Podkalicki and Repatriation Commission [2002] AATA 38 (22 January 2002)

Last Updated: 23 January 2002

DECISION AND REASONS FOR DECISION [2002] AATA 38

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V01/468

VETERANS' APPEALS DIVISION )

Re MARIANNA PODKALICKI

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Mrs Joan Dwyer, Senior Member

Date 22 January 2002

Place Melbourne

Decision The Tribunal affirms the decision under review.

Joan Dwyer

Senior Member

SERVICE PENSION - income test - reduction due to eligibility for overseas pension - not easily transferable to Australia - whether "income" within definition in Veterans' Entitlements Act 1986 - decision affirmed

LAW REFORM - reference to fact that a call for law reform made in a decision in 1990 had not lead to any statutory amendment

Veterans' Entitlements Act 1986 s 5H(1) and (2)

Rose v Secretary Department of Social Security (1990) 21 FCR 241

Re Menon and Repatriation Commission (AAT 891 1 August 1990)

Inguanti v Secretary to the Department of Social Security (1988) 8 AAR 502,

80 ALR 307

Re Hoogewerf and Secretary to the Department of Social Security

(AAT 4549, 10 August 1988)

Re Rose and Secretary, Department of Social Security (1989) 17 ALD 615

REASONS FOR DECISION

22 January 2002 Mrs Joan Dwyer, Senior Member

1. This is an application for review of a decision of the Repatriation Commission, made on 6 February 2001 and affirmed on 20 April 2001, which decided that the rate of service pension payable to Mrs Podkalicki be reduced by $26.30 per fortnight from 1 September 2000, because of her entitlement to a retirement pension from the Polish Government. At the relevant time the Polish pension entitlement was $169.61 per fortnight. That amount was paid into a bank account in Poland and was not transferred to Australia.

2. The matter first came on for hearing before the Tribunal on 27 November 2001. Mrs Podkalicki appeared and gave evidence with the assistance of Mr Mikolajewski, a Polish interpreter. Mr Douglass, an officer of the Department of Veterans' Affairs, appeared for the Repatriation Commission. The Tribunal had before it the documents ("the T documents") lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") and also the exhibits tendered during the hearing by the respondent.

3. On 27 November 2001 the Tribunal adjourned the matter to 22 January 2002 on Mr Douglass' application. He had sought the adjournment by letter dated 22 November 2001 in which he pointed out that there was "a discrepancy of policy (on the issue of "blocked" foreign income") between the Department of Veterans' Affairs and the Department of Family and Community Services on what, are essentially, identical legislative provisions". He advised that attempts were being made at a national level to "harmonise the divergent policy positions, but that as the process had not been finalised, the respondent was unable to put a considered and final policy position to the Tribunal." Mr Douglass explained that the issue potentially affected thousands of pensioners and that therefore it was considered that any review of policy should be on the basis of comprehensive and complete submissions as to law and policy, even if that meant Mrs Podkalicki's hearing would suffer some delay.

4. The Tribunal granted an adjournment. It pointed out to Mrs Podkalicki that the adjournment would enable her to follow the suggestion of the Polish Consul, in exhibit R2, and write to the Polish bank asking whether there was any possibility of having the money transferred to Australia.

5. When the matter came on for resumed hearing, Mr Purcell of Counsel represented the Repatriation Commission. Mrs Podkalicki appeared again and she and the Tribunal were again assisted by the interpreter Mr Mikolajewski. The respondent had lodged a detailed Statement of Facts and Contentions prepared by Mr Douglass. At paragraph 3.16 the respondent stated:

The Applicant drew attention to the policy applied by the Department of Family and Community Services (copy of an extract from the Guide to Social Security Law is attached). This policy appears to be based on the Tribunal decision of Re Hoogewerf and Secretary, Department of Social Security (unreported decision of S.M. Muller dated 10 August 1988, case reference Q88/63), which also involved an Indian government pension into a bank account in India which could not be transferred to Australia. In Re Menon, the Tribunal was also referred to Re Hoogewerf, but considered itself bound by Rose's case to hold that the Indian government pension formed part of the Applicant's "income" for the purposes of the Act. The respondent submits that the decision of Rose's case is binding on administrative decision-makers. The Commission's policy on the assessment of overseas income is based on Rose's case and there is no intention to amend the policy.

Mr Purcell at the hearing indicated that the Repatriation Commission considered it was bound to follow the decision of the Full Court of the Federal Court in Rose v Secretary Department of Social Security (1990) 21 FCR 241

6. The respondent lodged with its Statement of Facts and Contentions a bundle of the relevant authorities and further service documents relating to Mr Podkalicki, which have been taken into evidence as exhibit R4, and an extract from the Department of Family and Community Services Guide to Social Security Law - paragraph 4.3.6.10 Income from Overseas Pensions which has been taken into evidence as exhibit R5.

7. There was no dispute as to the facts. Mrs Podkalicki has been in receipt of partner service pension under the Veterans' Entitlements Act 1986 ("the Act") since the death of her husband on 24 December 1993.

8. On 16 January 2001 Mrs Podkalicki notified the Department of Veterans' Affairs ("DVA") that she had been granted a retirement pension by the Polish Government. The decision under review dated 6 February 2001, which was made in response to that advice, reduced the rate of service pension payable to Mrs Podkalicki, to take into account her entitlement to the Polish retirement pension. That decision was affirmed on review on 20 April 2001. Mrs Podkalicki then applied to this Tribunal for review. The reason for application was stated to be "decision is wrong as Mrs Podkalicki does not have easy access to overseas pension."

9. The evidence is not clear as to whether what Mrs Podkalicki lacks is easy access, or any access in Australia, to her Polish pension. The respondent on the first day of hearing tendered a letter dated 10 October 2001 which DVA had sent to the Embassy of the Republic of Poland asking (R1):

We would be most obliged if you could clarify whether any formal restrictions are imposed on the transfer of funds from bank accounts in Poland to accounts in Australia or whether restrictions are in place in regard to the conversion of Zloty to $Australian in general.

By reply dated 24 October 2001 the Consul replied (R2):

Thank you for the letter dated 10 October addressed to the Embassy of Poland, then sent to the Consulate.

I would like to inform that there is no agreement between Australia and Poland on pensioners' benefits.

Therefore, the pension granted in Poland, is being paid into a bank account of the person entitled. The pension can not be transferred to Australia.

The matter of possible transfer of funds from Poland to Australia is the subject of monetary regulations in Poland (not pension law) and the remittance could be successful provided that the necessary permissions would be granted by the bank. Such permissions do not refer to the pension but the monies no matter of their source of origin.

10. At the first day of hearing the Tribunal suggested to Mrs Podkalicki that she write to the bank in Poland asking whether it was possible to transfer the money to her in Australia. At the resumed hearing Mrs Podkalicki gave evidence that she had not written to the bank in Poland, as she intended to make enquiries in person. She explained that she was intending to travel to Poland in late February because of the illness of her older son. She said she would then investigate whether she could bring any of the money from her bank account in Poland to Australia.

11. On those facts the law in this matter is clear.

12. Mr Douglass in his Statement of Facts and Contentions set out the requirements of the Act in assessing the rate of partner service pension payable under the Act. The rate of such pension is affected by income which is defined in s 5H(1) of the Act as follows:

income, in relation to a person, means:

(a) an income amount earned, derived or received by the person for the person's own use or benefit; or

(b) a periodical payment by way of gift or allowance; or

(c) a periodical benefit by way of gift or allowance;

. . .

Section 5H(2) of the Act provides:

(2) A reference in this Act to an income amount earned, derived or received is a reference to:

(a) an income amount earned, derived or received by any means; and

(b) an income amount earned, derived or received from any source (whether within or outside Australia).

13. The crucial question is therefore whether the Polish retirement pension, paid into Mrs Podkalicki's bank account in Poland is income earned, derived or received by her. In Re Hoogewerf and Secretary to the Department of Social Security (AAT 4549, 10 August 1988) the Tribunal in similar circumstances concluded that the amounts of Indian pensions, paid into Mr and Mrs Hoogewerf's bank accounts in India and not able to be transferred to Australia, were not moneys, "earned, derived or received", by them for their own use or benefit, and were therefore not income within the meaning of that term in s 3(1) of the Social Security Act 1947. The evidence was that there was no realistic prospect of Mr and Mrs Hoogewerf returning to India to use the money. The Tribunal in Hoogewerf said that it had derived assistance from the Federal Court decision of Sheppard J, in Inguanti v Secretary to the Department of Social Security (1988) 8 AAR 502, 80 ALR 307. Sheppard J in that matter dismissed the appeal, but he left the gate open for a different result if the facts had been slightly different. His Honour said:

As at 9 September, 1987 less than 12 months had elapsed since the Italian Consul's statement that the average period required for the transfer of an Italian pension to Australia was between 12 and 18 months. There was therefore nothing in the evidence to suggest that the applicant would not receive the pension within that period. Moreover, it would appear that if he were to go to Italy, the pension would be paid to him immediately. In some respects this may be an impractical suggestion, bearing in mind the expenses of such a trip. The question is, in essence, one of fact and degree. There will be cases which so clearly fall on one side of the line or the other that only one decision is appropriate. But, within those extremes, it will be open to a tribunal of fact to determine the matter in accordance with the facts and circumstances of the case as it sees them. If the prospect of the moneys ever being received is remote, or, if receipt of them, although certain, is likely to be so far in the future as to make entitlement to them of no relevant benefit at the time the matter is considered, it will be correct to say that the moneys are not being "derived". This case is not in either of those categories. On the evidence before the Tribunal it was well open to it to conclude that the moneys would be paid, and would be paid at a time in the future which was not so remote from 9 September, 1987 (the date of the Tribunal's decision) as to make the entitlement to them either nugatory or of no relevant benefit.

14. Mr Douglass, on the first hearing day, informed the Tribunal that the Hoogewerf approach is still adopted in regard to entitlement to Social Security pensions. That is apparent from the extract from the Department of Family and Community Services' current Guide to Social Security Law (R5) which states:

Overseas pensions - blocked

Depending on the circumstances of the individual case, it MAY be accepted that a pension is NOT income for social security purposes as access is so limited that the moneys are not 'earned, derived or received for the person's own use or benefit'.

Explanation: An Administrative Appeals Tribunal case (HOOGEWERF, 1707) highlighted the situation where some foreign pensions are subject to such strict exchange control regulations that they are effectively 'blocked', if:

* the pension can only be paid to an address or domestic bank account within the paying country and cannot be transferred overseas, and

* access to the money is usually only allowed if the person is actually present in the country and even then there are restrictions on how this money can be withdrawn or spent.

Exception: If a customer travels to that country, any income paid them in that country during their stay is income for social security purposes.

15. However, DVA and the Repatriation Commission have, in my view correctly, taken the view that such a course is not open since the Full Court of the Federal Court decision in Rose. That case concerned a pension paid into a bank account in the German Democratic Republic ("the GDR") which could not be transferred out of that country. The Full Court concluded that the pension was income within the definition in the Social Security Act 1947, which was in all essential respects similar to that before this Tribunal. The Court held that the pension payments made to Mr Rose were income "earned, derived or received" by him for his own use or benefit from a source outside Australia, and were income within the meaning of that definition. The Court noted the agreed facts that Mr Rose, who was an Australian citizen and an Australian resident, lived in the GDR most of the year and travelled to Australia once a year, usually for a period of months at a time. The amount of the GDR pension payable to Mr Rose when residing in the GDR was not payable outside the GDR but disqualified him from entitlement to an age pension in Australia.

16. The Tribunal in Re Rose and Secretary, Department of Social Security (1989) 17 ALD 615 had held that the money was income, and had to be taken into account in assessing Mr Rose's entitlement to pension under the Social Security Act, but it had gone further and had commented that its decision was based, in part, on the fact that Mr Rose spent a considerable part of each year in the GDR, using the money which was paid into his account there, for his living expenses. The Tribunal had added "if he resided in Australia and was not able to use the entitlement or benefit from it, then a different situation might well arise. But that is not the factual position in this application". The Full Court, at p246, quoted that passage with disapproval, commenting:

The construction and application of the definition of "income" do not depend on the circumstance that an applicant for a pension may choose to live in Australia or another country or both countries.

17. While it is clear that that passage in the reasons for decision of the Full Court is obiter, as the evidence established that Mr Rose was able to use the money paid into his account in the GDR, it is obiter to which this Tribunal must give the greatest respect. It is a considered passage in the reasons for decision of the Full Court of the Federal Court. In Re Menon, Deputy President Thompson, in circumstances very similar to those in Hoogewerf, where the applicants could not use money paid into their accounts in India, held that in view of the decision of the Full Court in Rose, the Tribunal was bound to decide that the pension paid by the Government of India into the applicant's bank account in India was income, for the purpose of ascertaining the rate at which his service pension, and his wife's service pension, were payable. The Deputy President added (pp8-9):

12. It is with considerable regret and concern that I have come to the conclusion that that is the effect of the statutory provision, as it defeats what would appear to be the purpose of taking a pensioner's other income into account in determining the rate of his pension, that is to say that the rate of the pension should be related to his needs. If payments are made to him in another country and neither the money nor money's worth can be transferred to Australia and he cannot reasonably be expected to travel to the other country to reside for a period each year to utilize those moneys for his support, his needs are not in fact reduced in any way by the receipt or derivation of those moneys in that other country. Among the documents lodged with the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 is an extract from departmental guidelines which indicate that the respondent has previously considered such payments not to be income in those circumstances. However, now that the meaning of "income" has been clarified by the Federal Court, the respondent and the Administrative Appeals Tribunal standing in its shoes cannot do other than apply to the facts the law as so stated. The fact that the situation is expressly referred to in the guidelines indicates that it is one which affects a number of pensioners. It appears, therefore, that consideration should be given urgently to possible amendment of both Acts in order to prevent hardship to those pensioners who are in that situation.

18. The injustice of reducing a person's entitlement to pension in Australia on the basis of moneys paid into their account in another country, to which they have no access whatsoever has been highlighted by the Tribunal in Re Menon. That is however not the situation in this matter. Mrs Podkalicki gave evidence that she is about to travel to Poland. While in Poland she will have access to the money in her account, and will also enquire into the possibility of bringing that money to Australia. In those circumstances, her situation is clearly covered by the decision of the Full Court in Rose. I am bound by that decision to hold that the moneys paid into Mrs Podkalicki's bank account in Poland are properly characterised as "income . . . earned, derived or received" by her for her own use and benefit. Accordingly the decision under review must be affirmed.

19. I do however feel it appropriate to comment that the unsatisfactory nature of the current position, as it applies to people who cannot access money in accounts in other countries at all, was outlined by Deputy President Thompson in Re Menon. It is emphasised by the clear discrepancy in treatment of overseas pension between the Department of Family and Community Services, on the one hand, and the Repatriation Commission and the Department of Veterans' Affairs, on the other hand. Deputy President Thompson said, in 1990, that the need for law reform was urgent. It is depressing that even though that urgent need for law reform was adverted to by the Tribunal in 1990, the position remains the same in the year 2002 as it was when raised by Deputy President Thompson only a few months after the decision of the Federal Court in Rose. I do repeat his request for consideration of statutory amendments to prevent hardship to pensioners who have no access at all to pensions paid into overseas bank accounts.

20. The decision under review will be affirmed.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Mrs Joan Dwyer, Senior Member

Signed: Grace Carney

Associate

Date/s of Hearing 27 November 2001 and 22 January 2002

Date of Decision 22 January 2002

Counsel for the Applicant Nil

Solicitor for the Applicant Self Represented

Counsel for the Respondent Mr G Purcell

Departmental Advocate Mr R Douglass