220.127.116.11 Overview of the Application of the Special Circumstance Provisions
This topic contains information on the following:
- intent of compensation recovery provisions,
- improved advice on compensation payments,
- what are special circumstances,
- when to apply special circumstances,
- what is the practical effect of the special circumstances provisions, and
- when special circumstances should generally NOT be applied.
This topic explains how the special circumstance provisions are applied to CAPs (1.1.C.250). The general information in this section is supported by a number of AAT and Federal Court decisions. Some examples of these decisions are listed below:
Example 1: Legislative intent: The operation of an intended consequence of the legislation, such as the operation of the 50% rule, for lump sum settlements is by itself, not a special circumstance (Secretary, Department of Family and Community Services v Chamberlain (2002) FCA 67).
Example 2: Unreasonable expenditure: 'He then embarked upon a binge of gambling and drinking. The Tribunal is satisfied this pattern of expenditure was extravagant.' (Holzhauser and Secretary, Department of Family and Community Services (2004) AATA 251).
Example 3: Proof of costs: Much of the additional expenditure has not been satisfactorily explained (Lazarov and Secretary, Department of Family and Community Services (2004) AATA 743).
Note: Special circumstances should not be applied if the only reason is the delegate does not agree with the legislation. This is contrary to the intention of Parliament and is illegal.
Intent of compensation recovery provisions
The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.
Note: The special circumstances provisions should not be used to override this basic legislative intention.
Improved advice on compensation payments
The Centrelink FIS - Improved Advice on Compensation Payments measure is a Department of Education, Employment and Workplace Relations measure announced in the 2007-2008 Budget. The measure commenced on 8 September 2008.
This measure aims to ensure people who receive compensation are better informed as to the effect their compensation payment will have on their income support payments or future entitlements to income support.
The measure aims to discourage some compensation recipients seeking to receive social security payments for periods, which they have already received compensation money and to provide information to assist them to better manage their compensation monies.
What are special circumstances?
The discretionary nature of the special circumstances provisions makes it impossible to give a precise list of factors that should be taken into account when considering whether the provisions should be applied.
Explanation: It is not possible to set out a complete list of the relevant factors to be taken into account in determining whether special circumstances exist. Each case must be considered on its own merits (Secretary, Department of Social Security v Hulls (1991) FCA 58; 22ALD 570/13 Aar 414).
There is usually not one factor which makes a situation unusual, unforeseen or exceptional, but a combination of factors applying to each individual.
Explanation: The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it (Secretary, Department of Social Security v Hales (1998) FCA 219).
The legislation at SSAct section 1184K does not allow the lack of a causal link between the reason for the claim for a CAP and the reason a person receives compensation, alone, to constitute special circumstances.
Explanation: Lack of causal link is where the circumstances of the compensation payment and the reason behind the CAP of the compensation recipient and/or their partner are not related (Secretary, Department of Family & Community Services v Edwards (2000) FCA 1645).
When to apply special circumstances
The decision to apply the special circumstances provisions by the delegate should be based on an holistic view of an individual's circumstances (Hales Federal Court), i.e. the decision would not usually be based on just one factor but a combination of factors.
The special circumstances provisions should ONLY be applied in unusual, unforeseen or exceptional circumstances.
Explanation: In order for 'special circumstances' to exist, it must be possible to say that the circumstances in the case in question are 'markedly different from the usual run of cases'. The circumstances must have 'a particular quality of unusualness that permits them to be described as special' (Beadle v. Director-General of Social Security (1985) 7 ALD 670).
This means in situations where the compensation provisions could lead, or have led to extreme hardship or created an inequitable, unjust or unreasonable situation.
If special circumstances exist, a delegate can treat all or part of a compensation payment as:
- NOT having been made, OR
- NOT liable to be paid.
Act reference: SSAct section 1184K Secretary may disregard some payments
What is the practical effect of the special circumstances provisions
The special circumstances provisions apply to treat the whole or part of a compensation payment as not having been made or not liable to be made.
Generally, the provisions are applied to a lump sum compensation payment with the result that all, or part, of a preclusion period is reduced. This may also reduce, or negate altogether, any associated compensation debt. However the special circumstances provisions may also be applied to reduce all or part of a periodic payment of compensation.
The decision to apply the special circumstances provisions by the delegate may be made in terms of a reduction in the actual duration of the preclusion period. This would be relevant where there are a number of mitigating factors in the decision and it is not possible to determine any specific amount to be disregarded.
The special circumstances provisions can also be applied to treat a specific amount of the compensation payment as having not been made. This would be relevant where it is reasonable to disregard part of a compensation lump sum, but not all of it.
Explanation: In a settlement case, the amount specified is deducted from the original compensation lump sum and the 50% rule applied to the amended amount to give the new compensation part of the lump sum.
When special circumstances should generally NOT be applied
Each case must be examined on its own merits by the delegate but as a general rule, special circumstances would NOT usually be applied where:
- the person has sufficient liquid assets to support themselves, and their family if applicable, for the duration of the preclusion period, or
- the person acquired realisable assets AFTER the person was advised of the preclusion period, and there is no impediment to the realisation of those assets, or
- the person's periodic compensation payments are reduced due to the effects of taxation laws, and this is the only grounds for consideration, or
- where the only special circumstance is the legal deduction from both a social security payment and a DVA payment, or
- where the only special circumstance is the perceived unfairness of the 50% rule (Chamberlain Federal Court 2002), or
- if the sole factor is that the person or their partner's reason for receiving a CAP was different to the reason the compensation was paid (Edwards Federal Court 2000).
Act reference: SSAct section 1184K Secretary may disregard some payments
Policy reference: SS Guide 18.104.22.168 Factors to consider when determining special circumstance provisions, 22.214.171.124 Compensation part of lump sum - 50% rule, 126.96.36.199 Compensation Part of Lump Sum - Judgement by Contested Hearing