Badcock and Secretary, Department of Social Services (Social services second review)

[2020] AATA 277

Badcock and Secretary, Department of Social Services (Social services second review) [2020] AATA 277 (21 February 2020)

Division:GENERAL DIVISION

File Number(s):      2019/3142

Re:Maxwell Badcock 

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Ms S Taglieri SC, Member

Date:21 February 2020

Place:Hobart

The Tribunal affirms the decision under review.

...........................[sgd]......................................

Ms S Taglieri SC, Member

SOCIAL SECURITY – age pension – cancellation – assets test – assets exceeding the cut off limit – transfer of assets – whether the Applicant should be assessed under the severe financial hardship provisions – whether severe financial hardship discretion applies – decision affirmed.

Legislation

Social Security Act 1991 (Cth)

Social Security (Administration) Act 1999 (Cth)

Cases

Cummins and Secretary, Department of Families, Housing, Community Services and      Indigenous Affairs [2011] AATA 513

Drake and the Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

Secondary Materials

Social Security Guide

REASONS FOR DECISION

Ms S Taglieri SC, Member

21 February 2020

BACKGROUND

1. The Applicant had been in receipt of an age pension since 2016, until a decision was taken by the Respondent to cancel payment of age pension in May 2018. The cancelation decision was subject to review by an Authorised Review Officer and the Social Security and Child Support Division of this Tribunal. In each review, the decision to cancel the age pension was affirmed.

2. On 3 June 2019, the Applicant applied for a tier 2 review and the Tribunal ultimately conducted a hearing on 16 December 2019, at which the Applicant was self-represented and Ms Dinkha appeared for the Respondent.

3. The Tribunal received all the T-documents into evidence and the Applicant gave oral evidence. His essential contention was that he ought to continue in receipt of age pension and that cancellation was not fair given his personal and financial circumstances.

   CONTENTIONS OF THE PARTIES

4. The Applicant accepted that he was subject to the means test, but disputed the value attributed to the farm property he owned and that which had been disposed of by transfer to his son. He also maintained that if the Respondent was correct in concluding that his assets exceeded the cut off limit,[1] he satisfied the requirements of severe financial hardship and so was entitled to continued payment.

   [1] $556,500; Social Security Act 1991s 1064-G3.

5. The Respondent maintained its previous submissions, namely that the applicable law was contained within the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act). It also submitted that the policy contained within the Social Security Guide (the Guide) should be applied. The Respondent contended that the Applicant’s pension had been correctly cancelled because by applying the Assets test in Module G, s 1064 of the Act, the value of his assets exceeded the cut off limit of $556,500. The Respondent further argued that the discretion to continue paying the age pension was not available and should not be exercised.[2]

   [2] Social Security Act 1991, s 1129 and s 1130.

   EVIDENCE BEFORE THE TRIBUNAL

6. The Applicant started living on a property in Tasmania (the Applicant’s place of residence) on 1 January 2008.[3]

   [3] T26, p 245, T documents.

7. On 27 July 2015, the Applicant had contacted the Department and advised that he had transferred one-third of his interest in a farming property (the farm property) as a gift to his son on 6 June 2014.[4]

   [4] T27, p 263, T documents.

8. On 26 August 2015, the Applicant advised the Respondent that he had transferred his remaining two-thirds interest in the farm property as a gift to his son on 14 July 2015.[5]

   [5] T27, p 265, T documents.

9. The Applicant was granted age pension under the financial hardship rules, commencing on 26 August 2016.[6]

   [6] T9, p 113; T10, p 115, T documents.

10. On 16 April 2018, the Applicant returned an Income and Assets Update form which disclosed that he was living in his own home and had other assets which included:[7]

    ·$1,353.67 in a Commonwealth Bank account;

    ·$5,065.03 in a Westpac bank account;

    ·$5,063.45 in an ANZ bank account;

    ·$625.20 in an ANZ bank account;

    ·1436 ordinary shares in AMP Limited; and

    ·$50,000.00 surrender value of a life assurance policy issued by Asteron Life.

    [7] T13, pp 138 – 150, T documents.

11. Based on the disclosed information at [7], [8] and [10], the Respondent determined that the Applicant should no longer be assessed under financial hardship provisions and, because the value of his assets exceeded the maximum allowable threshold, his age pension was cancelled.

12. For the purpose of the decision taken at [11], the Respondent relied upon valuation reports from MVS National as to the value of the farm property and the Applicant’s place of residence, which stated the values to be $1,100,000 and $550,000 respectively.[8]

    [8] Annexures to Respondent’s Statement of Facts Issues and Contentions,12 August 2019.

13. As the property at the Applicant’s place of residence was comprised of land and house and curtilage in which the Applicant resided, a deduction for home ownership was made of $360,000. This meant that only $190,000 was included as an asset value for this property.

14. The Applicant stated these sums included for each property were excessive, but did not furnish any evidence to the Tribunal to rebut the opinions. Accordingly, I should accept the valuation evidence provided by the Respondent as it is established in principle that valuation evidence from an independent source is to be used for assets test purposes.[9]

    [9] For example, Cummins and Secretary, Department of Families, Housing, Community Services and     Indigenous Affairs [2011] AATA 513.

15. At the time of cancellation of the Applicant’s age pension, the farm property had been wholly transferred to his son. The applicant had worked the farm property with minimal remuneration until the date of transfer, as is typical of inter-generational farming families.

16. During the hearing, the Tribunal queried the accuracy of the Respondent’s calculation of the value of the disposed of asset and directed the Respondent to provide further explanation. Pursuant to the direction, the Respondent filed additional submissions and a copy of a declaration from the Applicant’s son about hours of work provided on the farm and wages paid.[10] The declaration, dated 15 July 2015, disclosed the hours worked between 2001 and July 2015. Only the hours worked until 2014 had been initially included for the purpose of calculating the value of foregone wages and, in turn, the value of the disposed of assets.

    [10] Respondent’s additional submissions, 20 December 2019.

17. The Respondent conceded that the value of foregone wages relied upon initially was inaccurate and submitted that based on the record of hours worked by the Applicant’s son, the correct total for wages foregone was $588,491. It submitted that this sum should be taken into account when assessing the consideration received for the relevant disposals.

18. In its additional submissions, the Respondent’s position was that the initial transfer of 1/3 of the farm property in 2014 was made for proper consideration, meaning that the provisions relating to disposal of assets do not apply.[11]

    [11] Ibid, [10]. 

19. In regard to the transfer of two thirds of the farm property in 2015, the Respondent altered its submissions, contending that the consideration received was the difference between the value of foregone wages and the value of the interest in the property transferred. That is, two thirds of $1,100,000 ($733,334) less foregone wages ($588,491), being $248,825.[12]

    [12] Ibid, [21].

20. In his evidence, the Applicant emphasised the very difficult personal and financial times he was experiencing due to drought and other hardships inflicting the farming community. He also gave evidence about his wife’s death and delays in finalising administration of her estate. He stated that these delays were causing difficulty for him, as he felt a moral obligation to his other children who had not yet received an estate inheritance.

21. The Applicant also gave evidence about his ailing mental and physical health and the impact of this on him as a farmer who had worked endlessly for decades. He felt his experiences meant that others would be disinclined to persist with farming, and that a reason for this was how farmers were treated for age pension purposes. He suggested this would have a negative impact on the community.

22. The Applicant did not dispute the value of his assets set out at [10] above, but explained that his bank account savings were modest and the life insurance policy had since been cashed in to provide funds for feed required for the farming stock. Upon questioning by the Tribunal about whether all these funds would be required for feed, the Applicant stated that bales of hay were $45 to $50 per bale plus cartage, but did not say all the funds would be expended on feed. Rather, he made remarks about paying $20,000 to his children for recognition of their share of deceased estate matters.

    CONSIDERATION AND FINDINGS  

23. Given the Respondent’s position that there was no disposal of assets in 2014 when one third of the farm property was transferred, the Tribunal accepts that it should focus on the operation of Division 2, part 3.12 of the Act in connection with the 2015 transfer to determine if the decision to cancel age pension was the correct one.

24. The evidence before the Tribunal is that two thirds of the farm property was transferred to the Applicant’s son in 2015 and this requires consideration of the operation of Division 2, part 3.12 of the Act. These provisions in effect deem a person to have assets and assigns values to those, even though the asset has been disposed of.

25. In the Applicant’s case, he is treated as having an asset valued at the deemed value of the two thirds of the farm property which he transferred to his son. This deemed value is by virtue of s 1124 of the Act, the difference between the value of the disposed of asset and the consideration received or taken to be received for it.

26. In this case pursuant to s 1124, the value of the transferred interest in the farm property is $733,334[13] and the consideration taken to be received is $248,825,[14] meaning the difference in value is $484,509. Pursuant to s 1126AA of the Act, the Applicant is consequently treated to have assets including the value by which this difference exceeds $10,000. This means that a sum of $474,509 must be included for the purpose of the means test which applies.

    [13] Note: This is two thirds of MVS National’s valuation of $1,100,000.

    [14] As set out in [15] of these reasons.

27. I am satisfied based on the evidence received that the Applicant had, at the relevant time of cancellation of age pension, assets with the following values:

Applicant’s place of residence	$190,000.00
Deemed value asset – disposed of farm	$474,509.00
Commonwealth Bank Account	$1,353.67
Westpac Bank Account	$5,065.03
ANZ bank account	$5,063.45
ANZ bank account	$625.20
AMP Limited shares	Unknown
Life assurance policy	$50,000.00

1. The Applicant’s total assets as listed above exceed the cut off limit of $556,500 provided for in Module G of s 1064 of the Act. This means that he was not entitled to an age pension, unless he has satisfied the Tribunal that he meets the requirements for an exercise of the discretion relating to severe financial hardship.

2. The Applicant’s personal circumstances are certainly difficult and his life in more recent years can be described as one involving personal hardship, having lost his wife and having ailing physical and mental health, which the Tribunal accepts as challenging and trying. However, personal toll and hardship is not the criteria at law which allows exercise of the discretion to pay a pension.

3. S 1129 of the Act strictly prescribes the situations when the discretion to pay pension may be exercised even though a person may not qualify under the asset test in Module G.

4. Relevant to the Applicant’s circumstances, by virtue of s 1129, the discretion is only available if:

   (a)his total assets exceed the cut-off limit; and

   (b)one or more of the assets are unrealisable; and

   (c)the Tribunal is satisfied the Applicant would suffer severe financial hardship if the discretion to pay the pension is not exercised.

5. Of the three requirements at [31], the Respondent contends that as the life insurance policy is a realisable asset, the Applicant does not meet all three requirements that would permit exercise of discretion to pay the age pension and regardless, the Applicant has failed to demonstrate severe financial hardship.

6. The evidence of the Applicant establishes that he will soon receive about $45,000 from the surrendered life policy. Only a portion of this sum will be used on feed for animals and the rest is intended to be paid to the Applicant’s children. This in itself evidences realisation of that asset.[15]

   [15] Social Security Act 1991 (Cth) ss 11(12) and 11(13).

7. I find that the life policy was a realisable asset at the time the decision was taken to cancel the age pension.

8. In view of the finding at [32] above, the Applicant was not eligible for payment of age pension under the severe financial hardship discretion, as all requirements expressed at [31] were not satisfied.[16] For this reason, the decision to cancel his pension was correct.

   [16] Note: this is because ss 1129(1)(c) of the Act was not satisfied.

9. The conclusion that the life policy was a realisable asset means it is unnecessary to consider the issue of whether the Applicant’s financial circumstances fall within the meaning of severe financial hardship. In any event, I would not be persuaded that he was suffering severe financial hardship in May 2018, as he had capacity to access cash funds from the policy in the order of $45,000. This capacity is demonstrative of absence of severe financial hardship pursuant to the Guide,[17] which the Tribunal customarily applies by virtue of Drake and the Minister for Immigration and Ethnic Affairs.[18]

   [17] Social Security Guides, 1.1.S.120 Severe financial hardship – assets test hardship; 4.6.7.60 Determining Severe Financial Hardship – Readily Available Funds.

   [18] (1979) 2 ALD 60.

10. The decision taken in this case is a difficult one as the Tribunal has empathy for the Applicant’s challenging personal circumstances. It appreciates the concerns the Applicant has expressed about how the assets test operates in the context of intergenerational farming. However, the provisions of the Act must be applied and the Applicant’s concerns are for Parliament as the policy makers, not this Tribunal.

11. Since the Applicant’s pension was cancelled in May 2018, his assets and financial position have changed. Further, it is almost 5 years since he transferred the farm property to his son. All these matters may impact on his eligibility to receive an age pension, should he make a fresh claim for the same.

12. For the foregoing reasons, the decision under review is affirmed, meaning that cancellation of the Applicant’s age pension in May 2018 was correct.    

I certify that the preceding 39 (thirty-nine) paragraphs are a true copy of the reasons for the decision herein of Ms S Taglieri SC, Member

..........................[sgd]...........................

Associate

Dated: 21 February 2020

Date(s) of hearing:	16 December 2019
Applicant:	By phone
Solicitors for the Respondent:	Ms Sarah Dinkha