King v Secretary, Department of Family & Community Services [2000] FCA 111 (16 February 2000)

Last Updated: 21 March 2000

FEDERAL COURT OF AUSTRALIA

King v Secretary, Department of Family & Community Services [2000] FCA 111

SOCIAL SECURITY - family allowance - maintenance income received - calculation of annual rate of maintenance income for purpose of reduction of family allowance rate payable - calculation on monthly basis of maintenance income payments made - irregular payments - annual rate should be calculated by summing payments of maintenance income actually made - distinction between "annual rate" and "annual amount".

Child Support Registration and Collection Act 1988 (Cth) s 76

Social Security Act 1991 s 10, s 831, s 838, s 1069

Harris v Director-General of Social Security [1985] HCA 1; (1985) 59 ALJR 194 followed

MARY KING v THE SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

W63 OF 1999

FRENCH J

16 FEBRUARY 2000

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 63 OF 1999

On appeal from the General Administrative Division of the

Administrative Appeals Tribunal constituted by Deputy

President T E Barnett

BETWEEN:	MARY KING Applicant
AND:	THE SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Respondent
JUDGE:	FRENCH
DATE OF ORDER:	16 FEBRUARY 2000
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The application be dismissed.

2. There be no order as to costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 63 OF 1999

On appeal from the General Administrative Division of the

Administrative Appeals Tribunal constituted by Deputy

President T E Barnett

BETWEEN:	MARY KING Applicant
AND:	THE SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Respondent

JUDGE:	FRENCH
DATE:	16 FEBRUARY 2000
PLACE:	PERTH

REASONS FOR JUDGMENT

Introduction

1 This case concerns a family allowance paid to Mary King, a divorced mother of three children, who has received sporadic maintenance payments from her ex husband. The rate of family allowance payable to her for two fortnightly periods in May 1998 was reduced because of a maintenance payment she received from her husband in April. The reduction, totalling just over $400, was challenged successfully by Mrs King in the Social Security Appeals Tribunal, but that decision was overturned by the Administrative Appeals Tribunal. She now appeals to this Court against the decision of the Administrative Appeals Tribunal. The case turns on the way in which reduction of family allowance rate is to be calculated having regard to the annual rate of maintenance income received from time to time. The question is whether the annual rate is to be the sum of maintenance payments received over a year or a variable figure which depends upon maintenance payments received from time to time.

2 The relevant provisions of the Social Security Act 1991 are complex. The point at issue ultimately however is a narrow one.

Factual Background

3 In May 1998, Mary King was a divorced mother with three dependent children aged about 10, 11 and 13 respectively. She was in receipt of Family Allowance from the Department of Family and Community Services, operating under the name Centrelink. She was also, from time to time and somewhat irregularly, in receipt of maintenance from her former husband, collected by a Commonwealth agency called the Child Support Agency pursuant to the Child Support Registration and Collection Act 1988 (Cth). Maintenance so collected was paid to her through Centrelink.

4 In April 1998, Mrs King received a maintenance payment of $1,032. Section 76 of the Child Support Registration and Collection Act requires money collected in one month to be debited to the following month. So money collected in April is to be paid to the recipient before the seventh day of the following month and debited to May. On the basis that the maintenance payment was received on 6 May, a delegate of the Secretary reduced family allowance payable to Mrs King for the fortnights commencing 7 May 1998 and 21 May 1998.

5 Prior to the decision Mrs King was receiving family allowance at the rate of $349 per fortnight. After the decision, for the fortnights in question, her rate was reduced to $148.65, a reduction of $200.34 in each fortnight. The delegate's decision was reviewed by an Authorised Review Officer with Centrelink and was affirmed. In a letter to Mrs King dated 7 July 1998 the Review Officer explained her decision thus:

"Your payment of maintenance for the CSA payday 6 May 1998 was $1000.32. This converts to an annual rate of $12,003.84. After the application of the maintenance income test set out in Module J of the Family Payment Rate Calculator (Points 1069-J1 to 1069-J11 of the Act), your rate of FA for the paydays 7 May 1998 and 21 May 1998 is required to be reduced and this decision is consistent with both the legal prescription of the Act and the policy of the Department."

The Authorised Review Officer also asserted that Mrs King had received letters from Centrelink dated 30 January 1998 and 2 May 1998 requiring her to notify within fourteen days if she commenced to receive maintenance or the amount of maintenance that she was in receipt of changed. The Officer asserted that she had received a maintenance payment of $1000.32 on 6 May 1998 and had failed to notify of that event within fourteen days. Centrelink itself had informed her that she would be receiving the April payment of maintenance. As the Social Security Appeals Tribunal was later to observe, Mrs King's responses to the notices had nothing to do with the decision, in fact the notice of 2 May was to tell her that her rate was to be reduced as a result of the maintenance payment.

6 Mrs King appealed to the Social Security Appeals Tribunal, which heard her case on 27 July 1998. The Social Security Appeals Tribunal decided to set aside the decision and to substitute a new decision that Family Allowance for May 1998 was to be recalculated on the basis that the annual rate of maintenance being received by Mrs King was $1435. The Secretary appealed against this decision to the Administrative Appeals Tribunal and on 16 June 1999 the Tribunal made a decision in the following terms:

"The Tribunal sets aside the decision of the Social Security Appeals Tribunal, dated 27 July 1998, and in substitution therefor decides that Mrs King's rate of Family Allowance for paydays 7 and 21 May 1998 be reduced by $200.34 per fortnight."

On 14 July 1999, Mrs King lodged a notice of appeal against the decision of the Administrative Appeals Tribunal in substance asserting that it had misapplied the steps required by the Act for the calculation of Family Allowance.

Statutory Framework

7 The entitlement to Family Allowance is established under Part 2.17 of the Social Security Act. Section 831 creates the designation "FA child" in respect of the dependent child of a person. Division 2 of Part 2.17 sets up the qualification for and payability of Family Allowance. Section 838 in particular provides:

"838(1) A person is qualified for family allowance if:

(a) the person has at least one FA child; and

(b) the person is an inhabitant of Australia; and

(c) the person's income for the relevant family allowance period does not

exceed the person's income ceiling; and

(d) the value of the person's assets does not exceed $376,750."

There is a relevant definition in s 10 of the Act, namely the definition of maintenance income which, in the relevant part, is in the following terms:

""maintenance income", in relation to a person, means:

(a) child maintenance - that is, the amount of a payment or the value of a benefit that is received by the person for the maintenance of a dependent child of the person and is received from:

(i) a parent of the child; or

(ii) the partner or former partner of a parent of the child;

.

.

.

but does not include disability expenses maintenance."

8 The rate of Family Allowance payable is calculated according to the provisions of Part 3.7 of the Act, which embodies as part of s 1069 a "FAMILY ALLOWANCE RATE CALCULATOR". Section 1069 opens with the words:

"1069 The rate of a person's family allowance rate is to be calculated in accordance with the following Rate Calculator."

The FAMILY ALLOWANCE RATE CALCULATOR that follows is divided into eleven modules designated respectively MODULE A to MODULE K. Each of these modules sets out a component of the calculation of the family allowance rate. Not all components will be applicable to all cases. Each module is divided into points numbered 1069, followed by the alphabetical designation of the module and a numerical designation for the relevant point. Module A has two points, 1069-A1 and 1069-A2. Only 1069-A1 is relevant for present purposes. It sets out an overview or "Method statement" of the steps for the calculation using the various modules. It is in the following terms:

"1069-A1 The rate of family allowance of a person (other than an approved care organisation) who has an FA child or FA children is a fortnightly rate calculated as follows:

Method statement

Step 1 Add the amounts worked out under the following Modules:

(a) MODULE B (standard family allowance rate);

(b) MODULE C (large family supplement);

(c) MODULE D (multiple birth allowance);

(d) MODULE F (guardian allowance).

Note: Module G may apply if 2 people who are not members of the same couple share the daily care and legal responsibility for a child.

Step 1A Work out the amount (if any) of rent assistance (using MODULE E) and add the amount to the total from Step 1. The result is the person's gross family allowance rate.

Step 2 Apply the family allowance income test in Submodule 3 of MODULE H to the person's gross family allowance to work out any reduction for income. Take any reduction away from the person's gross family allowance rate; the result is the person's income tested family allowance rate.

Step 3 Take away from the person's income tested family allowance rate the person's minimum family allowance rate: the result is the person's adjusted income tested family allowance rate.

Step 4 Apply the maintenance income test in MODULE J to the person's adjusted income tested family allowance rate to work out any reduction for maintenance income. Take any reduction away from the person's adjusted income tested family allowance rate: the result is the person's maintenance tested family allowance rate.

Step 5 Unless Step 6 applies, the person's family allowance rate is:

(a) if there is no reduction for income or for maintenance income - the person's gross family allowance rate; or

(b) if there is a reduction for income but no reduction for maintenance income - the person's income tested family allowance rate; or

(c) if there is a reduction for maintenance income - the sum of:

(i) the person's maintenance tested family allowance rate; and

(ii) the person's minimum family allowance rate.

Step 6 If there is any reduction for income under Step 2 or any reduction for maintenance income under Step 4, but the person's family allowance income worked out under Step 2 in Submodule 3 of MODULE H is less than the person's income ceiling worked out under Step 3 of Submodule 3 of MODULE H, then the person's family allowance rate is the greater of the following amounts:

(a) the rate obtained under Step 5;

(b) the minimum family allowance rate."

9 The relevant module for present purposes is Module J which deals with the maintenance income test. The parts of Module J applicable to the present case are as follows:

"1069-J1 This is how to work out the effect of a person's maintenance income on the person's rate of family allowance:

Method statement

Step 1 Work out the annual rate of the person's maintenance income disregarding any maintenance income for:

(a) a dependent child who is not an FA child; or

(b) an FA child who is, or because of subpoint 1069-B7(2) is taken to be, outside Australia for the purposes of point 1069-B7; or

(c) an FA child in respect of whom point 1069-K3 applies because action to obtain maintenance for the child that the Secretary considers reasonable to take has not been taken.

Note 1: For the treatment of maintenance income of members of a couple see point 1069-J2.

Note 2: "Special maintenance income" (see subsection 10(1)) may in some circumstances be disregarded under point 1069-J3.

Step 2 Work out the person's maintenance income free area (see points 1069-J8 and 1069-J9).

Note: A person's maintenance income free area is the maximum amount of maintenance income that the person may have without any deduction being made for maintenance income from the person's rate of family allowance.

Step 3 work out whether the person's maintenance income exceeds the person's maintenance income free area.

Step 4 If the person's maintenance income does not exceed the person's maintenance income free area, the person's maintenance income excess is nil and there is no reduction for maintenance income.

Step 5 If the person's maintenance income exceeds the person's maintenance income free area, the person's maintenance income excess is the person's maintenance income less the person's maintenance income free area.

Step 6 use the person's maintenance income excess to work out the person's reduction for maintenance income using points 1069-J10 and 1069-J11.

Note: The application for the maintenance income test is affected by provisions concerning:

. apportionment of capitalised maintenance income (section 1116);

. non -cash housing maintenance - value of substitute for family home (section 1117)."

"1069-J8(1) A person's maintenance income free area is worked out using Table J. Work out which family situation in Table J applies to the person. The maintenance income free area is the corresponding amount in column 3 plus an additional corresponding amount in column 5 for each FA child after the first other than a child for whom maintenance income is disregarded under Step 1 of the Method statement in point 1069-J1.

TABLE J

MAINTENANCE INCOME FREE AREA

column 1	column 2	column 3	Column 4	column 5	column 6
item	person's family situation	Basic free area per year	Basic free area per fortnight	additional free area per year	additional free area per fortnight
1.	Not a member of a couple	$865.80	$33.00	$288.60	$11.10
2.	Partnered (both the person and the partner have maintenance income	$1731.60	$66.60	$288.60	$11.10
3.	Partnered (only one has maintenance income	$ 865.80	$33.60	$288.60	$11.10

.

.

Only maintenance actually received taken into account in applying Table J

1069-J9 In determining whether or not item 2 or 3 of Table J applies to a person, point 1069-J2 is to be disregarded. This has the effect of taking to account only maintenance income that the person actually receives rather than any maintenance income that the person is taken to receive because of maintenance income received by the person's partner.

Maintenance income excess

1069-J10 A person's maintenance income excess is the person's maintenance income less the person's maintenance income free area.

Reduction for maintenance income

1069-J11 A person's reduction for maintenance income is:

maintenance income excess

52"

How Mrs King's Family Allowance was Calculated by the Administrative Appeals Tribunal

10 The calculation of Mrs King's Family Allowance Rate upon which the Administrative Appeals Tribunal based its decisions was set out in the reasons for decision. It was not in dispute that $1000.32 was the amount of the maintenance payment to be used for the purposes of the calculation.

11 The calculation itself can be somewhat abbreviated to get to the essential issues in the case. Step 1 in Module A yielded a Gross Family Allowance Rate of $325.90, comprising the sum of the standard family allowance rate (Module B) and the guardian allowance (Module F). Modules C and D relating to large family supplement and multiple birth allowance were not applicable. Step 2 applied the family allowance income test to the Gross Family Allowance Rate. There being no other relevant income, the Income Tested Family Allowance Rate was the same as the Gross Family Allowance Rate. Step 3 involved subtraction of the Minimum Family Allowance Rate, $70.50, from the Income Tested Family Allowance Rate, $325.90, to yield an Adjusted Income Tested Family Allowance Rate of $255.40. Thus far there was no dispute between the parties as to the calculation.

12 Step 4 involved the application of the Maintenance Income Test in Module J to the Adjusted Income Tested Family Allowance Rate to get the Maintenance Tested Family Allowance Rate which was calculated at $55.06 as shown below. By Step 5 the sum of $55.06 and $70.50, the latter being the minimum Family Allowance Rate, was calculated at $125.56. In the Tribunal's reasons the sum of $55.06 was mistakenly printed as $50.06 but the Step 5 addition was correctly calculated as though it were $55.06. The resultant sum of $125.56 was the Tribunal's calculation of the Family Allowance Rate applicable. It was somewhat less than that calculated by the Secretary's delegate which was $148.65. That figure is seen in par 3 of the Secretary's statement of facts and contentions before the Tribunal. It was a figure based on the Gross Family Allowance Rate of $349 reduced by $200.34 and rounded down to the nearest 5 cents. The difference seems to be accounted for by the fact that the Secretary was working off a Gross Family Allowance Rate of $349, while the Tribunal's calculation of the Gross Family Allowance Rate was $325.90. In the end, however, the Tribunal decision did not result in any further reduction of Mrs King's rate of Family Allowance as it expressed its decision by reference to the reduction only. Its own decision was that Mrs King's rate of Family Allowance for pay days 7 and 21 May 1998 be reduced by $200.34 per fortnight. Being expressed simply in terms of the reduction, the decision would not have affected the level of fortnightly payments of $148.65 made to Mrs King in the period concerned.

13 The critical calculations of the Maintenance Tested Family Allowance Rate pursuant to Module J were set out as follows in the Tribunal's decision:

"Step 1

Work out the annual rate of the person's MAINTENANCE INCOME. Mrs King received a maintenance payment of $1000.32 on the Child Support Agency payday 6 May 1998. This is then converted to an annual rate.

$1000.32 x 12 = $12,003.84

Step 2

Work out the person's MAINTENANCE INCOME FREE AREA (by using points 1069-J8 and 1069-J9 of the Act). As Mrs King is not a member of a couple with 3 children, the maintenance free area is $951.60 plus $317.20 for each child after the first.

$951.60 + 2 x $317.20 = $ 1,586.00

Step 3

Work out whether the person's MAINTENANCE INCOME exceeds the person's MAINTENANCE INCOME FREE AREA.

$12,003.84 - $1,586.00 = $10,417.84

Therefore Mrs King's MAINTENANCE INCOME does not exceed her MAINTENANCE INCOME FREE AREA.

Step 4

N/A

Step 5

The person's MAINTENANCE INCOME EXCESS is the person's MAINTENANCE INCOME minus the person's MAINTENANCE INCOME FREE AREA.

$12,003.84 - $1,586.00 = $10,417.84

Step 6

Use the person's MAINTENANCE INCOME EXCESS to work out the person's REDUCTION FOR MAINTENANCE INCOME using points 1069-J10 and 1069-J11.

$10,417.84 ÷ 52 = $200.34

Take any reduction from the person's ADJUSTED INCOME TESTED FA RATE: the result is the person's MAINTENANCE TESTED FA RATE.

$255.40 - $200.34 = $55.06"

The Annual Income Calculation

14 Mrs King made a number of points in her written submissions some of which were, quite understandably, based upon a misunderstanding of this appeal process. She made references to matters arising out of the Review Officer's decision and that of the Social Security Appeals Tribunal, whereas the focus in this hearing is necessarily upon the reasoning of the Administrative Appeals Tribunal.

15 There is one matter, however, arising from the Review Officer's decision that Mrs King deserves to have put right. That is that there can be no basis for the suggestion that she had failed in her obligation to keep Centrelink informed of her receipt of maintenance income which itself had been processed by Centrelink. As Mrs King said:

"The letter I did not send to Centrelink should read "I am writing to inform you, that you informed me, that the Child Support informed you, that for the pay day 15/4/98 I will receive $1,000.32 as maintenance."

The Secretary in this case properly concedes that there was no breach of her obligation on Mrs King's part.

16 I do not propose to recite all of Mrs King's criticisms of the Administrative Appeals Tribunal decision. The critical issue in my opinion reduced to whether the "annual rate of ...maintenance income" referred to in Step 1 of Point 1069-J1 in Module J was the total of maintenance income received in a given year or a rate calculated each fortnight for which maintenance income was treated as received. As was accepted by the Secretary before the Tribunal and, as appears from the Act, there is no prescription of the manner of calculating the annual rate. It was Mrs King's submission that "it is common sense to add all the payments received rather than to multiply one payment by twelve". She summed up her position by saying:

"I am asking the court to make the decisions I requested in the Notice of Appeal...based on the reality that I received a total of $1332.75 for the financial year 1996-1997 and a total of $1435.16 for the financial year 1997-1998."

17 The figure of $1,435.16 as maintenance income received for the financial year 1997/98 was based upon the following payments history which was not in dispute:

Date of Payment Child Support Paid

15/4/98 $1,000.32

6/8/97 $ 217.68

2/7/97 $ 217.50

The payment history in 1996/97 shows a total of $1,332.75 for that financial year:

Date of Payment Child Support Paid

21/5/97 $ 217.50

16/4/97 $ 217.85

2/4/97 $ 217.00

19/2/97 $ 217.00

15/1/97 $ 463.40

$1,332.75

18 In her attack upon the Tribunal's approach to calculation of the annual rate of maintenance income for the two fortnights in question, Mrs King said that under Step 3 in Module J the maintenance income should have been her actual receipt of $1,435.16 and not the "annualised figure" of $12,003.84. Had the actual figure been used there would have been no excess of maintenance income over the $1,586.00 maintenance income free area and therefore no deduction.

19 The common sense of Mrs King's position is perfectly understandable. Unfortunately it yields to a law which, notwithstanding its complexity, appears to place administrative process ahead of a precise calculation of the entitlements of beneficiaries. The payments of family allowance are to be made fortnightly. The rate is a fortnightly rate. So Point 1069-A1 says. The fortnightly rate must be adjusted from time to time according to the receipt of maintenance income. The law reflected in Step 1 of Module J requires calculation of an annual rate of maintenance income which is then fed into the subsequent steps. The legislative scheme is such that this appears to be the only method by which maintenance income can be assessed under the Act. This is the method that was applied by the Administrative Appeals Tribunal.

20 The approach taken to calculate the annual rate of maintenance income in this case, reflects that taken by the High Court in Harris v Director-General of Social Security [1985] HCA 1; (1985) 59 ALJR 194. The Court was there concerned with s 28 of the Social Services Act 1947 which provided for the reduction of fortnightly instalments of Old Age Pension "by one half of the amount (if any) per annum by which the annual rate of the income of the claimant or pensioner exceeds" a specified sum. The joint judgment of Gibbs CJ, Brennan, Deane and Dawson JJ held that implicit in the duty to make the calculation required by s 28 was:

"...the authority to ascertain administratively what the pensioner's annual rate of income is and the amount, if any, by which that rate exceeds one or other of the sums specified in s 28(2)." (at 196)

The annual rate of income they held, may change at any time. It is not an "annual amount but an annual rate". Their Honours went on to say:

"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." (at 196)

21 On this basis the approach of the Administrative Appeals Tribunal to the calculation of the relevant annual rate of maintenance income was correct. The calculation thereafter was applied in accordance with the Act. No error of law has been shown.

22 There was reference in Mrs King's argument to the content of a Departmental brochure. It is unnecessary to consider the proper interpretation of the brochure. The only point of reference for present purposes must be the terms of the Act itself.

23 The application will be dismissed. The Secretary has indicated that no order for costs would be sought in that event and none will be made.

I certify that the preceding twenty three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Associate:

Dated: 16 February 2000

	Mrs M. King appeared in person
Counsel for the Respondent:	Mr K M Pettit
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	7 February 2000
Date of Judgment:	16 February 2000