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SOCIAL SECURITY - Pensions, benefits and allowances - Commonwealth Seniors Health Card - Applicants not qualified to received CHSC - Superannuation payments not exempt and not non-assessable income - Decisions under review affirmed_._

Administrative Appeals Tribunal Act 1975 (Cth) s 34J

Income Tax Assessment Act 1997 (Cth) ss 6-5, 6-10, 6-20, 6-23, 11-5, 11-15

Social Security Act 1991 (Cth) ss 1061ZG, 1071

Social Security (Administration) Act 1999 (Cth) s 86

Director-General of Social Security v Hales [1983] FCA 81; (1983) 47 ALR 281

Trotter v Department of Family and Community Services [2005] FCA 929

1. The applicants, Gordon and Mary Faichney, initially wrote to the respondent department on 5 January 2012 to advise that their combined taxable income for the 2010/11 financial year was $91,630. On 27 January 2012, the Department cancelled the applicants' Commonwealth Seniors Health Cards (CSHC). The applicants have sought review from an authorised review officer (ARO), who affirmed Centrelink's decisions on 23 February 2012. A subsequent review by the Social Security Appeals Tribunal (SSAT) also affirmed that decisions on 22 May 2012.
2. The applicants have now applied to this Tribunal for further review by letter application dated 5 July 2012 (received in the Tribunal on 10 July 2012).

1. There are two issues submitted by the applicants for determination:

(2) If the answer to question 1 is "no", is there an issue of discrimination which entitles the applicants to another remedy?

1. The parties have consented to determination of this application for review by this Tribunal without a formal hearing. This is provided for in s 34J of the Administrative Appeals Tribunal Act 1975 (Cth). This procedure is authorised where a Tribunal considers that the issues may be adequately determined in the absence of the parties and where the parties have consented to a determination without a hearing. Those requirements are satisfied in this case.

1. The facts can be briefly stated. The applicants had taxable incomes for the 2010/11 financial years as follows:

1. Included in the above amount is $48,855 which represents superannuation pension income for the applicants. They argue that the superannuation pension payments should be excluded from their assessable income and if that is accepted, they would be entitled to retain their CSHC.
2. The applicants also argue that it is discriminatory to include their superannuation income because:

(1) The SSAT denied that it had jurisdiction to deal with the complaint, as it categorised the applicants' claim as "inequitable outcomes".

(2) "[T]here has been a failure to address errors in the legislation which requires CSS pensioners to include their pensions as income for CSHC eligibility purposes while excluding the same pension income of most other superannuated Australians when assessing CSHC entitlement".

(3) The Minister has discriminated against and it "... is prejudicial to CSS pensioners" by not amending the CSHC eligibility rules.

(4) A finding in favour of the applicants would be "highly persuasive notice to the Minister that the legislation is badly drafted, discriminatory, and results in significant financial harm for a vulnerable section of self-funded retirees".

1. The determination of the issues is dealt with separately below.

1. The answer to this question requires an analysis of a number of pieces of legislation. Relevantly they are as follows:

Social Security Act 1991 (Cth)

1. Subject to subsection (2), a person is qualified for a seniors health card on a day if, on that day, the person:
   • (a) has reached pension age; and
   • (b) is an Australian resident or a special category visa holder residing in Australia; and
   • (c) is in Australia; and
   • (d) satisfies the seniors health card taxable income test; and
   • (e) is not receiving a social security pension or benefit; and
   • (f) is not receiving a service pension or an income support supplement; and
   • (g) is not subject to a newly arrived resident's waiting period.

Note: If the person is temporarily absent from Australia, the person continues to be qualified for a seniors health card for a maximum period of up to 13 weeks (see Division 4).

1071 Seniors Health Card Taxable Income Test Calculator

The Seniors Health Card Taxable Income Test Calculator at the end of this section is to be used in working out whether a person satisfies the seniors health card taxable income test for the purposes of this Act.

The test to determine whether a person satisfies the seniors health card taxable income test is contained in s 1071-1.

Adjusted taxable income

1071-3 For the purposes of this Part, a person's adjusted taxable income for a particular tax year is the sum of the following amounts (income components):

(a) the person's taxable income for that year;

(b) the person's fringe benefits value for that year;

(c) the person's target foreign income for that year;

(d) the person's total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year;

(e) the person's reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year.

Note 1: For taxable income see subsection 23(1) and point 1071-4.

Note 2: For fringe benefits value see point 1071-6.

Note 3: For target foreign income see subsection 10A(2) and point 1071-7.

Taxable income

1071-4 For the purposes of this Part, a person's taxable income for a particular tax year is:

(a) the person's assessed taxable income for that year; or

(b) if the person does not have an assessed taxable income for that year - the person's accepted estimate of taxable income for that year.

Assessed taxable income

1071-5 For the purposes of this Part, a person's assessed taxable income for a particular tax year at a particular time is the most recent of:

(a) if, at that time, the Commissioner of Taxation has made an assessment or an amended assessment of that taxable income - that taxable income according to the assessment or amended assessment; or

(b) if, at that time, a tribunal has amended an assessment or an amended assessment made by the Commissioner - that taxable income according to the amendment made by the tribunal; or

(c) if, at that time, a court has amended an assessment or an amended assessment made by the Commissioner or an amended assessment made by a tribunal - that taxable income according to the amendment made by the court.

1071-11 If a person is a member of a couple, add the couple's adjusted taxable incomes for the reference tax year and divide by 2 to work out the amount of the person's adjusted taxable income for the reference tax year.

1071-12 A person's seniors health card taxable income limit is worked out using the Seniors Health Card Taxable Income Limit Table. Work out which family situation in the table applies to the person. The person's seniors health card taxable income limit is the corresponding amount in column 3 plus an additional corresponding amount in column 4 for each dependent child of the person.

Seniors Health Card Taxable Income Limit Table

Social Security (Administration) Act 1999 (Cth)

1. If the Secretary is satisfied that a person to whom a concession card has been granted is not qualified for the card, the Secretary is to determine that the card is to be cancelled.

Note: The Secretary must cancel a seniors health card in certain circumstances if the Secretary makes a request under subsection 75(2) or (3) of the holder (about providing tax file numbers): see subsections 76(1B) and 77(1B).

1. The statutory law sets rules for determining those who are qualified for CSHC (s 1061ZG). There appears to be no dispute as to the facts nor that there is any impediment to qualification by the applicants other than the assessment of the income test (s 1061ZG(1)(d)). This is determined by reference to the criteria set out under s 1071, particularly the five steps set out in s 1071-1 together with definitions in ss 1071-3 and 1071-5.
2. Section 1071-11 states that in relation to a member of a couple, in order to calculate their notional adjusted taxable income for determining eligibility to CSHC, the total taxable income of both members is to be totalled and then is to be divided equally. That result will then be regarded as the income of each of the members of a couple. In this case, the total taxable income of $91,630 would result in Mr and Mrs Faichney each having a total taxable income of $45,815.
3. Section 1071-12 sets out the limits of taxable income of a person to be eligible for CSHC. Item 2 of that section states the limit for that "partnered" person is $40,000. I make a finding of fact that the notional adjusted taxable income of $45,815 exceeds the taxable income limit of $40,000 in s 1071-12. Therefore, the applicants each exceed the limit for them to be eligible for CSHC.

1. Section 86(1) of the Social Security (Administration) Act 1999 (Cth) provides:

If the Secretary is satisfied that a person to whom a concession card has been granted is not qualified for the card, the Secretary is to determine that the card is to be cancelled.

1. The wording of that section specifies that the Secretary "is" to determine that a card is to be cancelled. This indicates a mandatory obligation on the part of the Secretary. It is not discretionary. Therefore, the Secretary is required to cancel the CSHC in the present circumstances.
2. I find that the SSAT decision is therefore correct.

Issue 2 - If the answer to Issue 1 is "no", is there an issue of discrimination present which entitles the applicants to another remedy?

1. The argument of the applicants set out earlier states that there has been discrimination against them. Discrimination in the Commonwealth jurisdiction has been dealt with in various statutory enactments, for example, the Discrimination Act 1991, the Sex Discrimination Act 1984 and the Disability Discrimination Act 1992. The applicants have provided no specific claims under these statutes.
2. The Secretary has submitted that it is not a matter for the Tribunal to consider. In its merits review role, this Tribunal must have a statutory power under an enactment to be able to review a decision. It is also a requirement under the Administrative Appeals Tribunal Act 1975 (Cth) that a determination by the Tribunal must result in the correct or preferable decision. But merely because the SSAT assumed it had no jurisdiction for this issue does not prevent this Tribunal from determining whether the SSAT made the correct or preferable decision (Director-General of Social Security v Hales [1983] FCA 81; (1983) 47 ALR 281).
3. The Secretary also says that it is not a matter for the Tribunal to consider as it is a function of the legislature not of a Court or Tribunal. Ms Forsyth, for the Secretary, referred the Tribunal to Trotter v Department of Family and Community Services [2005] FCA 929 and in particular to extracts of the judgement of Mansfield J:

8. Whether or not that is the case, it is not for the Court to form a view as to the desirability of, or the current validity of, the assumed underlying particular legislation. ... However, it is the duty of the Court to apply the law. It is the function of the parliament to make the law.

...

10. For those reasons, in my view, the Tribunal did not err in law in its decision, and the application by way of appeal must be dismissed. As was said to the applicant in the reasons for decision of the Tribunal, his complaint should more properly be directed to those who make the law... However, as I have said, that is matter for the legislature.

1. The principle set out above is directly relevant to the determination of this matter and I agree with the Secretary's submission.
2. The applicants seem to be concerned that the law has not been applied in accordance with a previously announced policy which, had it been enacted, would have resulted in a change to the law. The simple fact is that whatever policy proposal was announced, it has not resulted in an amendment to the Act. If the applicants regard the present law as unfair or unjust, then, as Mansfield J said in Trotter, the matter must be referred to the legislature through the elected representatives. Just as in that case it was not a matter to be considered by the Court, neither in the present matter is it an issue to be considered by this Tribunal.
3. One of the applicants' submissions to this Tribunal in their letter dated 5 July 2012 is that the legislation has "errors" or that it is "badly drafted ... and results in significant financial harm for a vulnerable section of self-funded retirees". Apart from making this submission, there is no evidence of substance to support those claims. Those submissions must therefore be rejected. The applicants provided a more recent submission dated 27 November 2012 and added a further argument that they are requesting the Tribunal to rule that the it was not the intention of Parliament "to require CSS pensioners to include their superannuation pensions as part of their income; ...". However, a letter written by a Minister to a constituent, which they contend is evidence of that intention, is not a basis for interpreting the intention of Parliament at the time an amendment Bill is passed in the House.
4. The applicants in their letter dated 5 July 2012 also state that their complaint is that superannuation pensions should be excluded from the income tests. Summarising their complaint in their letter dated 31 August 2012, they say it is "an unintended consequence of the government's decision to exempt from income taxation superannuation pensions paid from taxed superannuation funds". No specific evidence was provided to support this submission. However, one issue which underlies the applicants' argument is that there is a point of differentiation between "assessable income" and "exempt income". There is also, a further category entitled "non-assessable non-exempt income".
5. "Assessable income" is provided for in ss 6-5 and 6-10 of the Income Tax Assessment Act 1997 ("ITAA 97") and, broadly speaking, this includes ordinary income and statutory income. "Exempt income" under the ITAA 97 is as the term applies, not liable to be taxed (see s 6-20(2); s 11-5; s 11-10; s 11-15 ITAA 97). The further category is referred to as "non-assessable non-exempt income" (s 6-23 ITAA 97), which was introduced by legislative amendment which took effect on 1 July 2003. "Non-assessable non-exempt income" refers to ordinary or statutory income which is not exempt but is also not assessable. This is designed to provide relief where income is not exempt but is specifically made not assessable by Parliament where it would otherwise be assessable as ordinary or statutory income. "Non-assessable non-exempt income" only arises where Parliament makes specific provision to provide relief in defined circumstances because it implements a policy position which is seen as requiring rectification for some equitable purpose; or perhaps to motivate taxpayers to invest in a particular way to benefit the national economy. The government may also exempt certain income where it regards taxation of that income as being inequitable or where, for example, it results in double taxation.
6. In this case the applicants' argument about superannuation payments from taxed funds are not exempt and have not been made non-assessable. The Tribunal can only apply the law strictly as allowed by principles of statutory interpretation. Any change to the law is a matter to be determined by the Parliament. Until it does so, a claim of this nature cannot succeed in the applicant's circumstances.

1. The decisions under review are therefore the correct decisions and are affirmed.

I certify that the preceding 25 (twenty-five) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr K S Levy RFD.

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