4. At the hearing of the application the applicant was represented by Ms C. Merrick, a departmental officer, and the respondent by Mr J. Atkins, of Counsel. In addition to the documents lodged with the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 a number of documents mainly relating to the financial affairs of the respondent and the partnership business were tendered in evidence. Oral evidence was given by the respondent. Subsequently the respondent sent to the Tribunal a copy of a leaflet made available to the public by the applicant's department and entitled "Renewal of Health Care Card".

5. There is no dispute between the parties as to the facts; Ms Merrick informed the Tribunal that until the hearing the applicant had not been satisfied as to one fact but now accepted that it was as asserted by the respondent. The only issue, therefore, is the application of the relevant law to the undisputed facts. Those facts can be briefly stated as follows. The respondent and her husband commenced a farming business in partnership in 1980. In 1988 they sold their previous farm and moved to a dairy farm at Invergordon. A farming consultant drew up a budget which forecast that the partnership would make a substantial profit in that and the following years. However, subsequently the price of milk dropped, there were two consecutive wet winters and the milk yields of the cattle decreased. As a result the farming business was operated at a loss and the respondent, who was a qualified accountant, sought work away from the farm to obtain money which could be used to pay for the cost of operating the business, in particular buying hay for feeding the cattle. For some time she was unable to get long-term regular employment but on 21 May 1990 she began work as a secretary at Dookie Agricultural College about 50 km from the farm. Until the end of October she worked for 30 hours per week. From November onwards the hours which she worked were reduced and her income from that employment decreased. The reason why the applicant sought and undertook the employment was that the farming business was being operated at a loss and money was needed to be put into it to enable it to continue.

6. From soon after the respondent and her husband bought the dairy farm the prospect of the business ever being profitable became increasingly poor. That was because of decreases in the price paid for the milk produced. By early 1990 they had decided that they should sell the farm. During that year they sought a buyer, first by utilising the services of a number of estate agents, then by giving sole agency rights to one estate agent and finally by advertising in newspapers. They were unsuccessful in finding a buyer throughout 1990. In 1991 they have sold the farm but in doing so have suffered a loss of approximately one-third of the price which they paid for it.

7. The relevant provisions of section 5B of the Health Insurance Act are as follows:-

"5B. (2) Where the Secretary to the Department of Social Security

is satisfied, with respect to an applicant under sub-section (1),

that the income of the applicant, during the prescribed period was

less than the amount of the allowable income in relation to the

applicant, the Secretary shall, subject to sub-section (5), declare

the person to be a disadvantaged person . . . . .

(12) In this section -

'allowable income', in relation to any period of 4 weeks, means -

(a) in relation to a person who had a dependant or dependants on the

last day of that period - 4 times, or such other number of times as

is prescribed, the aggregate of -

(i) the amount of the weekly rate of income that would, as at the

last day of that period, be sufficient, but no more than sufficient,

to prevent a married person with no children from receiving any

unemployment benefit;

(ii) $20 or such other amount as is prescribed;

and

(iii) an amount equal to the product of -

(A) the number of the children of the

person on the last day of that period; and

(B) $34 or such higher amount as is

prescribed; or

(b) in relation to a person who had no dependants on the last day of

that period - an amount equal to four times, or such other number of

times as is prescribed, an amount calculated for the purposes of

this paragraph, being an amount equal to 60%, or such other

percentage as is prescribed, of the aggregate of the amount

calculated in accordance with sub-paragraph (a)(i) and the amount

referred to in sub-paragraph (a)(ii);

. . . . .

'income', in relation to a person, means income that

would be income of the person for the purposes of the Social

Security Act 1947 and includes -

(a) a payment under that Act (other than

a payment of an allowance under Part IIA, V, VI, VIB or VIIB

of that Act, a benefit under Part IVA of that Act or a

pension under Part VIA of that Act);

(b) a pension payable under the Veterans' Entitlements Act 1986;

(c) a pension payable by a foreign country, being a pension that, in

the opinion of the Secretary to the Department of Social Security,

is similar in character to a pension specified in paragraph (b);

(d) a pension under the Seamen's War Pensions and Allowances Act 1940;

(da) a payment received by a trainee in full-time training under a

program included in the programs known as the Labour Force Programs,

being an amount calculated by reference to a rate of unemployment

benefit under Part VII of the Social Security Act 1947; and

(e) a payment under the scheme known as the New Enterprise Incentive

Scheme;"

8. At the relevant time the definition of "income" in the 1947 Act was contained in section 3(1) of that Act. So far as is relevant in these proceedings it was as follows:-

"'income', in relation to a person, means personal earnings, moneys,

valuable consideration or profits, whether of a capital nature or

not, earned, derived or received by that person for the person's own

use or benefit by any means from any source whatsoever, within or

outside Australia, and includes a periodical payment or benefit by

way of gift or allowance . . . . ."

9. There is no dispute that in the relevant period the amount of the wages paid to the respondent by the agricultural college exceeded the amount of the "allowable income" in relation to her. The applicant's case is that for the purposes of section 5B her income during that period was the amount of those wages. However, the respondent's case is that it was the amount of the wages less half the amount of the losses of the partnership business during that period. The evidence before the Tribunal establishes clearly that, if the respondent is correct, the amount of her income was considerably less than the amount of the "allowable income" in relation to her. The sole issue in these proceedings, therefore, is whether the losses of the farming business should have been taken into account in calculating the amount of her income for the purposes of section 5B(2).

10. This is not the first occasion on which the question has arisen whether, for the purpose of ascertaining the income of a person within the definition in section 3(1) of the 1947 Act, a loss suffered as a result of the person engaging in one form of activity which has the potential of producing income can be offset against the amount derived by that person from engaging in another activity which is producing income. In Haldane-Stevenson v Director-General of Social Security (1985) 7 ALD 467 the appellant was in receipt of amounts received by way of retiring allowance as an ordained clergyman, by way of a United Kingdom pension and as interest on an investment, as well as an amount representing the value of free lodgings. He sought to offset against those amounts expenditure which he had incurred in connection with research for, and the writing of, a book which had yet to be published. The Full Court of the Federal Court held first that income as defined in the 1947 Act meant net, rather than gross, income. However, it also held that, where a person's income was derived from several sources, his net income from each of his sources of income had to be ascertained by offsetting against the gross income from that source any expenditure associated with it. The net income from all sources had then to be aggregated. Because the expenditure on research for, and the writing of, the book was not associated with any of the appellant's sources of income, it could not be offset against any income. The Court stressed that the assessment of income for the purposes of the 1947 Act was not to be approached in the same way as the ascertainment of "taxable income" under the provisions of the Income Tax Assessment Act 1936, where generally non-capital losses resulting from one commercial activity can be offset against income from other activities.

11. In Secretary, Department of Social Security v Garvey (1989) 19 ALD 348 Mr Garvey and his wife derived income from renting four residential properties which they owned, from dividends, from interest and from the wife's salary. Together the amounts totalled more than $47,000. Of that total $16,396 was income from renting the properties. However, Mr Garvey had borrowed money to buy those properties and had to pay a large amount of interest on those borrowings. The estimate of the expenses incurred in generating the rental income, including interest, was more than $43,000. Mr Garvey sought to set off the whole of that amount against the total of the income from all four sources. The Administrative Appeals Tribunal held that he could not do so but in Garvey v Secretary to the Department of Social Security (1989) 17 ALD 265 a single judge of the Federal Court allowed an appeal against the Tribunal's decision and held that for the purposes of the 1947 Act Mr Garvey's income was the net amount after deducting from the aggregate of the incomes from the four sources the amount of the expenses incurred in generating the rental income. He distinguished Haldane-Stevenson on the ground that in that case there had been no sales of the book to produce income with which the expenditure on the research for, and the writing of, it could be associated. Mr Garvey, by contrast, had received rental income from the properties, so that the expenditure on them was associated with income which he had received. His Honour pointed out that, if as had been said in Haldane-Stevenson the 1947 Act was intended to provide income maintenance, offsetting all expenditure against the aggregate of income from all sources was appropriate as the result was closer to the real level of income; by contrast the quarantining of each activity and the income and losses resulting from it, as the Tribunal had understood the decision in Haldane-Stevenson to require, did not at all reflect the actual capacity of the person to maintain himself.

12. When the Full Court heard the appeal against the decision of the single judge, therefore, the question whether aggregate losses from all sources should be offset against aggregate income from all sources or whether the net income from each source should be ascertained separately and then those amounts aggregated was squarely before it. At pages 351 and 352 the Court said:-

"In defining 'income' the Act was concerned with what amount was

available to a pensioner to meet commitments and outgoings after the

pensioner had drawn together the net returns of various sources of

income. It was not concerned with what amount was left in the

pensioner's hands after that income had been received and had been

applied to various commitments and outgoings including the losses of

business activities that had produced no net income. There would

have been an expectation underlying the Act that any applicant for

income assistance in the form of a pension would have corrected or

relinquished any such activities which occasioned loss. The purpose

of the relevant part of the Act was very clear, namely to maintain a

basic level of income for those who were unable to receive

sufficient income to provide for themselves. It was not the purpose

of the Act to provide a further source of income for a person who

had applied his or her income to maintain a business conducted at a

loss or upon outgoings incurred in acquiring or maintaining assets .

. . . .

In our opinion, the decision in Haldane-Stevensen (sic) v

Director-General of Social Security does not depart from that view

in any way.

With respect to his Honour, we are of the view that the definition

of 'income' in the Act does not permit the 'negative yield' of one

source of income to be off set against the yield from other sources.

In truth, a 'negative yield' is no more than a demonstration of the

lack of source of income. The loss sustained by the failure of that

source to provide an excess of income over the expenditure incurred

in that activity has no relevance to any other source of income.

The operation of the Act has been so understood in a number of

Tribunal decisions before and after the decision of the Full Court

in Haldane-Stevensen (sic) v Director-General of Social Security

and in our view that approach has been the correct approach: see .

. . . . VXB v Secretary, Department of Social Security (AAT, 16

March 1989, No 4968, unreported)." (Emphasis added)

13. Following the decision of the Full Court of the Federal Court in Garvey there can, in our view, be no room for any argument that expenditure which is associated with one source of income can be set off against income from another source. Consequently, in the present case expenditure incurred in carrying on the dairy farming business can be offset only against income derived from carrying on that business. If such offsetting produces what their Honours referred to as a "negative yield" from that source, the result is that the net income from that source is to be taken to be nil and not a negative amount which can be offset against income from another source.

14. The Social Security Appeals Tribunal, however, was of the view that Garvey's case could be distinguished from the present case by reason that the respondent and her husband had made all reasonable efforts to sell their farm and thus relinquish activities which were occasioning loss. It referred particularly to the sentence in the passage from the Full Court's decision which we have set out above which reads:-

"There would have been an expectation underlying the Act that any

applicant for income assistance in the form of a pension would have

corrected or relinquished any such activities which occasioned

loss."

At the hearing of the application in these proceedings Mr Atkins also submitted that, because the respondent had obtained employment only because money had to be put into the farming business to enable it to continue to operate and the money which she earned from that employment was used for that purpose, her income from that source was itself associated with the partnership's farming business.

15. In our view neither of those submissions can succeed. Not only are the statements of the Full Court which we have underlined in the passage set out above quite clear but also one of the decisions of the Tribunal expressly approved by the Court in that passage was that in Re VXB and Secretary to the Department of Social Security (Decision No. 4968: 16 March 1989). The facts in that case were that the applicant's husband was operating a farming business. In each of the two financial years which were relevant for the purpose of ascertaining the applicant's deemed income he had incurred a loss from that business. The amount of the loss in the first of those years was not in evidence but that in the second year was in excess of $8,000. However, the husband had deposited money with a bank in a term deposit account and was receiving interest. The applicant had obtained unemployment benefit under the Social Security Act 1947; in doing so she had not disclosed the income which her husband was receiving by way of interest. The money deposited had been derived from the sale of land previously used for farming and had been applied by the husband to maintain his farming business. The applicant's Counsel submitted that the term deposit interest should not be viewed in isolation but taken into account along with the profit or loss derived from the farming operation. The Tribunal did not accept that argument. It held that the interest received from the term deposit was income from a source separate from the farming business so that the loss incurred in operating the farming business could not be offset against it. The income from farming should be treated as nil while the income from the interest was the full amount of interest paid.

16. Although the facts in Re VXB were not identical with those in the present case, the differences are not such that in this case a decision having a different result can be given which is at the same time consistent with the decision in Re VXB. Income from a source other than the farming business was in each case utilized to enable the farming business to continue in operation. Although there was apparently no evidence in Re VXB that the applicant's husband had tried to sell the farm, we are satisfied that that is not a significant difference. In view of the fact that the Full Court of the Federal Court expressly referred with approval to the decision in Re VXB, we are satisfied that the argument cannot be sustained that, because the income from the other source was obtained and used for the purpose of supporting the business, that income is to be regarded as being from a source associated with the income source where there was a net loss.

17. The leaflet issued by the applicant's Department does not assist the respondent. It includes a statement of what is meant by "income". As the respondent correctly pointed out in her letter, one of the items specified is "net profits from shops or businesses". However, another item separately specified is "earnings, sick or holiday pay . . .". The wages paid to the respondent by the agricultural college were earnings. There is nothing in the leaflet which could lead a reasonable person reading it to understand that earnings not received from the operation of a shop or business could be taken into account in determining the net profit - or loss - from the shop or business.

18. In the course of the hearing of the application in these proceedings the Tribunal referred the parties to the fact that the decisions in Haldane-Stevenson, Garvey and the cases referred to by the Full Court in Garvey had all been concerned with persons who had sought or obtained pensions or benefits under the 1947 Act whereas in the present case the decision under review was made under the Health Insurance Act. Neither Ms Merrick nor Mr Atkins took up that point. Having considered it ourselves, we are satisfied that, because the definition of "income" which is applicable is essentially the same as that which was applicable in those cases and because section 5B of the Health Insurance Act makes provision not dissimilar in purpose from the provisions of the 1947 Act, i.e. to assist with the maintenance of financially disadvantaged persons, the principles enunciated in those cases are applicable also in the present case.

19. We have considerable sympathy with the respondent and with others who face a similar predicament, particularly in these difficult times. However, the Tribunal, like the applicant, is bound to apply the legislation in accordance with the decisions made by the Federal Court in respect of it. We have come to the conclusion, therefore, that the decision originally made by the applicant's delegate was the correct decision and that it should not have been set aside by the Social Security Appeals Tribunal. We have made our decision accordingly.