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

Bettington and Secretary, Department of Social Services (Social services second review) [2024] AATA 3267 (13 September 2024)
Division:GENERAL DIVISION
File Number(s): 2024/0225
Re:Albemarle Bettington
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Member W Frost
Date:13 September 2024
Place:Canberra

The Tribunal affirms the decision under review pursuant to subsection 43(1)(a) of the Administrative Appeals Tribunal Act 1975.
.................[SGD]....................................
Member W Frost
Catchwords
SOCIAL SECURITY – pensions, benefits and allowances – age pension – eligibility for age pension – assets test – whether the applicant had assets above the assets test limit – decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 ss 43
Social Security Act 1991 ss 9, 11, 44, 55, 179, 11208, 1123, 1126
Cases
Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Secondary Materials
Social Security Guide (version 1.319), Services Australia
A Guide to Australian Government Payments (20 March 2024 to 30 June 2023), Services Australia
REASONS FOR DECISION
Member W Frost
13 September 2024
INTRODUCTION

Mr Bettington applied for review by the General Division of the Administrative Appeals Tribunal (Tribunal) of a decision to cancel his Age Pension because it was determined that the value of his assets was above the ‘allowable limit’ to be eligible for that social security payment. For the following reasons, the Tribunal affirms that decision, meaning Mr Bettington’s application is unsuccessful, and he was ineligible for the Age Pension from the date of its cancellation in June 2023.
ISSUE
The issue for determination by the Tribunal was whether Mr Bettington’s assets exceeded the allowable assets limit as at the date of the cancellation of his Age Pension on 16 June 2023.
BACKGROUND
On 24 March 2023, Mr Bettington lodged a claim for the Age Pension.[1] At that time, Mr Bettington and his estranged wife were the only directors and shareholders in the company called Coolie Pastoral Co Pty Ltd (Company).[2]
[1] Exhibit 1, pages 89-115.
[2] Ibid., pages 5 and 152-208.
On 16 June 2023, Mr Bettington ceased to be a director and shareholder in the Company.[3] His son was appointed a director of the Company and Mr Bettington’s shares were transferred to his wife, who became the sole shareholder in the Company.[4] Mr Bettington received no payment for the transfer of his shares in the Company.[5] He also forgave a shareholder loan to the Company.[6]
[3] Ibid., pages 267-274 and 284.
[4] Ibid., pages 267-274.
[5] Ibid., page 265.
[6] Ibid., pages 179, 222, 284 and 321.
On 10 August 2023, Mr Bettington was granted the Age Pension effective from the date his claim was made in March 2023.[7]
[7] Ibid., pages 294 and 381.
On 26 September 2023, Services Australia (the Agency) decided to cancel Mr Bettington’s Age Pension with effect from 16 June 2023, because it determined that the value of his assets was above the ‘allowable limit’ under the assets test.[8]
[8] Ibid., pages 285-287, 294, 384-385.
On 20 October 2023, following Mr Bettington’s request for review of the Agency’s decision, an Authorised Review Officer (ARO) affirmed the decision to cancel his Age Pension.[9]
[9] Ibid., pages 287- 293.
On 12 December 2023, after Mr Bettington sought further review, the Social Services and Child Support Division of the Tribunal (AAT1) affirmed the ARO’s decision to cancel his Age Pension.[10]
[10] Exhibit 2, pages 86-87; Exhibit 1, pages 3-7 and 294.
On 10 January 2024, Mr Bettington lodged an application for review of the AAT1 decision with the Tribunal.[11]
[11] Exhibit 1, pages 1-2.
LEGISLATION & POLICY
Section 44 of the Social Security Act 1991 (Act) relevantly provides that an Age Pension ‘is not payable to a person if the person’s age pension rate would be nil’.
Section 55 of the Act states that a person’s Age Pension rate, if they are not permanently blind, is worked out using ‘Pension Rate Calculator A at the end of section 1064’ of the Act. Relevantly in this proceeding, Module G of the Age Pension Rate Calculator sets out ‘how to work out the effect of a person’s assets on the person’s maximum payment rate’. This involves determining the value of the person’s ‘assets’.
Subsection 11(1) of the Act defines an ‘asset’ to mean ‘property or money (including property or money outside Australia)’.
Subsection 9(4) of the Act relevantly provides that an ‘asset’ is a ‘deprived asset’ if:
(a)a person has ‘disposed of the asset’; and
(b)the value of the asset is included in the value of the person’s assets by section 1126AA of the Act.
Subsection 1123(1) of the Act provides that:
(1) For the purposes of this Act, a person disposes of assets of the person if:
(a) the person engages in a course of conduct that directly or indirectly:
(i) destroys all or some of the person’s assets; or
(ii) disposes of all or some of the person’s assets; or
(iii) diminishes the value of all or some of the person’s assets; and
(b) one of the following subparagraphs is satisfied:
(i) the person receives no consideration in money or money’s worth for the destruction, disposal or diminution;
(ii) the person receives inadequate consideration in money or money’s worth for the destruction, disposal or diminution;
(iii) the Secretary is satisfied that the person’s purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage. [emphasis in Act]
Section 1126AA of the Act regarding disposal of assets relevantly provides as follows:
(1) This section applies to a disposal (the relevant disposal) on or after 1 July 2002 of an asset by a person who is not a member of a couple at the time of the relevant disposal.
Increase in value of assets
(2) If the amount of the relevant disposal, or the sum of that amount and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000, then, for the purposes of this Act, the lesser of the following amounts is to be included in the value of the person’s assets for the period of 5 years starting on the day on which the relevant disposal took place:
(a) the amount of the relevant disposal;
(b) the amount by which the sum of the amount of the relevant disposal and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000. [emphasis in Act]
Section 1208M of the Act states that if:
(a) an individual ceases to be an attributable stakeholder of a company or trust on or after 1 January 2002; and
(b) immediately before the cessation, the company or trust owned a particular asset (whether alone or jointly or in common with another entity or entities);
Division 2 of Part 3.12 and sections 93U, 93UA and 198F to 198MA (inclusive) have effect as if:
(c) the individual had disposed of an asset of the individual; and
(d) the amount of the disposition referred to in paragraph (c) were equal to the individual's asset attribution percentage of the value of the asset referred to in paragraph (b), worked out immediately before the cessation.
For completeness, the Tribunal notes that, under section 179 of the Act, an application may be made to the Tribunal for review of a decision of the AAT1 made under subsection 43(1) of the AAT Act.
The Tribunal also notes that, although government policy is not binding, it will ordinarily be followed unless there are cogent reasons not to do so.[12] The relevant policy in relation to the Age Pension payment is contained in the Social Security Guide (Guide) and the Tribunal is not aware of any cogent reason for not following its terms. Section 4.6.3.40 of the Guide relevantly provides that:[13]
A person may live in a home that is owned by a company or trust in which they have an interest. The home is assessed as the person's principal home IF the person has reasonable security of tenure.
Explanation: A person is a homeowner if they have a right or interest in the place they occupy as their home, and the right or interest gives them reasonable security of tenure. [emphasis in original]
[12] Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.
[13] accessed on 11 September 2024.
Section 4.12.9.10 of the Guide further provides that:[14]
An attributable stakeholder who resigns control of a private trust or private company ON or AFTER 1 January 2002 will be treated in a manner comparable to other people who gift or relinquish assets. That is, the deprivation provisions will apply from the date of resignation (subject to the percentage of the assets of the structure attributed to the stakeholder).
[14] accessed on 11 September 2024.
Section 4.1.1 of the Guide regarding the deprivation of assets relevantly states that:[15]
[15] accessed on 11 September 2024.
Summary
Deprivation provisions apply to all payments subject to assets testing.
Explanation: The social security system is based on the principle that people should use their own income and assets to help meet their day-to-day needs before calling on the community for income support. While people are free to make gifts to their families, charities and other organisations, where significant gifts are involved, the pension income and assets tests will take this into account. Deprivation provisions limit the potential for recipients to avoid the assets and income tests by giving their assets away.
…
Disposing of an asset or income
For deprivation provisions to apply it MUST be shown that a recipient has destroyed or diminished the value of an asset, income, or a source of income.
A recipient disposes of an asset or income when they:
·engage in a course of conduct that destroys, disposes of or diminishes the value of their assets or income, AND
·do not receive adequate financial consideration in exchange for the asset or income.
Example: Signing a document transferring legal title to land and then giving it to another person to register the transfer is a course of conduct.
…
Allowable disposal free areas for assets disposed of on or after 1 July 2002
The allowable disposal free areas for assets are $10,000 per financial year (income year - see note), and $30,000 over any rolling 5 financial year period...These amounts apply to single recipients and couples...
Explanation: Only amounts disposed of in excess of the disposal free areas are assessable under the assets test.
Note: In the legislation the term 'income year' is defined as having the same meaning as in the Income Tax Assessment Act 1997. Accordingly, an income year aligns with the commonly understood financial year, i.e. from 1 July to 30 June. [emphasis in original]
Section 4.12.4.10 of the Guide further relevantly provides that:[16]
An asset of a designated entity is any asset (excluding exempt assets…and excluded assets), whether fixed or financial…that the entity owns (wholly or partially). The value of the assets (including shares and managed investments) of a designated entity is determined by the current market value…less any allowable liabilities.
An income support recipient's estimate of the value of an asset is accepted only where the delegate considers the estimate is commensurate with the current market value. Where there is doubt about its value, the delegate should take all reasonable steps to ascertain the current market value of the asset.
Example: A valuation by a professionally qualified valuer appointed by Centrelink of real estate owned by the company. [emphasis in original]
[16] accessed on 11 September 2024.
CONSIDERATION
The essential question to be resolved in this review was whether Mr Bettington’s disposal on 16 June 2023 of his shareholding in the Company, and his forgiveness of a shareholder loan to the Company, were deprived assets and therefore to be included in the calculation of assets to determine his eligibility for the Age Pension.
For the following reasons, the Tribunal finds that the disposal of Mr Bettington’s shares in the Company and the forgiveness of the shareholder loan were each a ‘deprived asset’, as defined in subsection 9(4) of the Act. This meant that Mr Bettington’s total assets were above the allowable asset limit, making him ineligible for the Age Pension from 16 June 2023. Based on the documentary evidence, the Tribunal is satisfied that Mr Bettington disposed of the shares in the Company and also forgave a shareholder loan to the Company.[17] The Tribunal finds that Mr Bettington did not receive any consideration for the gift of the shares and the forgiven shareholder loan.[18] That is, pursuant to subsection 1123(1) of the Act, Mr Bettington disposed of those assets and received no consideration in money or money’s worth for that disposal.
[17] Exhibit 1, pages 267-274 and 284.
[18] Ibid., pages 265 and 321.
Before the disposal of Mr Bettington’s shareholding in the Company to his wife, he held at least 50% of its shares.[19] He held 101 class ‘A’ shares and 10,000 class ‘C’ shares and Mr Bettington’s wife held 100 class ‘A’ shares and 10,000 class ‘B’ shares.[20] As a result, and in the absence of any contradictory evidence, the Tribunal proceeds on the basis that Mr Bettington had a 50% shareholding in the Company. The Tribunal finds that the total value of the assets of the Company was $1,857,285, made up of the following:
(a)net assets in the amount of $394,250 as at 30 June 2022;[21]
(b)plus the market value of the Company’s real property in Mogo, New South Wales, in the amount of $2,330,000 as at 16 June 2023;[22]
(c)minus the value of the buildings, homestead and land on that property (in the amount of $885,136), less the accumulated depreciation on the buildings ($18,171), the figures for which are listed in the Company’s balance sheet as at 30 June 2022, totalling a deduction of $866,965.[23] The Tribunal accepts that the valuation of the Company’s real property, assessed in September 2023 but with a valuation date of 16 June 2023, by a professionally qualified valuer appointed by the Agency was commensurate with the market value of the property as at 16 June 2023.[24]
[19] Exhibit 1, pages 156-157.
[20] Ibid. ,page 157
[21] Ibid., page 179.
[22] Ibid., page 320; Exhibit 2, pages 82-85.
[23] Exhibit 1, page 179.
[24] Exhibit 2, pages 82-85.
Having regard to the above, the Tribunal finds that Mr Bettington’s 50% shareholding of the Company’s total assets (in the amount of $1,857,285) was $928,642.50.[25] On 16 June 2023, Mr Bettington transferred his 50% shareholding to his wife.[26] He did not receive any consideration for that transfer of his shares in the Company.[27] Mr Bettington also forgave a shareholder loan owed by the Company in the amount of $498,893, of which his 50% share was $249,446.50.[28] Accordingly, the Tribunal finds that Mr Bettington disposed of an asset in the amount of $1,178,089, made up of the value of his 50% shareholding in the Company totalling $928,642.50, and the value of his 50% interest in the forgiven shareholder loan to the Company totalling $249,446.50.
[25] Exhibit 1, page 321.
[26] Ibid., pages 267-274, 315 and 321.
[27] Ibid.
[28] Ibid., pages 179, 284 and 321.
Under subsection 1126A(1) of the Act and in accordance with the Guide, as Mr Bettington was not a member of a couple and disposed of the sum of $1,178,089 after 1 July 2002, all but $10,000 of the $1,178,089 (being $1,168,089) was to be included in the value of his assets for the period of five years starting on the day on which the disposal took place on 16 June 2023. Based on the evidence before the Tribunal, it is satisfied that Mr Bettington’s assets as at 16 June 2023 totalled $1,228,305, made up of the aforementioned disposed assets in the amount of $1,168,089 (which total accounted for the deducted $10,000 allowable under the Act), plus savings ($241), managed investments ($6,917), income streams ($5,849), another business ($12,209), home contents ($5,000) and life insurance ($30,000).[29]
[29] Ibid., pages 153-172, 179, 341-343, 350 and 361.
The Respondent accepted, as does the Tribunal, that Mr Bettington was a single non-homeowner from when he relinquished his shares in the Company on 16 June 2023. As set out above, the Company owns the real property in Mogo where Mr Bettington continues to live with his estranged wife. The guide to Australian Government payments for the period 20 March 2023 to 30 June 2023 (applicable at the time of the disposal of the assets on 16 June 2023) provided that the assets limit for a single non-homeowner during that period was $859,250.[30] Accordingly, Mr Bettington’s total assessable assets had to be below the amount of $859,250 in order for him to be eligible to receive the Age Pension from the time of the disposal of the assets on 16 June 2023. The Tribunal is satisfied that the total value of Mr Bettington’s above identified assets at the relevant date, being $1,228,305, exceeded the applicable assets limit of $859,250. Therefore, Mr Bettington’s rate of Age Pension would have been nil as at 16 June 2023. As a result, the Age Pension was not payable to him from that date pursuant to section 44 of the Act. For these reasons, the Tribunal is satisfied that Mr Bettington was not eligible for the Age Pension from 16 June 2023 and the decision to cancel that payment was correct.
[30] page 46, accessed on 11 September 2024.
For completeness, the Tribunal notes that it is open for Mr Bettington to apply to the Agency to be paid the Age Pension under the ‘asset hardship provisions’.
DECISION
The Tribunal affirms the decision under review pursuant to subsection 43(1)(a) of the Administrative Appeals Act 1975.

I certify that the preceding 29 (twenty-nine) paragraphs are a true copy of the reasons for the decision herein of Member W Frost.

..........................[SGD]..............................................
Associate
Dated: 13 September 2024

Date of hearing: 12 September 2024

Date last submissions received:

Applicant:

Solicitor for Respondent:

14 August 2024

By Telephone

Mr Matt Gauci, Hunt & Hunt Lawyers

[2024] AATA 3267

13 September 2024

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