Turk; Secretary, Department of Family and Community Services [2000] AATA 103 (15 February 2000)

Last Updated: 17 February 2000

DECISION AND REASONS FOR DECISION [2000] AATA 103

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/792 &

GENERAL ADMINISTRATIVE DIVISION ) N1999/793

Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicants

And FRANK TURK AND MERCEDES TURK

Respondent

DECISION

Tribunal Mr BJ McMahon (Deputy President)

Date 15 February 2000

Place Sydney

Decision The decision under review is affirmed.

(Sgd) BJ McMahon

..............................................

Deputy President

CATCHWORDS

SOCIAL SECURITY - Social Security Act 1991 Section 1064-E1 - Disability Pension - Overpayment - whether the income earned should be calculated as ordinary income earned on a yearly basis - whether there was a stable pattern of employment - whether annual blueberry picking establishes a stable pattern of employment - the effect of illness or other sources of employment - stable pattern of employment established - the calculation of income on a yearly basis affirmed

WORDS AND PHRASES - 'stable pattern of employment' - regular periodic employment

Social Security Act 1999 ss 132, 115A (repealed), 1115C (repealed), 1064 Pension Rate Calculator A, Module E 1064-E1

Social Security Legislation Amendment (Budget and Other Measures) Act 1996 No. 84 of 1996 Schedule 10 - Abolition of the earnings credit scheme Part 3.10 Divisions 4 and 5

Social Services Act 1947 s28 (2) (repealed)

Harris v Director General of Social Security (1985) 7 ALD 277; 57 ALR 729 applied

Secretary, Department of Family and Community Services v John Lennon and Margaret Lennon [1999] AATA 368

Secretary, Department of Family and Community Services v Ruth Wiltshire [1999] AATA 562

Secretary, Department of Family and Community Services v Janet Rolley [1999] AATA 968

Haldane-Stevenson v Director General of Social Security (1985) 9 FCR 73

Secretary, Department of Social Security and Moroney and Another 52 ALD 655

Re Dunning and Secretary, Department of Social Security (1986) 10 ALD 92

REASONS FOR DECISION

Mr BJ McMahon (Deputy President)

1. This is an application to review a decision of the Social Security Appeals Tribunal given on 26 March 1999. It relates to the method of calculating the pension entitlement of Mr and Mrs Turk. The calculation will depend upon how income received by Mr Turk between 19 November and 18 December 1997 and between 12 March and 1 April 1998 and income received by Mrs Turk between 13November 1997 and 12 December 1997 are to be treated for the purpose of the relevant sections of the Social Security Act 1991.

2. Mr Turk was born in 1946. He worked as a panel beater for 15 years then turned to servicing poker machines for a further 18 years. Artery disease led to his first by-pass surgery in 1982. Thereafter he was unable to participate in full-time employment. In due course, he was paid a Disability Support Pension. He returned to work in 1992 through the auspices of the Commonwealth Rehabilitation Service (CRS). His second by-pass surgery was carried out in 1997. There is now only an extremely limited field of work which he is capable of undertaking.

3. Mrs Turk receives the wife's pension. She was a certified public accountant in the Philippines and is presently studying at Southern Cross University to achieve a similar qualification in this country. Mr and Mrs Turk have 3 dependent children aged 6, 9 and 11, all of whom are at school. They live in a small village in the Coffs Harbour area.

4. Since Mr Turk's illness they have found it difficult to manage financially. In order to relieve this hardship, they have sought part-time employment. The only employment they have been able to find offering any degree of regularity is picking blueberries for approximately four weeks each summer.

5. He had tried panel beating (his old trade) but found he could no longer stand the fumes, the work postures on his haunches and using a hammer. This occupation was attempted as part of a rehabilitation scheme but caused more medical problems than it solved. Mr Turk had also tried fish filleting as part of another rehabilitation scheme. He was not paid any money and left when his left wrist seized up because of the constant cold.

6. Blueberry Farms of Australia Limited grow blueberries on a farm about half an hour's drive from their home. It is a large organisation employing up to 800 people during the picking season. The season itself is expanding because of the introduction of new species of fruit. The time available for picking, however, can be reduced by a number of factors. As Mr and Mrs Turk cannot work for an entire day because of the children, and because of Mrs Turk's studies, and because of Mr Turk's medical condition, they are paid at a rate per kilo picked rather than at an hourly rate, which applies with full-time workers. The per kilo rate reduces over the season as the fruit improves. Picking cannot take place during the rain as the berries rot when wet. The present summer has been particularly damp and has cut down the picking period by almost half. The amount they received, therefore, has been similarly diminished.

7. Earnings from these activities have been reported by Mr and Mrs Turk in accordance with their obligation under section 132. From these records have emerged details of the dates they have worked and the amounts they have earned. They worked from 14 November 1994 to 3 January 1995 and from 30 October 1995 to 14 February 1996 (in Mr Turk's case) and to 23 December 1995 (in Mrs Turk's case).

8. During 1996, CRS provided a subsidy to the proprietor of another blueberry farm, Phil Jurgens. As a result of this, Mr Turk was employed full-time between 19February 1996 and 30 August 1996 in general maintenance work around the farm. When the subsidy from CRS ran out employment stopped, as Mr Jurgens did not have the money to continue to employ Mr Turk.

9. Between 30 October 1996 and 17 December 1996 Mrs Turk was again picking at the big blueberry farm. Mr Turk had his second by-pass operation in June and was unable to pick that summer.

10. He was, however, again at the blueberry farm between 13 November 1997 and 24 December 1997, as was Mrs Turk. This is one of the periods the subject of the present proceedings.

11. The other period relates to monies earned by Mr Turk for 2 weeks between 12March1998 and 1 April 1998 picking persimmons at a farm called Tropical Plantations. That farm is now under the same ownership as the blueberry farm. Mr Turk described the difficult physical labour involved in mounting a ladder, cutting the fruit, descending and depositing the fruit elsewhere for a number of consecutive hours. The work was more than he was physically able to do. He did not last more than 2 weeks and is quite unlikely to return to that job.

12. Both of them were back again at the blueberry farm between 6November1998 and 30 December 1998 and, of course, all of the amounts earned each week during that period have been declared.

13. Earnings of this nature were previously dealt with under a system known as the Earnings Credit Scheme comprised, from a legal point of view, in sections 1115A to 1115C. These were repealed by Act number 84 of 1996, effectively from 20March1997. The repeal, once again, raised the question of appropriate treatment for yearly income purposes of monies earned in this manner.

14. Under the Act, a person's pension rate has to be worked out using the Pension Rate Calculator A, which is found in section 1064. The Calculator is divided into a number of modules. To calculate a person's rate of pension, steps 1 to 4 in Module A require the person's "maximum payment rate" to be calculated. Step 5 then requires application of the "ordinary income test" using Module E to work out the difference between the two sums. Module E requires the assessor to "work out the amount of the person's ordinary income on a yearly basis". This is the first step to be taken before the subsequent steps in the method statement. What has to be decided in the present application is how the ordinary income of Mr and Mrs Turk is to be expressed on a yearly basis.

15. The High Court considered a similar question in Harris v Director General of Social Security 57 ALR 729. That case concerned the provisions of subsection 28(2) of the Social Services Act 1947, the predecessor of the current legislation. The old provision referred to the determination of "the annual rate" of the income of a pensioner. Although the Act has been repealed and replaced it is, in my view, now beyond doubt that the observations of the Court are equally appropriate to the provisions of the new legislation. In this respect, I agree with the reasoning of Deputy President Blow in Lennon [1999] AATA 368 at paragraph 16 and following, which was repeated in Wiltshire [1999] AATA 562 at paragraph 12, and was followed by Deputy President Forgie in Rolley [1999] AATA 968 at paragraph 42.

16. Relevantly, the High Court said (at 733 and 734):

"The distinction between an annual amount of income and an annual rate of income is critical to an understanding of s 28(2). If an annual amount of income were a component in the s 28(2) calculation, it would be necessary to identify a commencing date of the income year in order to ascertain what receipts fell into one year and what into the next. But a rate of income, like a rate of interest, may vary within any annual period though it is expressed as an annual rate. It is a current rate of income, expressed as so much per annum. An annual rate of income may not subsist for a year: an annual rate of income that obtains in one week may change in the week following. Annual income is the sum of the products of each annual rate of income that obtained during any part of the year multiplied by the fraction of the year during which it obtained.

Income can be derived from various sources, as the definition of "income" in s 18 makes clear. Some items of income may be received at frequent and regular intervals during a year (for example, weekly or fortnightly wages paid to an employee), some intermittently (for example, profits of a business) and others at lengthy intervals (for example, annual dividends or shares). Subject to the exceptions stated in the s 18 definition and subject to the limitations expressed in s 29, no income derived from any source is to be let out of account in ascertaining the annual rate of income. At the time when an annual rate of income is ascertained, it is necessary to have regard to the pensioner's sources of income at that time and to find what each of those sources would yield over the period of a year assuming the current yields from those sources were to continue. It is not necessary to predict whether the pensioner will retain his sources of income for the year or whether the current yields will be maintained, for the annual rate of income is the current rate of income though it is calculated and expressed as an annual rate. If the current income from a current source is receivable as so much per week or per month, it must be calculated and expressed as an amount per annum. But an annual rate of income is not ascertained merely by extending to a year the income receipts of a shorter period without considering the period in respect of which the particular item of income has been received. A pensioner whose only income apart from his pension is $1000 paid annually as a dividend on an investment has an annual rate of income of $1000. It is wrong in law as it is absurd in fact to say that he has an annual rate of income of $52,000 in the week in which he receives the dividend and a nil rate of income for 51 weeks of the year. His investment, the source of his income, yields an annual sum and, so long as the pensioner retains the investment, his annual rate of income from that source will be $1000. If that source of income were lost, the annual rate of income from that source would be reduced to nil from the time of the loss. When a pensioner is in receipt of weekly wages from employment, however, his annual rate of income from that source is calculated on the assumption that his earnings at the current rate will continue for the year. If he were to retire from work, that source of income would be gone and the annual rate of income attributable to that source would be nil. In cases where pensioners or claimants are employed intermittently, it may be appropriate in some cases to treat the intermittent work as a continuing source of income and to take an average of earnings over a period as the yield from that source, and in other cases to treat each employment as a separate source of income yielding its particular amount of earnings. The former method would establish a comparatively constant annual rate of income; under the latter method, the annual rate of income would change as the pensioner or claimant went into and out of employment. The circumstances of the particular case would show which method is more appropriate.

Similarly, if a change occurs in the level of income derived from a particular source, the new level is the basis on which, from the time of the variation, the annual rate of income attributable to that source is to be calculated. If a pensioner is in casual employment earning different amounts each week, as Mrs Harris was, it may be appropriate - it is a question of fact - to determine the annual rate of income attributable to casual employment by striking an average of earnings over a period. Section 45(1) refers to a period of eight consecutive weeks. Although that provision relates to notification, not calculation, it may be administratively sound in many cases to strike an average over a period of eight weeks. But the circumstances of the case must determine what is a fair method of ascertaining the current rate of income at a particular time. The rolling periods of eight weeks referred to in s 45(1) do not impose a restriction on the fair methods of ascertaining the current rate of income.

An annual rate of income, at whatever time it is ascertained for the purposes of s 28(2), is the aggregate of those income payments which would be received by the pensioner during the ensuing year on the assumption that he retains all his current sources of income for the year and that they continue to yield income at the current level. The annual rate thus ascertained ensures until something occurs which falsifies the assumption on which the particular annual rate was ascertained - that is, until a source of income is gained or lost, or the level of income yielded by a source of income changes. Then a new annual rate of income must be ascertained on a new set of assumptions that accord with the then current sources of income and the then current levels of income yielded by those sources. If the s 28(2) rate changes, then pension that is being paid should be changed pursuant to s 46(1)."

17. In Haldane-Stevenson v Director General of Social Security (1985) 9 FCR 73, DaviesJ said at 78, in explanation of what the Court had said in Harris:

"From the above, several principles can be derived. First, it is necessary to calculate not the annual amount of income but the current rate of income of the pensioner and to express that current rate of income as so much per annum. Secondly, in calculating the annual rate of income, one has regard to all the pensioner's sources of income at that time and finds what each of those sources would yield over the period of a year assuming the current yields from those sources were to continue. Thirdly, the annual rate of income is the aggregate of the income payments that would be received by the pensioner during the ensuing year on the assumption that he retains all his current sources of income for the year and that they continue to yield income at the current level."

18. In Harris, the Court made reference above to "a fair method of ascertaining the current rate of income at a particular time". This is not to say that the criterion is simply one of general fairness. It seems from the context that their Honours were referring to appropriateness, having regard to the nature of the income and the way in which it is derived. By way of example, their Honours quoted an annual dividend of $1,000 and agreed that it would be absurd in fact to say that the recipient has an annual rate of income of $52,000 in the week in which he receives the dividend and a nil annual rate of income for 51 weeks of the year. In Rolley, Deputy President Forgie, by way of analogy, concluded (at paragraph 45):

"These two notions continue to underlie the Ordinary Income Test in the 1991 Act. With that in mind, the cases of Moroney, Lennon and Wiltshire are consistent both with the Ordinary Income Test principles enunciated by the High Court in Harris and with each other. In Moroney and Lennon, the period of employment was for a short and relatively closed period or periods each year. So long as Mr Moroney and Mr Lennon retained their particular employment, they retained a particular source of income. To assume, however, at any particular time in those periods of employment that the source was an ongoing source of income for the whole year would have been contrary to the known facts. Those facts were known both at the time Mr Moroney and Mr Lennon entered those periods of employment each year. As the majority of the High Court said in Harris, consideration has to be given to the period during which income is received and the manner in which it is received. As each could only expect to retain that particular source for a short and closed period or periods in each year, the annual rate of income which could be expected from that source coincided on the facts of those cases with the amount of income actually received."

19. Moroney (52 ALD 655) dealt with the position of a pensioner who regularly earned money as a Santa Claus during the Christmas season. Senior Member Beddoe considered that earnings in this capacity should be annualised as the amount actually earned during this limited season. The same results followed in Lennon, Wiltshire, and Rolley. In my view, these decisions are consistent one with the other and follow from the findings of fact made by the Tribunal that these were the appropriate ways of treating the monies having regard to the stable pattern of employment. They were no doubt mindful of other observations on Harris made by the Tribunal presided over by Davies J in Re Dunning and Secretary, Department of Social Security 10 ALD 92 as follows:

"As these remarks indicate, different means may have to be adopted to calculate the annual rate of income of different pensioners, the means being suited to the source or sources of the pensioner's income and the manner in which the pensioner derives that income. But the adoption of a means of calculating the annual income is not a matter of discretion, though it may involve judgment or evaluation. In any particular case, there is a means of calculating the annual income which is the most appropriate in the circumstances of that case. That means, once identified, is the only correct means to adopt to calculate the income."

20. It seems to me that Mr and Mrs Turk also have a stable pattern of employment. It matters not that it varies in time or in earnings produced from time to time. The evidence was that the picking season could be enlarged by production of better strains of the fruit, or could be diminished by poor weather. Variations of this kind seem to me no more significant than variations in the amount of a yearly dividend paid by a company. If a company has a particularly profitable year, it would pay a larger dividend than normal. If it has a cash flow problem, the dividend might be late one year. The fact that there is a variation in amounts received does not, in my view, necessarily detract from the stability of the pattern of receipts.

21. It is not necessary to rely on hindsight to establish the regularity of the blueberry picking pattern. At the beginning of each summer, it would be possible to say, as each weekly sum was declared to the Department, that each of the applicants is embarking on his and her regular summer routine which, in accordance with all past experience, will end some time in January.

22. It is also not important, in my view, that the pattern was interrupted by illness in 1996. This was a factor in Mr Turk's capacity to earn money, as was the poor weather in 1999. Had he not been in hospital he would have followed his usual pattern. Similarly, the 2 weeks of picking persimmons, in my view, do not affect the stability of his pattern of employment. Viewed as fruit picking, rather than as blueberrying picking, the 2-week episode at Tropical Plantations is simply a continuation of his normal activity. If this view is wrong, then the 2-week period may be viewed as a minor aberration of not sufficient significance to interrupt the flow of regular periodic employment. This is particularly the case in view of the fact that there is no possibility of Mr Turk returning to persimmon picking.

23. Having regard to the known facts and to their predictability, it seems to me "absurd in fact" (as the High Court said) to say that with each week of declared picking income, their rate of income should be annualised by multiplying that sum by 52. Such a process would be, as Deputy President Forgie put it in paragraph 45, "contrary to the known facts". The only appropriate and fair method of treating their income earned during the picking season is to treat that amount as the whole of their "ordinary income on a yearly basis".

24. For these reasons the decision under review is affirmed.

I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of Mr BJ McMahon (Deputy President)

Signed: .....................................................................................

Jacqueline Healy, Associate

Date/s of Hearing 3 February 2000

Date of Decision 15 February 2000

Counsel for the Applicant Mr S Gageler

Solicitor for Applicant Australian Government Solicitor

Solicitor for the Respondent Ms S Koller, Welfare Rights Centre