Case: Read v Commonwealth [1988] HCA 26 ; (1988) 167 CLR 57
Outcome: cited
The AAT affirmed the decision of the SSAT. Deputy President Hack in the AAT identified the key issue as whether a contractual obligation on the part of an employee to make good till shortfalls should be taken into account in determining the employee's income from that employment. It is useful to set out in full relevant observations from the AAT decision: "[19] As it seems to me, the critical issue for determination is whether Ms Richards ordinary income was the nominal amount calculated by reference to a number of hours at an hourly rate or the actual rate that is the nominal amount less any shortfall that Ms Richards had to make good. In my view the employment contract between Ms Richards and the Hotel was one where Ms Richards' wages were determined by reference to three factors - the number of hours worked in a week, an hourly rate and any till shortages. It is unnecessary for present purposes to determine whether it was lawful for the employer to oblige Ms Richards to make good the shortfall, rather the question is whether in circumstances where she did make good the shortfall her gross ordinary income was the nominal amount or the actual amount. [20] In Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 at page 42 French J said, "The definitions of 'income' and 'income amount' in the Social Security Act indicate that like their statutory predecessors they are of wide application. This meets the public policy requirement that 'public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide' - Read v Commonwealth [1988] HCA 26 ; (1988) 167 CLR 57 at 69 (Brennan J)." His Honour went on to make the point that the concept of income in the Act is entirely different from that embodied in the comparable provisions of the Income Tax Assessment Act 1936 . ... [21] At pages 43-44 his Honour said, "The definition of 'income' extends to income amounts 'received' by a person. There is no requirement in the Act that such amounts are received in exchange for anything. They may therefore extend to gifts. This is reinforced by the extension of the definition of 'income' to 'a periodical payment by way of gift or allowance.' There is no requirement in the definition for the payment received to constitute a net gain. Absent such a requirement a payment of money received by a person for that person's own use or benefit is a payment of an income amount." [22] In my view the key to the present issue is to ask whether the amounts that went to making up the shortfall in the till were amounts that were received to Ms Richards' own use or benefit. That is so I consider because the definition of gross ordinary income in s 1072 of the Act incorporates the s 8 definition of income relevantly an amount earned, derived or received by a person for the person's own use or benefit. Thus s 1072 looks at income earned, derived or received for the use or benefit of the person in issue. It is in my view not to the point that s 1072 goes on to speak of 'without any reduction.' To treat the amounts of shortfall in this way simply recognises the reality that those sums were not received by Ms Richards for her own use or benefit. There was at best a nominal receipt but given that Ms Richards used those sums to satisfy her contractual obligation to make good shortfalls it could not be said that in any real sense she earned, derived or received those sums or that she had the use or benefit of them. [23] The Secretary was unable to identify any benefit to Ms Richards from these amounts beyond the benefit of retaining her employment. I do not think, with respect, that that could be seen as a benefit of the type contemplated by the definition of income in s 8. [24] It follows that in my view the decision of the Social Security Appeals Tribunal was correct and ought to be affirmed." 32 Third, the concept of "income" under the Act is broad. As Brennan J observed in Read v The Commonwealth [1988] HCA 26 ; (1988) 167 CLR 57 at 69 in relation to the definition of "income" under the Social Security Act 1947 (Cth) (which in the context of the proceedings before me is not materially different to the definition of income in s 8 of the Act): "The definition is exhaustive: the term 'income' means what it is defined to mean; it does not mean what 'income' would be understood to mean if the definition were not in the Act. The definition is couched in the widest terms, presumably to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide." (I note that Brennan J was in dissent in his judgment in Read [1988] HCA 26 ; 167 CLR 57. However, like Foster J in Secretary to the Department of Social Security v Cuneen [1997] 1033 FCA, I do not read the other judgments in Read [1988] HCA 26 ; 167 CLR 57 as differing from Brennan J's construction of the meaning of "income"). 34 In relation to the concept of income being "earned, derived or received", it is clear that: &#8226; the use of the verbs "earned", "derived" and "received" in juxtaposition in the definition of "income" in the Act suggests that each was intended to have a different meaning: Sheppard J in Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307 at 311 &#8226; income cannot be "earned, derived or received" unless it is also realised: Read 167 CLR per Mason CJ, Deane and Gaudron JJ at 67 &#8226; income can be realised - and hence received - even if temporarily it is not accessible: Rose 21 FCR at 245 &#8226; income can be "derived" within the meaning of s 8(1) even if it is not at that time received ( Inguanti 80 ALR at 311) &#8226; "earned" relates to personal earnings and profits ( Inguanti 80 ALR at 310). 44 Fifth, in interpreting the phrase "own use or benefit" it is clear that the obligation of the respondent in this case can be contrasted, for example, with payments made by a person as a result of arrangements otherwise within his or her control, such as outgoings on residential properties of the person which constitute an expense in generating rental income on those properties. As pointed out by the Full Court in Garvey 22 FCR at 136 in relation to such circumstances, "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. (See Read v Commonwealth [1988] HCA 26 ; (1988) 167 CLR 57 per Brennan J (at p 69)."