FNPQ v Secretary, Department of Social Services [2025] FCAFC 159

1. In 2021, the first appellant received back-payments totalling $184,909.71 from her former employer after an audit revealed that she had been underpaid. The payments took the form of three lump sums relating to seven past periods of employment.
2. The appellants' ordinary income was assessed having regard to the back-payments. As a result of that assessment, the age pensions the appellants were then receiving were reduced to nil. After 12 weeks of nil payment, on 16 June 2021 the Secretary cancelled the appellants' pensions under s 80 of the Social Security (Administration) Act 1999 (Cth) (Administration Act).
3. Two days later, the appellants each made a new claim for the age pension under s 11 of the Administration Act. It is the new claims that form the subject matter of this appeal.
4. The new claim by each appellant was originally rejected, then granted on review by the Social Services and Child Support Division of the AAT. The decision to grant each of the appellants the age pension was affirmed on further review by the General Division of the AAT (AAT Decision).
5. On the Secretary's appeal from the AAT Decision, the primary judge concluded that the back-payments precluded the appellants from receiving the age pension and that the AAT erred in law in finding otherwise: Secretary, Department of Social Services v FNPQ [2024] FCA 1428. His Honour made orders setting aside the AAT Decision and remitting the matter to the newly-formed Administrative Review Tribunal for rehearing.

The cancellation of the appellants' earlier age pensions

1. To explain the single issue that arose on this appeal, it is convenient to explain how the back-payments had the consequence that the appellants' earlier age pensions were reduced to nil and then cancelled.
2. Under s 11 of the Administration Act, a person who wants to be granted a social security payment must make a claim for the payment in accordance with Div 1 of Pt 3 of the Administration Act. The Secretary has an obligation to determine the claim, by granting or rejecting it: Administration Act, s 36. A claim for the age pension is to be granted if a person is "qualified" for the payment and if the payment is "payable": Administration Act, s 37.
3. To be qualified, the claimant must fulfil the criteria in s 43 of the SS Act, relating to age and residency in Australia. The age pension is not payable to a person if the person's age pension rate would be nil: SS Act, s 44(1).
4. In accordance with s 43 of the Administration Act, the appellants' age pensions were paid in arrears, and by instalments relating to 14-day "instalment periods", as determined by the Secretary.
5. Under s 66A of the Administration Act, a person who has claimed or is receiving a social security payment must notify the Department of Social Services of any change in circumstances that might affect their eligibility for payment (or the rate of payment they have applied for or are receiving), including changes in income.
6. At the time that the first appellant received the back-payments, she and her husband were both receiving the age pension as members of a couple, with their payments administered through Centrelink. For the purposes of the income and asset tests in the SS Act, their income and assets were pooled and attributed to them on a 50/50 basis: SS Act, s 1064-A2.
7. The appellants promptly notified the Department of the receipt of the back-payments.
8. The rate of a person's age pension is governed by the provisions in Ch 3 of the SS Act, specifically "Pension Rate Calculator A", found at the end of s 1064. The overall calculation process is described in Module A and comprises 11 steps, cross-referencing other modules. The overall method involves calculating the maximum payment, and then reducing the maximum by reference to asset and income tests. The resulting annual payment amount is then divided by 364 to determine the claimant's daily payment rate: SS Act, s 1064‑A1.
9. Step 5 within Module A requires the "ordinary income test" in Module E to be applied in working out any reduction referable to a person's sources of income.
10. Module E is found in s 1064-E1. Within that module, Step 1 is to work out the amount of the person's ordinary income "on a yearly basis".
11. Part 3.10 of the SS Act is headed "General provisions relating to the ordinary income test". It commences with the following definitional section:

1072 General meaning of ordinary income

A reference in this Act to a person's ordinary income for a period is a reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.

1. Section 1073A is contained in Div 1AA of Pt 3.10 of the SS Act. It provides:

1073A Attribution of employment income paid in respect of a particular period or periods

(1) This section applies if:

(a) a person is receiving a social security pension or a social security benefit; and

(b) the person's rate of payment of the pension or benefit is worked out with regard to the income test module of a rate calculator in this Chapter; and

(c) one or more amounts of employment income, each of which is in respect of a particular period or periods (each period is an employment period), are paid in an instalment period of the person to or for the benefit of the person by the same employer.

Note 1: If the person has multiple employers, this section applies separately in relation to each employer.

Note 2: If a person is receiving a social security pension and is paid employment income monthly, section 1073B may apply to that income instead of this section.

Note 3: Section 1073BA deals with the payment of employment income that is not in respect of a particular period.

(2) The person is taken to have received the employment income over a period (the assessment period) that consists of the number of days that is equal to the sum of the number of days in each employment period, where the assessment period begins on the first day of the instalment period in which the amounts of employment income are paid.

Example: On 3 June a person is paid $756 employment income for work the person performed in the period beginning on 9 May and ending at the end of 29 May. The number of days in the employment period is 21.

Assume the instalment period begins on 1 June. The person is taken to have received the $756 over the period beginning on 1 June and ending at the end of 21 June (a period of 21 days).

(3) Subject to subsection (4), for each day in the assessment period, the person is taken to have received an amount of employment income worked out by dividing the total amount of the employment income covered by paragraph (1)(c) by the number of days in the assessment period.

Example: To continue the example in subsection (2), the person is taken to have received $36 ($756/21) on each of the days in the period beginning on 1 June and ending at the end of 21 June.

(4) If the person is taken, under subsection (3), to have received employment income (the attributed employment income) during a part, but not the whole, of a particular instalment period, the person is taken to receive on each day in that instalment period an amount of employment income worked out by dividing the total amount of the attributed employment income by the number of days in the instalment period.

Example: To continue the example in subsection (2), for the instalment period beginning on 15 June and ending at the end of 28 June the person is taken, under subsection (3), to have received employment income during a part of that instalment period (15 June to 21 June). The person is taken to have received $252 ($36 x 7).

Under subsection (4), the person is taken to receive on each day in that instalment period an amount of employment income of $18 ($252/14).

(5) This section applies in relation to an amount of employment income paid on a day in an instalment period, whether or not the amount is received on that day.

(6) In applying subsection (2) in relation to one or more amounts of employment income paid by a particular employer in an instalment period, in working out the sum of the number of days in each employment period, if a day in an employment period overlaps with a day in another employment period, that day must only be counted once.

1. For the purposes of s 1073A, the first appellant's back-payments were in the nature of remuneration and so met the description of "employment income": SS Act, s 8(1) and (2). Applied to her case, the back-payments were attributed as follows:

Employment period to which the payments related

Calculated Assessment Period (employment periods

1. The parties acknowledged that there may have been an arithmetical error in the AAT's calculation, but nothing turns on that for present purposes.
2. When taken into account in Step 5 of Module A, the resulting daily income figures reduced each of the appellants' age pension daily rate to nil. That state of affairs continued for 90 days, after which the Secretary exercised a power under s 80 of the Administration Act to cancel each of the age pensions. There is no dispute that the decision to cancel the appellants' age pensions was correctly made.

1. The Secretary rejected each appellants' new claim for the age pension made on 18 June 2021. Reduced to its essence, the Secretary's position (maintained before the AAT and at first instance and in written submissions on this appeal) was that the attribution periods calculated under s 1073A (at a time when the appellants were last in receipt of the age pension) continued to run for the purposes of assessing their ordinary income on the new claim. The consequence, it was submitted, was that the amount of age pension calculated under Pension Rate Calculator A would be nil and therefore no age pension was "payable" within the meaning of the SS Act.
2. The AAT rejected those submissions. It concluded that the back-payments were not receipts that should be taken into account in assessing the appellants' ordinary income for the purposes of each new claim. Among other things, it concluded that the conditions in s 1073A(1) for applying the deemed attribution in s 1073A(2) of the SS Act were not satisfied in relation to each new claim.

1. The single issue on this appeal was whether the primary judge erred in determining that the AAT made an error of law in concluding that, in assessing each new claim for the age pension, s 1073A of the SS Act did not operate so as to include the back-payments in the assessments of the appellants' ordinary income for the purposes of the income test component of Pension Rate Calculator A.
2. Two days before the hearing of this appeal, the Secretary conceded error in the reasoning of the primary judge, being the same reasoning that underpinned the original rejection of each new claim. Accepting the Secretary's submissions, the primary judge reasoned as follows:
   1. The purpose that underlies s 1073A of the SS Act is similarly apparent. It serves, in certain circumstances, to deem the times at (or the periods over) which employment income is taken to have been received. Its obvious purpose is to ensure that the receipt of employment income is brought to bear upon the amounts to which recipients of a social security pension or a social security benefit are entitled; and that that occurs regardless of how far it is beyond the period in respect of which they are payable that the amounts are, in fact, paid.
   2. I accept that the construction of s 1073A of the SS Act that the Secretary advances is correct. It is consistent with the terms in which the provision is framed and their context within the broader scheme of the SS Act. The deeming function (or process of 'attribution', as the respondents were careful to describe it) to which the section is directed is a function of s 1073A(2). It deems employment income that is received by certain pension recipients to be referrable to periods other than those in respect of which they were actually paid. It operates with that effect if the conditions listed in s 1073A(1) are satisfied; in other words, from the point that a person who is receiving (relevantly) an age pension receives employment income. Employment income so received is deemed to have been received in the way that sub-s (2) provides. The section does not identify any point or points in time to which that artificial deeming process is limited.
   3. Insofar as concerns a pension application that is made later in time (that is to say, after employment income is received in the circumstances that s 1073A(1) of the SS Act contemplates), there is no reason to read s 1073A(2) as ceasing to apply or applying with modified effect. That is not what s 1073A says; and nor is it consistent with the apparent object of the provision or its place within the broader statutory context. To construe the provision as the AAT construed it is to permit - precisely as has occurred here - the all-but-immediate circumvention of the very consequences that the provision is plainly intended to accommodate (including, as in this case, the processes pursuant to which the respondents' prior age pension entitlement was reduced to nil and, ultimately, cancelled). Such a construction would mean (as it has in this matter so far) that a cancellation brought about by reason of a recipient's deemed receipt of employment income could be immediately set at naught simply by the making of a fresh pension application.
   4. That is an absurd outcome that the legislature cannot reasonably be presumed to have intended.
   5. There is further reason to reject it. Before me, it was accepted that s 1073A did not mandate the cancellation of - or, by its application, lead to a circumstance in which there was no option other than to cancel - the respondents' existing age pension entitlement. An alternative option was, I was told, for the Secretary to suspend it pursuant to s 80 of the Social Security (Administration) Act 1999 (Cth). Had that occurred, there could be no suggestion that the suspension did not properly foreclose upon the respondents' receiving their age pension for the full 12-month 'assessment period' that s 1073A of the SS Act established in respect of the Back-pay Amounts. That would be so because (as I should hope is already apparent) there was no question that those amounts were sufficient to take the respondents beyond the income threshold at which age pension entitlements are reduced to nil.
   6. It is the case, as the respondents were at pains to point out, that, had they not been in receipt of the age pension at the point that the Back-pay Amounts were received, there would be no question that their Age Pension Application should proceed as the AAT has determined. In that universe, s 1073A would have no application, there would be no deeming as to when the Back-pay Amounts were received and those amounts would not qualify as employment income upon which the outcome of the application might turn. Thus, a couple that had received the same Back-pay Amounts at the same time as the respondents (or the first respondent) - and that applied at the same time as they did for the same pension entitlement in circumstances that were otherwise identical - would, nonetheless, be treated to a different outcome.
   7. Accepting that hypothetical proposition, it remains clear all the same, from the provision's text and context, that that is what was intended. Section 1073A(2) applies so as to deem the time or times at which employment income is received if the conditions outlined in s 1073A(1) are met. There is no question, presently, that those criteria were met.
   8. Nothing in the text of s 1073A or the broader statutory context within which it appears suggests that s 1073A(2) is temporally limited such that a 'person is taken to have received the employment income over a period' only insofar as concerns an ongoing entitlement to an existing pension and not insofar as concerns a fresh application made at some later time. The section contemplates simply that a person will be 'taken' to have received certain income as identified. It does not identify any time or limitations as to when the person will be so taken.
   9. Having construed the relevant provisions of the SS Act differently, it follows that the AAT Decision was a product of legal error. That decision should (and will) be set aside and the Review Application should be remitted for redetermination upon the correct statutory interpretation. The Secretary does not seek an order for his costs in this appeal and, accordingly, none shall be made.

1. The concession on this appeal is in relation to a question of law. It reflects this Court's view as to the proper construction of s 1073A of the SS Act. On that construction, the income attribution assessment that led to the cancellation of the age pensions was not to be taken into account in the assessment of the appellants' ordinary income when deciding whether to grant or reject each new claim. In short, that is because:

(1) The appellants' new age pension claims were to be determined based on facts existing at the date of the claims (18 June 2021) or within the 13 weeks following that date: Administration Act, Sch 2, cl 3-4.

(2) Section 1073A(1) of the SS Act sets out three cumulative preconditions to the application of the attribution provisions in s 1073A. Those preconditions are to be construed in accordance with their ordinary meaning. In the case of the precondition in s 1073A(1)(a), the use of the present tense in the phrase "a person is receiving a social security pension or a social security benefit" is of significance in the present case.

(3) At the time of their new claims, the appellants were not receiving a social security pension or a social security benefit for the purposes of s 1073A(1)(a). Accordingly, one of the preconditions to the application of the attribution provisions in s 1073A was not satisfied and therefore those provisions had no application to the new claims.

1. Contrary to the Secretary's earlier submission, that construction does not result in an absurdity. Nor did the making of the new age pension claims involve any side-stepping of the intended effect of the SS Act. As the appellants correctly submitted, on the new claims, the amounts constituting the back-payments will be treated as assets for the purposes of other provisions of the statutory regime.

1. The setting aside of the orders of the primary judge has the effect that the AAT Decision is restored. The orders of the AAT required the new claims to be remitted to the Secretary for determination on the basis that s 1073A did not apply. The Secretary has confirmed that any prior disadvantageous miscalculation by the AAT of the appropriate age pension rate will not affect the consideration of the new claims.
2. The new claims (made more than four years ago) may now be determined according to law.

I certify that the preceding thirty one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Charlesworth, Kyrou and McDonald.