Akers and Secretary, Department of Employment (Social services second review)
[2016] AATA 990
•5 December 2016
Akers and Secretary, Department of Employment (Social services second review) [2016] AATA 990 (5 December 2016)
Division
GENERAL DIVISION
File Number(s)
2015/5532
Re
Bruce Akers
APPLICANT
And
Secretary, Department of Employment
RESPONDENT
DECISION
Tribunal Dr Gordon Hughes, Member
Date 5 December 2016 Place Melbourne The Tribunal affirms the decision under review.
[sgd]........................................................................
Dr Gordon Hughes, Member
SOCIAL SERVICES - pensions, benefits, allowances - payment of Newstart allowance - assets test - loan to family trust - where applicant's loan to family trust an asset which exceeded assets value limit - asset hardship provisions - loan to family trust an unrealisable asset - where available funds exceeded annual maximum rate of newstart allowance - whether proceeds of loan drawdowns available to applicant - where applicant had capacity to access funds and/or remove trustee in his role as appointer - no severe financial hardship - decision affirmed
Legislation
Social Security Act 1991 ss 14A, 593, 611, 1131, 1132.
Cases
Re Attard and Secretary, Department of Social Services [2015] AATA 990
Re Biddlecombe and Department of Family and Community Services [1999] AATA 528
Re Boyd and Secretary, Department of Social Security (1994) 36 ALD 331
Re Bysouth and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 59
Re Cherry and Secretary, Department of Families, Housing, Community Services and Anor [2010] AATA 454
Re Davidson and Secretary, Department of Education, Employment and Workplace Relations [2013] AATA 342
Re Hanrick and Secretary, Department of Family and Community Services (2003) 75 ALD 231
Re Morales and Secretary, Department of Family and Community Services [2004] AATA 669
Re Jacobsen and Secretary, Department of Social Security (1992) 25 ALD 253
Re Ling and Secretary, Department of Family and Community Services [1999] AATA 797
Re Williamson and Secretary, Department of Family and Community Services [2003] AATA 652Secondary Materials
Guide to Social Security Law (Department of Human Services), Instruction 1.1.S.120
REASONS FOR DECISION
Dr Gordon Hughes, Member
5 December 2016
Background
The Applicant was seeking a review of a decision made by the Administrative Appeals Tribunal (Social Services & Child Support Division) on 8 October 2015 to affirm a decision made by the Department of Human Services to cancel his Newstart allowance from 31 May 2014.
The application related specifically to whether he was entitled to receive arrears of a Newstart allowance for the period 31 May 2014 to 8 January 2015 inclusive.
It was not in dispute whether the Applicant met the basic eligibility criteria for Newstart allowance, subject to the payment calculation provisions. The principal issue before the Tribunal revolved around a question of whether on 31 May 2014 the Applicant qualified for payment of Newstart allowance under the asset hardship provisions in sections 1131 and 1132 of the Social Security Act 1991.
Legislation
Section 593 of the Act provides that a person qualifies for Newstart allowance if, amongst other requirements, they are unemployed and satisfy the activity test.
Section 611 of the Act provides that Newstart allowance is not payable to a person if the value of their assets is more than their assets value limit, as determined by reference to a table in subsection (2).
Section 1131 of the Act contains financial hardship rules which apply, inter alia, in the case of an individual with an unrealisable asset.
Section 1132 provides that the value of an unrealisable asset is to be disregarded when determining, for the purposes of section 1131, whether a social security benefit is payable to a person.
To the extent applicable to the present application, further elaboration of these legislative provisions is provided in the Tribunal's reasons for decision below.
Discussion
The Akers Family Trust was created by deed, with the Applicant as appointer, on 6 March 1979. On 12 January 2005, the Akers family Trust was registered as sole proprietor of an estate in fee simple of 50 Batey Court, Bulla (also referred to as Lot 3, Batey Court, Bulla).
On 14 September 2010, the Applicant appointed Ms Christy Akers, his daughter, as trustee, and on 20 September 2010 the property was transferred to Ms Akers as sole proprietor, acting in her capacity as trustee and holding the property beneficially for the Akers Family Trust.
It was not disputed that at or about the relevant time, the Applicant had loaned the Akers Family Trust $2,360,477.00. It was also not disputed that the Applicant had the legal authority to remove or appoint a trustee, although the Applicant emphasised to the Tribunal that it would not have been pragmatic for him to do so as the ANZ Bank would not continue to deal with him personally and there was no other potential trustee to replace his daughter.
As indicated above, section 611 of the Act provides that a Newstart allowance is not payable to a person if the value of their assets is more than their assets value limit. It was not disputed that on 31 May 2014, the assets value limit applicable to the applicant was $196,750.00.
The Respondent contended that as at 31 May 2014, the Applicant had assets of at least $2,360,477.00, based on a balance sheet relating to the Akers Family Trust. These assets comprised loans given by the Applicant to the Akers Family Trust. Section 1122 of the Act provides that the value of a person's assets includes so much of a loan amount that remains unpaid.
The Respondent submitted that the outstanding unrepaid amount of the Applicant's loan of $2,360,477.00 to the Akers Family Trust was an asset and that the Applicant accordingly did not qualify for payment of Newstart allowance under section 593 and 611 of the Act. The assets value limit of $196,750.00 was exceeded and the Applicant did not qualify for payment of Newstart allowance.
This conclusion was based on the following analysis as set out in the Respondent's Statement of Facts, Issues and Contentions:
The Tribunal in decisions such as Boyd and Secretary, Department of Social Security [1994] AATA 580; Re Ling and Secretary, Department of Family and Community Services [1999] AATA 797; Bysouth and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 59; Cherry and Secretary, Department of Families, Housing, Community Services and Anor [2010] AATA 454; Davidson and Secretary, Department of Education, Employment and Workplace Relations [2013] AATA 342 and others have made clear that:
· If financial records characterise a particular amount as a loan, it is a strong indication that it is a loan and Applicants should be bound by characterisations made by their accountant;
· It is the face value of loans made by income support recipients to borrowers which must be taken into account for the purposes of calculating their entitlements, and not some lesser or reduced rate reflecting actual recoverability or unrealiseability (sic);
· Loans made by Applicants are taken into account even if they are less than their book value, have not been repaid, are unrecoverable or otherwise valueless;
· There is no room in the context of section 1122 of the Act for an analysis of whether the amount was actually recoverable from a borrower.
The Tribunal does not disagree with the Respondent's contentions in this regard. It follows that the Applicant's entitlement centred on the asset hardship provisions of the Act.
As stated above, section 1131 of the Act contains financial hardship rules which apply, inter alia, in the case of an individual with an unrealisable asset. The Respondent conceded that the beneficiary loan of $2,360,477 to the Akers family Trust was an unrealisable asset and that all elements except one of section 1131 were satisfied by the Applicant's circumstances. The exception was paragraph (g) of section 1131(1).
Section 1131(1)(g) of the Act states in effect that a person will not qualify under the assets hardship test if, notwithstanding satisfaction of all other criteria, the decision maker cannot be satisfied "that the person would suffer severe financial hardship if this section did not apply to that person".
The term "severe financial hardship" is not defined in the Act for the purposes of section 1131. The Respondent nevertheless referred to the Guide to Social Security Law which, in Instruction 1.1.S.120, states that a single person is in "severe financial hardship" if the readily available funds are equal to, or less than, the annual maximum rate of Newstart allowance plus energy supplement. As at 31 May 2014, the annual maximum rate of Newstart allowance plus energy supplement was $14,606.80. In relation to "readily available funds", section 14A(1) of the Act refers to "liquid assets".
The term "liquid assets" was considered by the Tribunal Re Jacobsen and Secretary, Department of Social Security (1992) 25 ALD 253:
12. In our view, the MISA (a mortgage offset account) is simply a special savings account, where the balance is off-set daily against the balance of a home loan. A minimum balance of $2,000.00 must be maintained, and individuals withdrawals and deposits should not be less than $1,000.00, but the money is available at call. We are satisfied that the MISA account is an amount deposited with a bank…
13. The Tribunal takes the view, as previously stated, that the term "liquid assets" means no more than assets which are capable of ready conversion into cash. Such an assessment is not be influenced by the possible existence of liabilities…
Similarly, the Tribunal stated in Biddlecombe and Department of Family and Community Services [1999] AATA 528:
17. The Tribunal in the decision Re Jacobsen and Secretary, Department of Social Security (20 March 1992, AAT Decision No. 7846) took a literal interpretation of the term as described in s.14A(1) of the Act and said "that the term liquid assets means no more than assets which are capable of ready conversion into cash. Such an assessment is not to be influenced by the possible existence of liabilities…". "This Tribunal agrees with this interpretation and notes that the section does not include provision for the existence of liabilities in relation to the asset sum. Section 14A simply refers to amounts deposited with a bank or other financial institutions and the applicant's monies in the sum of $12,500 held with the Commonwealth bank at the time of her application must be necessarily be caught by this section. Her responsibilities in relation to the use and or payment of the monies is irrelevant so far as the liquid assets test is concerned.
The Respondent cited other decisions of the Tribunal to the effect that if funds are available for use at the discretion of the borrower, they represent "liquid assets": Williamson and Secretary, Department of Family and Community Services [2003] AATA 652; Morales and Secretary, Department of Family and Community Services [2004] AATA 669; Attard and Secretary, Department of Social Services [2015] AATA 990.
On the question of whether the Applicant had "readily available funds" in excess of $14,606.80 as at 31 May 2014, the issue became whether funds deposited in an ANZ offset account were to be included in the calculation.
In this context, the Respondent referred to the sum of $53,409.90 deposited in an ANZ One Account as at 30 May 2014. This amount had been included as a current asset in the 2012 balance sheet for the Akers Family Trust as "Christy Akers ANZ One".
The Respondent asserted that as an attributable stakeholder in the Akers Family Trust, the Applicant should be attributed with 100% of trust assets. In this regard, the Tribunal notes the following written submission from the Respondent as set out in its Statement of Facts Issues and Contentions:
"The Respondent submits that the Applicant should be attributed with at least the $53,409.90 deposited in the ANZ One Account (Acc No. 2001-26222) and that it meets the definition of readily available funds as "an amount deposited with a bank The applicant is an attributable stakeholder in the Akers Family Trust and should be attributed with 100% of trust assets as:
i.The Akers Family Trust is a designated private trust as per section 1207P of the Act;
ii.The Akers Family Trust is a controlled private trust of the Applicant as he passes the control test in subsection 1207V92) of the Act by virtue of his position as appointer and ability to remove or appoint trustees;
iii.As the Akers Family Trust is a controlled private trust of the Applicant, he is an attributable stakeholder and is to be attributed with 100% of trust assets in accordance with section 1207X of the Act. Given the Applicant's investment of $2,360,477 in the trust, his residence on trust property at 50 Batey Court Bulla, his position as appointer and consultation with the trustee, there is no reason to apply a lower percentage, having regard to the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000;
iv.Section 1208E of the Act provides that if a person is an attributable stakeholder, they are to be attributed with trust assets equal to their attribution percentage.
The Applicant contended that the funds in the account belonged to Ms Christy Akers in a personal capacity, rather than the Akers Family Trust. An email from the Trust's accountants, G S Sutherland & Associates, dated 23 December 2015 had explained that the earlier categorisation was an error and confirmed the Applicant's contention that the ANZ One account was the personal account of Christy Akers.
The Tribunal has difficulty accepting the Applicant's assertions in this regard. The contention ignores the plain facts of the trust structure and the role of Christy Akers as trustee of the Akers Family Trust.
The Tribunal agrees with the Respondent that no great weight can be given to the email from G S Sutherland & Associates in the absence of further evidence as to the context in which, or the basis upon which, it was no changing its categorisation of the account.
The Respondent further contended that even if the account were that of Ms Christy Akers in a personal capacity, the $53,409.09 deposited in that account came directly from loans taken out with the ANZ by the Akers Family Trust.
A total of $149,596.39 had been deposited in the ANZ One account directly from "proceeds of loan drawdowns" between 11 October 2013 and 22 November 2013 from loan accounts taken out by the Akers family Trust with the ANZ Bank. The loan accounts had an offset/draw down facility and, in accordance with authorities such as Jacobsen, Biddlecombe, Williamson, Morales and Attard cited above, mortgage offset accounts are simply special savings accounts where money is available at call and should thus be considered liquid assets in the form of borrowed monies. The Applicant had the capacity to access and use the funds in the account at his discretion in his role as appointer for the Akers Family Trust.
As appointer of the Akers Family Trust, the Applicant had the power to remove Mr Christy Akers as trustee if he was unsatisfied with how the trust funds were being managed, such that it left him without means of support. Given that he had loaned $2,360,477.00 to the Akers Family Trust (albeit unrealisable) it could reasonably be expected, according to the Respondent, that at least some of the $149,596.39 withdrawn from trust loan accounts would be given to him for support. The Applicant, according to the Respondent, had thus made a conscious decision to refrain from taking any action that would enable him to use funds which were otherwise available for his own maintenance, inconsistent with the policy and intent of the Act.
The Applicant again contended that the Respondent's perspective was flawed because the ANZ One account was his daughter's personal account. He regarded the funds as rightfully belonging to his daughter who "had to be repaid anyway" after personally making interest payments and paying for farm upkeep. Any funds transferred to Christy Akers simply involved her personal recoupment of interest she had paid out on loans, and payments she had made for upkeep of the property. The Applicant emphasised that he was not a signatory to the account and had not seen any bank statements relevant to the account.
The Respondent's submitted, and the Tribunal accepts, that the Applicant in the circumstances had at least $53,409.90 in readily available funds on 31 May 2014, thus exceeding the $14,606.80 limit to be considered in "severe financial hardship". He therefore did not qualify for payment of Newstart allowance under hardship provisions in sections 1131 and 1132 of the Act as at 31 May 2014, and the decision to cancel his payment was correct.
The Applicant acknowledged, and it was evident to the Tribunal, that there was much he did not understand about the operation of a family trust. He was relying on professional advice in establishing the trust, which was no doubt the correct thing to do, but it left him confused when it came to differentiating between trust assets and personal assets, trust accounts and personal accounts, and the role of his daughter in her capacity as trustee and in a personal capacity. He acknowledged under cross-examination that "I don't know how it works" – this in itself is quite common and quite understandable, and probably explains his confusion and frustration at what he no doubt views as legal technicality and overall injustice.
The Respondent alluded, quite pertinently, to the observation contained in Re Hanrick and Secretary, Department of Family and Community Services (2003) 75 ALD 231:
[I]f one is to make use of complicated structures in the course of managing one's affairs in order to take advantage of the legal consequences of those structures, one cannot ignore the structure and its consequences when it suits one to do so.
Decision
For the reasons set out above, the Tribunal affirms the decision under review.
1. I certify that the preceding 35 (thirty-five) paragraphs are a true copy of the reasons for the decision herein of:
Dr Gordon Hughes, Member
[sgd]........................................................................
Associate
Dated 5 December 2016
Date of hearing 20 October 2016 Solicitors for the Applicant By Phone Advocate for the Respondent Mr James Henderson Solicitors for the Respondent Department of Human Services,
Freedom of Information & Litigation Branch
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