Bennell and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2011] AATA 883

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 883

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2011/1686

GENERAL ADMINISTRATIVE  DIVISION		)
Re		NEIL BENNELL

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms A F Cunningham (Senior Member)

Date13 December 2011

PlaceHobart

Decision The decision under review is affirmed.

[Sgd Ms A F Cunningham]

Senior Member

CATCHWORDS

SOCIAL SECURITY – age pension – pension bonus scheme – late application – whether an accruing member – not satisfy work test for all test periods – decision under review affirmed

Social Security Act 1991, ss 92A, 92H, 92 Q, 92U, 92V, 92X, 93U, 93V, 93W

Social Security (Administration) Act 1999

Guide to the Social Security Law – 3.4.7.70

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

Drake and Minister for Immigration and Ethnic Affairs No 2 (1979) 2 ALD 634 

Polchow and Secretary, Department of Families, Housing and Community Services and Indigenous Affairs [2011] AATA 224

REASONS FOR DECISION

13 December 2011 Ms A F Cunningham (Senior Member)   

1.The applicant, Neil Bennell, seeks the review of a decision made by Centrelink to reject his claim for pension bonus.  Mr Bennell lodged a claim for an age pension and a pension bonus payment on 13 August 2010.  Centrelink decided to grant Mr Bennell’s application for age pension but rejected his claim for pension bonus on the basis that he had not met the work test during the period between him turning age pension age and seeking to register for the scheme.

2.Centrelink’s decision was affirmed by the Social Security Appeals Tribunal (SSAT) on 25 March 2011.

ISSUES

3.The issue for the Tribunal to determine is whether Mr Bennell qualified for a pension bonus.  Specifically, whether Mr Bennell’s late registration in the Pension Bonus Scheme (PBS) should be accepted.

BACKGROUND FACTS

4.Mr Bennell was born on 5 April 1936 and reached age pension age on 5 April 2001. 

5.On 2 August 2010 Mr Bennell registered an intention to lodge a claim which he did on 13 August 2010.  In his claim form Mr Bennell indicated that he was not a registered member of the PBS but wished to register and subsequently completed a PBS registration form.  Mr Bennell was granted age pension on 3 November 2010 which was backdated to August 2010 being the date when he registered an intent to lodge a claim. 

6.The above background facts were confirmed by the T Documents tendered in evidence and are not in dispute. 

THE LEGISLATION

7.The legislation relevant to this matter is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).

8.A simplified outline of the pension bonus provisions is contained in section 92A as follows:

·   A person who qualifies for an age pension but defers claiming that pension may be able to get a single lump‑sum pension bonus.

·   A person who wants to get a pension bonus must register as a member of the pension bonus scheme.

·   To get a pension bonus, a person must accrue between 1 and 5 bonus periods while deferring age pension.

·   Generally, a bonus period runs for 1 year.

·   To accrue a bonus period, the person must pass the work test for that period.

·   To pass the work test for a year, either the person, or the person’s partner, must gainfully work for at least 960 hours during that year.

·   The amount of a person’s pension bonus depends on the number of accrued bonus periods and the person’s annual rate of age pension. A person may get a bigger bonus by accruing more bonus periods.

9.Although Mr Bennell reached pension age on 5 April 2001 he did not claim until 13 August 2010.  Section 92H(1) provides that a claimant must lodge an application within 13 weeks of qualification for the age pension.  Section 92H(3) allows for an extension of the period.  

10.Subsection 92H(4) details the parameters under which such an extension can be given:

“92H(4)  The Secretary must not make a decision to extend the period within which a person must lodge an application unless, if it were assumed that the person had been a member of the pension bonus scheme throughout the pre‑application period:

(a)  the person would have been a non‑accruing member for all of the pre‑application period; or

(b)  both:

(i)  the person would have been an accruing member for some or all of the pre‑application period; and

(ii)  the person would have passed the work test for each test period that is applicable to the person.

Note 1:       Pre‑application period is defined by subsection (5).

Note 2:       Test period is defined by subsection (6)”

11.The pre-application period as defined by subsection 5 is the person’s date of qualification for the age pension and ends on the date on which the person lodges the application.  In Mr Bennell’s case, it is the period between 5 April 2001 to 2 August 2010.

12.Section 92H(6) defines the test period in the following terms:

“92H(6)  For the purposes of this section, to work out what is a test period:

(a)  identify the overall accruing period, which is that part of the pre‑application period for which, if it were assumed that the person had been a member of the pension bonus scheme throughout the pre‑application period, the person would have been an accruing member of the scheme;

(b)  if the overall accruing period is 365 days or less—the overall accruing period is the only test period;

(c)  if the overall accruing period is longer than 365 days—each of the following periods is a test period:

(i)  the full‑year period beginning at the start of the overall accruing period;

(ii)  if 2 or more succeeding full‑year periods are included in the overall accruing period—each of those full‑year periods;

(iii)  the remainder (if any) of the overall accruing period”

13.Pursuant to sub-paragraph 92H(6) the various test periods within the total accruing period are:

5 April 2001 to 4 April 2002  5 April to 4 April 2003

5 April 2003 to 4 April 2004  5 April 2004 to 5 April 2005

5 April 2005 to 4 April 2006  5April 2006 to 4 April 2007

5 April 2007 to 4 April 2008  5 April 2008 to 4 April 2009

5 April 2009 to 4 April 2010  5 April 2010 to 20 August 2010

14.Under Sub-Division B of Division 3 a person’s membership of a PBS at a particular time can be classified as either accruing or non-accruing. It was submitted on behalf of the Secretary that there is no evidence that Mr Bennell would have been a non-accruing member for all of the pre-application period. He was not subject to a disposal preclusion period, a compensation preclusion period or a carer preclusion period as the terms are defined in sections 93U, V and W of the Act. Nor was there any evidence that the Secretary had issued any legislative instrument declaring Mr Bennell a non-accruing member pursuant to section 92Q.

15.Thus, the issues to be determined are whether Mr Bennell was an accruing member who passed the work test during the various test periods as outlined above. 

16.The work test for a full year period is defined in section 92U as requiring that a person’s total number of hours gainfully worked during the full year period was at least 960.  Under section 92V a pro rata number of hours will be accepted for a part year period. 

17.Gainful work is defined in section 92X in the following terms:

“92X  Gainful work—basic rule

(1)  For the purposes of this Part, gainful work is work for financial gain or reward, whether as an employee, a self‑employed person or otherwise, where:

(a)  the work involves a substantial degree of personal exertion on the part of the person concerned; and

(b)  the work is carried on within or outside Australia.

(2)  Subsection (1) is to be ignored in determining the meaning of an expression used in a provision of this Act other than this Part”

18.The Guide to the Social Security Law provides guidance in administering a Pension Bonus Scheme and is an acceptable reference provided it does not conflict with the relevant legislative provisions.  (Re Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 and Drake and Minister for Immigration and Ethnic Affairs No 2 (1979) 2 ALD 634. The Guide defines gainful work as work performed for financial gain or reward requiring that the member be engaged in some form of gainful activity for financial reward rather than contrived situations. The Guide refers to section 93 which states that work consisting of management or administration of family financial investments is not taken to be gainful work.

19.In Paragraph 3.4.7.70, the Guide provides examples of activities which appear to meet the spirit of the legislation and may be treated as gainful work for the purposes of the Act. Such as:

Example 1:    A member engaged in a business that is temporarily running at a loss.  In this case, their activity would be considered as gainful work, provided the activity did not appear to be deliberately contrived to meet the scheme’s requirements.

Example 2:    A member who has to practice for a performance such as a piano recital.  The practice time would count as gainful work.

Example 3:    A member who attends a training course or conference to maintain their qualifications or knowledge to perform their duties.

Example 4:    A member who is, by the nature of their employment, required to perform tasks to gain employment, such as preparing tenders, which may or may not be successful.  The preparation time would be counted as gainful work.  This would be the case for people working as consultants.

Example 5:    A member’s time performing jury duty may be counted as gainful work.

20.There are a number of references to the requirement to keep records within Division 5 with respect to the work test which can be waived in particular circumstances.  There was no evidence that a waiver had occurred in this case.

THE WORK TEST – GAINFUL WORK

21.It was Mr Bennell’s evidence that during the test periods in review dating from 5 April 2001, he was the managing director and chairman of the company, Tom Groggin Farm Pty Ltd until its closure in August 2009.  Shares in the company were held in the proportions of 51% by Mr Bennell and 49% by his wife, Margo Bennett who was the company secretary.  During the period the company operated as a farm and farm development company and also engaged in two small logging operations in Tasmania. 

22.Mr Bennell stated that he and his wife lived in the manager’s cottage on the property at Bulahdelah which was owned by the company from 5 April 2009 until 20 January 2009 when the property was sold.  The couple then moved to Tasmania and lived on a property at Hastings.  Mr Bennell claims that during the relevant period between 2001 and 2009 he was wholly involved in the activities of the company as farm manager.  These activities involved:

Management of cattle -  the purchase, sale and adjustment of cattle; overseeing the delivery and receiving of cattle; yarding and paddock placement of cattle; drenching, castrating,  ear marking and tagging;  overseeing calving; supplementary feeding and nutriment

Paddock management – herd separation; placement of weaners from mothers

Farm management – field management, pasture improvement, clearing and slashing; fencing, wild dog management and baiting program; implementing a fire control system and procedure; dam construction, management and control;  vegetable garden tilling, planting and watering;  hiring of sub-contractors;  operating a breeding program for stud kelpie working dogs; soil assessment tests;  property improvement;  house renovation and conversion of old dairy to a residence

Equipment management – service of farm equipment and hire of special equipment when required;  management of farming activities which involved being active and on-call most days of the week

Management of farm real estate development activities – Tom Groggin Farm, NSW and Old Inn Road.   This included applications to council subdivision, rezoning applications, financial management, physical work and overseeing of clearing, surveying, road construction and fencing. 

23.In June 2003 Mr Bennell purchased a property at Strathblane in Tasmania which he subsequently subdivided into four lots and sold.  Mr Bennell contended that he spent an enormous amount of time on this property over a five year period which required many return visits from New South Wales to Tasmania.  He was also involved in the purchase and exploration of development opportunities of a property at Lune River which was reluctantly sold. 

24.It was Mr Bennell’s evidence that during the period in question, he estimates that he worked productively, essentially on a fulltime basis for the company, well in excess of 20 hours per week.   He contended that it was his choice to continue to work for their company rather than claim the age pension.  He did not become aware of the Pension Bonus Scheme until late 2004 but took no steps to register until he lodged his claim for age pension in August 2010. 

25.In his written witness statement Mr Bennell states that when he purchased the farm at Bulahdelah in 1993 it had significant tax losses in the order of $1,216,282.00 from its previous ownership.  As the company Tom Groggin Farm Pty Ltd was under-capitalised, Mr and Mrs Bennell were forced to plough any surplus monies back into the company for capital investment and to service loans and provide general working capital.  The company could not afford the services of an accountant but Mr Bennell used to have informal meetings with an accountant to assess the tax situation.  The only available financial statement was that prepared at the time of deregistration of the company.  The balance sheet as at 30 June 2010 recorded current liabilities as share holders loan accounts in the sum of $1,162,480.00, a net asset deficit of $1,133,135.00, accumulated losses of $1,653,135.00 and total share holders equity deficit of $1,133,135.00. 

26.It was Mr Bennell’s evidence that he and wife decided to close the company as it could no longer trade profitably without risk and this occurred when the interest rate went up to 11.75%.  During the period in review, Mr Bennell said that neither he nor his wife were paid a salary because the company was short of surplus cash.  Instead they received financial rewards in lieu of salary which covered a significant portion of their cost of living.  This included rent free accommodation as well as rates and charges, household repairs, maintenance and insurance, phone, internet, fax, power, gas, water and residential improvement costs as well as medical expenses and insurance, dental and pharmacy expenses and the use of two motor vehicles.  In addition, their business expenses which included travel to and from Tasmania, were paid for by the company. 

27.In a letter from Mr and Mrs Bennell to the Manger of Centrelink dated 28 October 2010 it is stated that Mr Bennell and his wife put all of their assets into the company.  This comprised proceeds from the sale of Mrs Bennell’s residence in Sydney for $850,000.00 (less costs) and superannuation in total of $1,000,000.00.  In addition Mr Bennell contributed the net proceeds from his parent’s inheritance in the approximate amount of $240,000.00. 

28.Despite their best efforts Mr Bennell states that their assets today are significantly less than they were at the start of the business partnership in 1997.  It was Mr Bennell’s oral evidence to the Tribunal that, when the company was wound up, they received approximately $350,000.00 which they used towards the repayment of debts in the sum of $500,000.00. 

29.It is apparent from the evidence as outlined above that Mr Bennell did not receive any financial gain for his considerable efforts and work on behalf of the company.  The Tribunal accepts Mr Bennell’s evidence of the nature of the activities and hard work involved in the management of the farms, property development and business activities.  It was Mr Bennell’s evidence that he had not taken a holiday for many years and devoted all of his energies to his business activities.  The Tribunal is satisfied that the nature of Mr Bennell’s work involved a substantial degree of personal exertion. 

30.The remaining question is whether he was financially rewarded for his work.  It was contended on behalf of the Secretary that the receipt of any claimed rewards from the company simply amounted to a return on the Bennell’s own assets.  The word “reward” is defined in the Chambers 21 Century Dictionary as “something given or received in return for work done, a service rendered, good behaviour”.

31.The Tribunal in its decision Polchow and Secretary, Department of Families, Housing and Community Services and Indigenous Affairs [2011] AATA 224 at paragraph 27 after referring to the dictionary definitions of finance, gain and reward stated:

“Therefore, it should be apparent that the expression gainful work in the context of the Act means work which involves a substantial degree of personal exertion on the part of the person concerned which results in that person receiving money or some other form of payment for that work”.

32.In this case Mr Bennell did not receive any money or payment for his personal exertion but instead the indirect benefits that arose as a result of the company paying a large portion of the directors living costs. 

33.In the absence of financial records the Tribunal is unable to assess the quantum of such benefits and thus how they relate to the activities and work performed by Mr Bennell.  The nature of Mr Bennell’s evidence in this regard was general and not specific.  It did not relate to any particular periods of time.  Whilst his accountant stated in a letter to the Manager at Centrelink on 12 August 2010 that it was his belief that Mr Bennell had worked on behalf of the company, albeit for no salary due to shortage of funds for the required minimum of 20 hours per week for 48 weeks, there is no supporting documentation or corroboration of Mr Mortensen’s “belief”. 

34.The period under consideration is extensive and dates form 5 April 2001 until 20 August 2010.  Mr Bennell is required to satisfy the work test for this entire period. It was his evidence that the company farm was sold in January 2009.  Although he claims that there was a considerable amount of work undertaken in closing the company, the evidence was that it was closed in August 2009.  There is an absence of any evidence that Mr Bennell was gainfully employed as this term is defined in the legislation following the sale of the property in January 2009 until the end of the test period which expired on 20 August 2010. 

35.The Tribunal is accordingly not satisfied that Mr Bennell meets the work test for the full test period and accordingly finds that he does not satisfy the requirement in the Act as a non-accruing member.

36.For these reasons the Tribunal affirms the decision under review.

I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member)

Signed:  R Hunt  - Associate

Date/s of Hearing  7 October 2011
Date of Decision  13 December 2011
Counsel for the Applicant         Mr H Pill
Solicitor for the Applicant          Hobart Community Legal Service Inc
Counsel for the Respondent     Mr B Sparkes

Solicitor for the Respondent     Centrelink - Program Litigation and Review  Branch