correct.
21. Mr Sidebottom said that he made the new claim because the international staff of Centrelink informed him that he could not apply in the UK because there was no social security agreement with Australia and he had nothing to lose by lodging a new claim. What he described as the “delay” in making the decision made no difference to the outcome because it depended on what his financial circumstances were on the day of application and they had not changed since 6 April 2018.

Decision

22. For those reasons the reviewable decision must be affirmed. The Tribunal has no discretion.
23. The reviewable decision is affirmed.

I certify that the preceding 23 (twenty-three) paragraphs are a true copy of the reasons for the decision herein of Mrs J C Kelly, Senior Member

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Associate

Dated: 18 October 2019

Date(s) of hearing:	3 October 2019
Applicant:	In person
Solicitors for the Respondent:	Mr L Dennis, Department of Human Services