Centrelink are still using income averaging

Income averaging was found to be illegal by the Federal Court in the Robodebt Test Case of Amato vs Commonwealth (2019), yet Centrelink still use this methodology when calculating income for certain windfalls.

These windfalls include lottery wins, inheritances, gifts, bequests, insurance payments, bursaries, scholarships and anything else Centrelink decide is income, if they are paid in two or more payments.

Normally, if paid as one lump sum, they are considered as exempt amounts, and not assessed as income. This is set out in s 8(11) of the Social Security Act (1991).

However, if they are paid in two or more payments, they are considered as assessable income under s 8(11A) of the Act, even if the payments are irregular in time and amount.

This is where Centrelink use income averaging.

In Module A of s 1064 of the Act, the method for working out assessable income and reduction of benefits is set out. This section applies to aged pensions, disability pensions and carers allowance, but there are similar sections in other parts of the Act for other benefits.

According to Centrelink rules, if a windfall payment is made in January, and another payment made in July, then the two amounts are added together and averaged out to calculate a fortnightly payment that is applied to every fortnight in that six month period.

Consider the case where an insurance company pays an advance on an insurance payment for funeral costs, then pays the balance at a later date. Or where a deceased has bequeathed an inheritance to be paid in instalments instead of as a lump sum. Centrelink apply the same rules.

This is clearly income averaging, which was found to be illegal in the Amato case. Further, the Amato case said that income amounts can only be applied in the fortnight in which they are actually paid.

This was the case I put to the Administrative Appeals Tribunal (AAT) yesterday, and surprisingly, they were unaware of the Amato case.

There is clearly a conflict between the Federal Court’s ruling and the legislation that exists. Not being a legally trained person, I am unsure how this will be resolved.

What is clear is that the minister needs to get advice from the Solicitor-General about whether these sections of the Act are illegal or not. To date, the minister has refused requests to refer the matter to the Solicitor-General, preferring instead to let it play out through two AAT hearings and be returned to the Federal Court for decision.

This legislation potentially affects tens of thousands of people who receive lottery wins, inheritances, bequests and insurance payments paid in two or more amounts, and that is why I took the matter up.

True, I will benefit from it, but so too will tens of thousands of other people. The AAT should make their decision within 14 days, and I will keep you informed of what happens.

Craig Hill is a Brisbane-based Social Justice Campaigner, Writer, Teacher and Business Consultant. He has campaigned for social justice in Australia, promoted human rights in China and worked with the homeless in Honolulu. He holds a Graduate Certificate in Business, a Graduate Certificate in Education and a degree in Management. He is also the General Manager of The Australian Business and Leadership School.

If you liked this article, please click “Subscribe To My Blog” in the sidebar to receive an email each time a new article is published.

Visit the Australian Business and Leadership School

www.abls.com.au