Barton and Secretary, Department of Families, Community Services and Indigenous Affairs

[2006] AATA 1076

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 1076

ADMINISTRATIVE APPEALS TRIBUNAL      Nº W2005/21

GENERAL ADMINISTRATIVE DIVISION

Re:         PATRICK WILLIAM BARTON

Applicant

And:       SECRETARY,
  DEPARTMENT OF FAMILIES,

COMMUNITY SERVICES & INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal:       G.D. Friedman, Senior Member

Date:             13 December 2006

Place:            Perth

Decision:The Tribunal affirms the decision under review. 

(sgd) G.D. Friedman
  Senior Member

CATCHWORDS

SOCIAL SECURITY ‑ reduction of pension ‑ assets exceeded allowable limit - loan to family trust - deemed income 

Social Security Act 1991 ss 9(1), 11(1), (4), (12) (13), 55, 1064, 1076, 1122

REASONS FOR DECISION

13 December 2006  G.D. Friedman, Senior Member

1.      Patrick Barton established a family trust and made a loan to the trust.  In 2001 Centrelink reduced his mature age allowance because his assets were above the allowable limit.  In 2003 his age pension was reduced because of the amount of his assets, and 2004 Centrelink reduced the age pension because of deemed income from the loan.  The Social Security Appeals Tribunal affirmed the decisions and Mr Barton has applied to this Tribunal for review.

ISSUES 

2.       The issues before the Tribunal are whether Mr Barton's loan to his family trust was a financial asset that should be included as part of his personal assets; and, if so, the appropriate rates of mature age allowance and age pension payable to him.

BACKGROUND

3.      Mr Barton had a beneficiary loan account of $149,359 for the year 1999/2000.  His accountant confirmed that this amount was the current balance as at 30 June 2000.  According to Mr Barton's statement of 25 June 2001 the amount of the loan was reduced from $143,640 to $49,453, resulting in an increase in his assets to $144,453, comprising $30,000 in an ESANDA term deposit; a further $50,000 in an ESANDA term deposit; $49,453 in beneficiary loan; and $15,000 in household and personal effects.  On this basis Centrelink considered Mr Barton to be a homeowner for social security purposes; his home was owned by the company; and as sole director he had security of tenure.  As his assets were more than the single homeowner limit for mature age allowance ($141,000) his payments were cancelled as at 28 June 2001.

4.      On 27 January 2001 Mr Barton informed Centrelink that his household contents were now worth $9000 (reduced from $15,000) and his total assets were reduced to $138,453.  Accordingly, Centrelink restored his mature age allowance at less than the maximum rate, because of deemed income generated by his bank balances and the beneficiary loan.

5.      Mr Barton reached 65 years of age on 10 June 2002 and was transferred to age pension, which is also subject to income and assets test.  Although his assets remained under the threshold ($141,000) his age pension was calculated on the basis of his deemed income from the beneficiary loan and his bank accounts.  On 14 April 2003 his age pension was reduced after Centrelink decided that the beneficiary loan amount had increased to $148,455 and total assets were calculated at $237,455.

6.      On 9 June 2004 Mr Barton’s 2002/2003 financial statements showed that his assets were $136,000, including a loan amount of $47,000.  As this was less than the assets limit his rate of pension was calculated under the income test and was increased.

7.      On 17 November 2004 Mr Barton’s accountants advised Centrelink that the trust was vested.  The property was transferred to Mr Barton, who resigned as director and secretary of the company.

EVIDENCE  

8.      Mr Barton told the Tribunal that in 1983 his accountant established the trust and a company (Mill Park Pty Ltd) for the purposes of running his business (Solahart Melville).  He said that in the same year the company purchased a house in Russell Street, East Fremantle (the property), as an office and the mortgage was paid by the company.  He said that in 1991 after his divorce he commenced living at the property.  He said he has never paid rent for the house and does not have a lease, so he does not have reasonable security of tenure and consequently he said that he was not a homeowner.  He said that he is the sole trustee and the appointer of the trust and the sole director of the company.

9.      Mr Barton said that in response to a request from Centrelink about information concerning private trusts and companies he made a written statement on 25 June 2001 in which he stated that the balance of the beneficiary loan account had been reduced to $49,453.  He explained that the beneficiary loan should never have been treated as an asset because his business had not operated for a number of years, so the loan was an unrealisable asset.  He said that deeming provisions of the legislation were unfair, and he would have wound up the company earlier if he had been aware of the consequences of maintaining the loan, as it had not generated any income.  

10.     In relation to the handling of his social security claims Mr Barton was critical of delays by Centrelink, particularly the time taken for an authorised review officer to review his claims.  He said that reduction and suspension of his benefits did not take into account his personal circumstances and his financial difficulties.

CONSIDERATION OF THE ISSUES

11. Section 11(1) of the Social Security Act 1991 (the Act) defines an asset as including property.  In relation to homeowner, s 11(4) of the Act provides:

“11(4)  For the purposes of this Act:

(a)       a person who is not a member of a couple is a homeowner if:

(i)        the person has a right or interest in the person’s principal home; and

(ii)the person’s right or interest in the home gives the person reasonable security of tenure in the home;”

12. Financial assets are defined in s 9(1) of the Act and include a loan that has not been repaid in full. In relation to an unrealisable asset, s 11(12) and s 11(13) of the Act provide:

“11(12) An asset of a person is an unrealisable asset if:

(a)       the person cannot sell or realise the asset; and

(b)       the person cannot use the asset as a security for borrowing.

11(13)For the purposes of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:

(a)       the person could not reasonably be expected to sell or realise the asset; and

(b)       the person could not reasonably be expected to use the asset as a security for borrowing.” 

13.      Section 1122 of the Act sets out the amount of a loan that is to be included in a person’s assets:

“If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.”

14.      Section 55 of the Act provides that a person’s rate of pension is to be paid in accordance with the rate calculator set out in s 1064 of the Act.  Section 1076 of the Act provides that income is deemed from a financial asset.

15.      Mr Barton was the sole director of the company which owned the property where he lived, and he had security of tenure.  Therefore he was a homeowner in accordance with s 11(4) of the Act.  There was no evidence to support the view that the trust was being irreversibly wound up prior to 17 November 2004, so the loan remained a financial asset of the trust until 16 November 2004.  Further, the trust owned the property and had the option of transferring it to Mr Barton or selling it and using the proceeds to satisfy the debt.

16.      The Tribunal finds that the balance of Mr Barton’s loan to the trust on 30 June 2001 was $148,825, so his assets exceeded the limit for mature age allowance, and he was not entitled to receive the allowance.

17.      The balance of Mr Barton’s loan as at 30 June 2002 was $148,555 and at 30 June 2003 was $47,000.  Therefore the Tribunal finds that Mr Barton was entitled to less than the maximum rate for the period 10 June 2002 to 22 April 2003 because of the level of his assets, and less than the maximum rate during the period 23 April 2003 to 26 November 2004 because of his deemed income.  On this basis the calculations by Centrelink were correct.

DECISION

18.      The Tribunal affirms the decision under review.

I certify that the eighteen [18] preceding paragraphs are a true copy of the reasons for the decision of:

G.D.Friedman, Senior Member

.....[Sgd S da Motta]...............

Associate

Date of hearing:  7 December 2006 
Date of decision:  13 December 2006
Advocate for applicant:                Self‑represented
Advocate for respondent:            Ms M Conlon, Centrelink