SOCIAL SECURITY - pensions, benefits and allowances - Newstart Allowance - activity test breach - failure to notify extent of knowledge - definition of income considered - distinction between 'earned, derived and received' - non-reliance on Departmental advice - reasonable excuse considered

Social Security Act 1991 ss.8, 630AA, 644AA, 658

Inguanti v Secretary, Department of Social Security 80 ALR 307

1. This is an application for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 20 March 1998 which affirmed a decision of an authorised review officer of the respondent (the Department) of 5 February 1998 to impose a Newstart activity test breach amounting to an 18% rate reduction of Newstart Allowance for a period of 26 weeks.

2. The evidence before the Tribunal comprised the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (the T documents). The applicant was represented by Mr Tremaine. Ms Odgers, a Departmental advocate, represented the Department.

3. The applicant is a 37-year-old man. He has been in receipt of Newstart Allowance (NSA) since early 1996. On 4 September 1997 he completed a form for continuation of payment of NSA, and in answer to question 5 "Did you do any part-time or casual work in the period 22 August 1997 and 4 September 1997?" he answered "No". The balance of the question reads "If yes, what is the amount earned before tax or other deductions? (You must tell us what you will get even if you have not been paid yet)". In answer to the remainder of the question "Do you expect this work to continue more than 12 weeks", he answered "No" (T7/22).

4. A data-matching program selection with the Australian Tax Office dated 6 October 1997 disclosed that the applicant had worked on a casual basis in August 1997 for Direct Input P/L in the television services industry. On 13 November 1997 the applicant had a telephone conversation with an officer of Centrelink's Salisbury office and advised that he would be attending and providing his payslip. On 14 November 1997 the applicant attended, and the payslip at T9/25 disclosed that on 3 November 1997 the Company had forwarded a cheque for $296.38 net, after deductions of tax and agent's commission of 10%. The payment was for "CFS and CFS stills" on 22 August 1997. The file note at T9/24 reads:

"Clt attended SLB 14/11/97, payslip provided, & I advised clt to declare this income at the end of his next fortnightly period to offset this overpayment he has incurred as a result of not declaring this income".

5. On 1 December 1997 a Departmental file note discloses (T10/26) that the applicant rang the Salisbury branch of Centrelink and advised that he had been to the bank and his payment was not there. He asked why he had not received a letter regarding a debt, and was advised that as of that date there was no debt, but that the Department was looking at the details.

6. On 23 December 1997, a delegate decided that the applicant had failed to declare his casual earnings for the period 22 August 1997 to 4 September 1997, and in accordance with s.658 of the Social Security Act 1991 (the Act), an overpayment of $201 had arisen. Payment of NSA was ceased. Subsequently, on 9 January 1998, the delegate decided that the applicant had failed to provide information in relation to his income, in accordance with s.630AA of the Act. An activity test breach had occurred. The relevant legislation provides:

(a) refuses or fails, without reasonable excuse, to provide information in relation to a from remunerative work (the failure); or

(b) knowingly or recklessly provides false or misleading information in relation to the person's income from remunerative work (the provision of information);

when required to do so under a provision , a newstart allowance is not payable to the person.

630AA.(2) If a newstart allowance becomes payable to the person after the time it ceases to be payablesubsection (1), then:

(a) if the failure or the provision of information is the person's first or activity test breach rate reduction period applies to the person; or

(b) if the failure or the provision of information is the person's third or subsequent activity test breach in the 2 years immediately before the day after the failure or the provision of information-an activity test non-payment period applies to the person.

644AA. If an activity test breach rate reduction period applies to a person under this Part, the period applicable to the person is 26 weeks."

7. The applicant applied for review of the decision, and on 5 February 1998 the decision was affirmed by the authorised review officer, who in the course of his letter to the applicant stated, in part (T26/45-46):

"In making my decision, I had regard to the legislation contained in section 630AA of the Act. This legislation is further clarified in Instructions 12.3120 to 12.3136 of the Guide to the Administration of the Act. I have enclosed copies of the relevant legislation and instructions for your information.

* you were previously in receipt of NSA from 1.1.96 to 22.1.98;

* the fortnightly form for the period covering this employment was lodged on 4.9.97 but you failed to declare the income on that form;

* the employment was discovered via a check with the Australian Taxation Office (ATO) relating to Employment Declaration Forms;

* a debt was raised for the amount incorrectly paid;

* your failure to declare the employment is considered to have been 'reckless' and in this situation your NSA was cancelled and a breach/rate reduction period imposed on your reapplication;

* I am satisfied that this provision was applicable.

The evidence on which I based these findings was:

* records held by Centrelink relating to your NSA;

* the relevant fortnightly form for the period of the employment;

* documentation of your contacts with the Salisbury Office concerning this matter;

As you are aware the rate of NSA payable to a person is affected by several factors including the amount of the person's other income. To enable entitlement to be reassessed as circumstances change section 657 of the Act requires a person in receipt of NSA to advise within 14 days of undertaking paid employment.

When you undertook employment with Direct Input Pty Ltd on 22.8.97 you failed to declare the income on the form you lodged on 4.9.97. In this circumstance section 630AA of the Act imposes an Activity Test breach and a rate reduction period if it is considered that you knowingly or recklessly gave incorrect information.

I accept your assertion that you did not knowingly give incorrect information but I consider that, in not advising of the employment at all, you failed to exercise due care in completing the fortnightly form and that this equates to recklessly giving the wrong information.

I am therefore satisfied that the provisions of section 630AA should be applied and therefore I have affirmed the original decision. This means that your request for a review of that decision has been unsuccessful. I have told the Salisbury Office of my decision."

8. The applicant applied for review of the decision, and on 19 March 1998 the SSAT affirmed the decision; and the applicant has applied to this Tribunal for review of that decision.

9. The applicant submits that at the date the form was lodged (4 September 1997) he had not "earned, accrued or received" an income amount. Section 8 of the Act defines "income" inter alia, as "an income amount earned, derived or received by the person for the person's own use or benefit". Income can only mean an amount that has been actually paid to the person. Income had not been received by 4 September 1997. The delegate and the authorised review officer were in error in finding that the applicant did not declare his income - there was no income to declare. He argues alternatively, if there was "income" then in accordance with s.630AA(1)(a) of the Act, the applicant had a reasonable excuse for failure to provide the information, because the information was not known to him, and relies on the decision of Senior Member Kiosoglous in Sas and SDSS (AAT 3270, 6 March 1987).

10. The applicant maintains also that the Departmental officer's advice of 14 November 1997, that disclosure in the next return would offset the overpayment, was misleading advice; and it is unconscionable, and an abuse of process for the Department to make the Activity Test breach in January 1998, as a result of this overpayment.

11. The Department submits that the applicant was required, pursuant to s.658 of the Act, to provide the information requested in the form completed by him on 4 September 1997. He failed to declare his employment in answer to question 5, and he advanced no reasonable excuse for such a failure. Section 630AA(1)(a) of the Act applied to that failure, and NSA was not payable to him therefore and a breach rate reduction period was properly imposed. Alternatively, the applicant knowingly or recklessly provided misleading information, in that by ticking "No" to question 5, there was nothing to draw the Department's attention to the possibility of income being earned in the period; and s.630AA(1)(b) applies therefore.

12. The Department maintains that the applicant knew or ought to have known that it was necessary for him to disclose that he had engaged in casual employment. He had failed to advise the Department of casual work in the period 13 January 1996 to 25 January 1996, an overpayment had arisen. This recent experience should have alerted him to the necessity to declare income. He recklessly provided false information. The advice provided by the Departmental officer on 14 November 1997, related to the matter of overpayment only, the applicant did not follow the advice, and did not declare the income on the next fortnight's form, in answer to either question 5, or, for example, question 9, which asks whether during the relevant period "you or your partner got any other money". There was ample opportunity for the applicant to declare the income on the appropriate form.

13. I have examined the whole of the evidence carefully and in detail, and I have taken into account the parties' submissions, which I have set out briefly, but all aspects of which I have taken into account in my deliberations.

14. In my view, the applicant, by answering question 5 as he did, failed to provide information relevant to the payment of NSA, as required by s.658 of the Act. This failure to provide the information on 4 September 1997, that he had worked (albeit for 2 hours) on 22 August 1997, led to him being paid an amount of NSA which did not take into account the money earned on that day; and thus an overpayment of $201 was raised subsequently, on 7 January 1998. The applicant did not apply for review of that decision, and thus has impliedly accepted that the overpayment was raised, appropriately in accordance with the Act. The overpayment has been recovered in full. What he challenges is the second decision which relates to the imposition of an activity test breach rate reduction under s.630AA(1) of the Act, as a result of the failure to provide information in relation to his income, which arose from the same set of circumstances which gave rise to the overpayment raised on 9 January 1998.

15. I do not accept the applicant's submissions that he had a reasonable excuse for failing to provide information in relation to his income because, in effect, he had not received the income, or alternatively, that the amount was not known to him. "Income" is defined in the Act to include "an income amount earned, derived or received by the person for the person's own use and benefit". I consider that the applicant had "earned" the income on 22 August 1997, although the income was payable at a later date. In this matter the income was paid finally when the producer had paid the after tax sum to the applicant's agent, and the agent had taken his commission. The matter of Sas relied upon by the applicant, is distinguishable on its facts. I consider that income can be earned or derived but not received until a later time. As Shepherd J remarked in Inguanti v Secretary, Department of Social Security 80 ALR 307 at 311:

The use of the verbs "earned", "derived" and "received" in juxtaposition in the definition of "income" in the Act strongly suggests that each was intended to have a different meaning. Notwithstanding that the word "derived" can mean "received", I reject the submission made on behalf of the applicant that "derived" is used in that sense here. Sometimes moneys will be earned, derived and received simultaneously. At others they will be earned or derived but not received until a later time. ..."

16. I am satisfied on the evidence that the applicant failed, without reasonable excuse, to provide information in relation to his income, and in accordance with s.630AA(1) of the Act, NSA was not payable to him. In addition, I consider it was appropriate that the activity breach reduction period be imposed. The documentary evidence discloses that the applicant was aware prior to 5 November 1997 of the possibility of the imposition of a breach (T18/35). He had previous experience of the necessity to provide information regarding casual earnings; as his failure to do so in the period 13 January 1996 to 25 January 1996 had led to an overpayment being raised. The information provided by the Departmental officer on 14 November 1997 (T9/24) which the applicant maintains was misleading, related, clearly, to the matter of the overpayment; but equally clearly, the applicant did not follow the advice, he did not declare the income in his next statement, and the income was not offset against the overpayment. I reject the applicant's submissions on this topic.

17. I am satisfied, on the evidence, and find as a fact that the applicant failed, without reasonable excuse, to provide information in relation to his income from remunerative work for the period 22 August 1997 to 4 September 1997, and that in accordance with s.630AA(1) of the Act, Newstart Allowance was not payable; and in accordance with s.630AA(2) an activity breach reduction period was applicable, and in accordance with s.644AA of the Act, the reduction period was 26 weeks.

18. For these reasons the Tribunal affirms the decision under review.

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member WFJ Purcell

Signed: .....................................................................................