Bryars and Secretary, Department of Social Services (Social services second review)
[2024] AATA 414
•6 March 2024
Bryars and Secretary, Department of Social Services (Social services second review) [2024] AATA 414 (6 March 2024)
Division:GENERAL DIVISION
File Number(s): 2022/7871
2022/7873
Re:Keith Bryars
Caryl Bryars
APPLICANTS
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Senior Member A Poljak
Date:6 March 2024
Place:Sydney
The decisions under review are affirmed.
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Senior Member A Poljak
Catchwords
SOCIAL SERVICES – Age Pension – Assets test – Combined assets exceeding the allowable assets limit – Whether there existed a constructive trust - Whether a sole controller of the Trust - Disposal of assets – Decision under review affirmed.
Legislation
Social Security Act 1991
Cases
Bornecrantz v Secretary, Department of Social Services [2017] FCA 1010
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Secondary Materials
Second Reading Speech for the Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testings) Bill 2000
Social Security Guide
REASONS FOR DECISION
Senior Member A Poljak
6 March 2024
Mr Keith Bryars and Caryl Bryars, the applicants, seek review of decisions made by the Social Services & Child Support Division of the Administrative Appeals Tribunal (SSCSD) on 21 June 2022. The decisions affirmed two decisions made by Authorised Review Officers (ARO) from Services Australia (the Agency) to reject the applicants’ claims for age pension (AP) lodged on 7 August 2020. Those decisions were made on the basis that the applicants assets exceeded the assets test for AP.
The issue to be decided in these proceedings is whether the applicants’ assets exceeded the assets test for AP at the time of their claim.
Background Facts
The applicants have at all relevant times been members of a couple with each other.
The Keith Bryars Family Trust (the Trust) was established in writing on 25 September 1998. Mr Bryars was the sole trustee, principal beneficiary, and a primary beneficiary. There are three other relevant primary beneficiaries under the Trust, being Mrs Bryars, and Mr Bryars’ children, Martin Bryars and Nicola Parker.
On 13 February 2008, the Trust purchased a property at 22 Holly Street, Mooroobool, Queensland (the Mooroobool Property) for a sale price of $340,000.00.
On 16 March 2009, the Trust purchased a property at 55 Collinson Street, Westcourt, Queensland (the Westcourt Property) for a sale price of $320,000.00.
Both the Mooroobool Property and the Westcourt Property were financed through a home loan provided by Westpac to the applicants personally.
Martin Bryars resided in the Mooroobool Property following its purchase. The Agency’s records show that Martin Bryars informed the Agency that he was residing in the property on 29 May 2008 and ceased residing there on 29 November 2021.
Nicola Parker resided in the Westcourt Property following its purchase. The Agency’s records show that Mrs Parker informed the Agency on 8 February 2011 that she was residing in the property and continues to do so.
Records held by the Australian Tax Office demonstrate that between 2008 and 2019, the Trust declared rental income earned from both properties.
On 5 September 2018, Westpac separated the home loan account into two separate accounts, one relating to each property.
On 27 February 2019, Mrs Parker and her partner purchased the Westcourt Property from the Trust for a sale price of $97,601.27. A valuation of the property dated 25 October 2018 estimated the market value of the property to be in the vicinity of $340,000.00 to $360,000.00.
On 11 March 2019, Martin Bryars purchased the Mooroobool Property from the Trust for a sale price of $253,967.60. A valuation of the property dated 18 February 2019 estimated the market value of the property to be $350,000.00.
The Trust was wound up on 30 June 2019.
On 7 August 2020, the applicants applied for AP. In his “Income and Assets” form, Mr Bryars said that he and Mrs Bryars had been “involved in a private trust”, which had vested by 7 August 2020; and, that he had not “made any type of gift involving a private trust … in the last 5 years”, including the transfer of assets from a trust for less than their value.
On 7 September 2020, Mr Bryars informed the Agency that the Trust no longer operates. the applicants lodged a “MOD PT Private Trust” form advising that Mr Bryars had been the trustee of the Trust which was set up on 25 September 1998. No details were provided about the beneficiaries.
On 29 September 2020, Mr Bryars lodged only three pages of the Trust deed with the Agency. The pages provided did not disclose the identity of the beneficiaries.
On 7 June 2021, the applicants lodged another “MOD PT Private Trust” form in which they said that the beneficiaries of the Trust were Mrs Bryars (described as “wife”), Martin Bryars (described as “son”) and Nicola Bryars (described as “daughter”).
On 9 July 2021, the Agency rejected both of the applicants’ claims for AP on the basis that the value of their combined assets was above the allowable limit.
On 1 December 2021, an ARO decided to affirm the decision relating to Mr Bryars. A different ARO affirmed the decision relating to Mrs Bryars on 1 April 2022. The AROs found, in summary, that:
(a)Mr Bryars was the sole trustee of the Trust and 100% of its assets were attributable to him;
(b)the applicants took out loans to purchase the properties held by the Trust;
(c)the Trust declared rental income from the properties in its tax returns;
(d)as the properties owned by the Trust were disposed of at less than market value, the sales were assessed as gifts under the deprivation of assets provisions in the Act;
(e)the evidence did not establish that a constructive trust, separate to and distinct from the Trust, existed which would mean the properties could not be assessed as assets belonging to the Trust (or the applicants);
(f)the deprived assets (being the difference between the market value of the properties and the amount they were sold for, minus $10,000) are to be assessed as assets held by the applicants for five years; and
(g)the applicants’ total assessable assets were $1,039,061.00 which was greater than the upper asset threshold for members of a couple who were homeowners, which at the time of claim was $876,500.00.
The applicants applied to the SSCSD for review of both ARO decisions and on 21 June 2022, the SSCSD affirmed both decisions and relevantly found that:
(a)Mr Bryars was the sole controller of the Trust and 100% of the Trust’s income and assets are attributable to him under section 1207V of the Social Security Act 1991 (Cth) (SS Act).
(b)there was no constructive trust in existence in relation to the two properties.
These are the decisions under review in these proceedings.
Consideration
Part 3.18 of the SS Act relevantly deals with the attribution to individuals of income and assets which form part of a private trust. For an asset or income to be attributed to an individual:
(a) the trust must be a designated private trust (section 1207P); and
(b) the trust must be a controlled private trust in relation to the individual (section 1207V); and
(c) the individual must be an attributable stakeholder of the trust (section 1207X).
In Bornecrantz v Secretary, Department of Social Services [2017] FCA 1010
(Bornecrantz), Perry J observed, at [38]:Part 3.18 was inserted…so as to ensure that social security customers who held their assets in private companies or private trusts received comparable treatment under the means test to those customers who held their assets directly”.
Further, Perry J in Bornecrantz referred to the Second Reading Speech for the Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testings) Bill 2000 (which inserted Part 3.18), which relevantly explained:
Under current social security and veterans’ affairs legislation, assets held in private trusts and private companies generally cannot be assessed under the social security means test. This means that individuals can use private trusts or private companies to hold and control assets outside the bounds of the current means test.
People who arrange their affairs this way are therefore often treated more favourably under the means test than a person holding similar levels of assets directly. Thus, well-off or even quite wealthy people can receive income support payments.
This isn’t how the community expects the income support system to operate. It is also at odds with the principle that people with similar levels of private resources should receive similar levels of payment. This measure is about providing a level playing field for all social security customers, no matter how they choose to hold their assets or income.
The Trust was a “designated private trust” in accordance with subsection 1207(1) of the SS Act. Subsection 1207V(1) provides that a trust is a “controlled private trust” in relation to an individual if it is a designated private trust; and the individual passes either the “control” test or the “source” test.
Mr Bryars passes the control test as he was a beneficiary and the sole trustee of the Trust. He had absolute control of the Trust in accordance with the management provisions in the Trust deed; he was at all relevant times until 30 June 2019, in a position to apply any part of the income or capital of the Trust for his own benefit if he had elected to do so; and he was in a position to sell the assets of the Trust at his sole discretion for less than market value.
It does not appear to be in dispute that Mr Bryars is the sole attributable stakeholder of the Trust and 100% of the Trust’s income and assets are attributable to him in accordance with Part 3.18 – Means treatment of private companies and private trusts, of the SS Act. Accordingly, 100% of the income and assets of the Trust were attributable to Mr Bryars at all relevant times.
The key issue in these proceedings is whether the Mooroobool and Westcourt properties were assets held by the Trust and were required to be assessed as part of the applicants’ assets, and whether there was a separate and distinct constructive trust with Mr Bryars’ children as the beneficiaries.
Instruction 4.12.3.51 of the Social Security Guide (the Guide) provides:
A common intention constructive trust is created to enforce a promise and/or a gift. The following elements need to be demonstrated to establish the existence of a common intention constructive trust:
· there must have been a common intention between the legal owner of the property and the beneficiary, regarding the beneficiary's beneficial ownership of the property,
· this common intention is to be inferred as a fact from the words or conduct of the parties,
· the beneficiary must be able to show that they have acted to their detriment on the basis of the common intention as to the beneficial ownership of the property, and
· it must be a fraud on the beneficiary for the legal owner to assert that the beneficiary did not have the beneficial interest in the property.
The Guide ought to be applied unless there are cogent reasons for departing from the policy; Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.
The applicants and Mr Bryars’ children state that an informal agreement was reached where the Mooroobool and Westcourt properties would be purchased in the name of the Trust as a way of assisting the children in buying their own homes. Each child lived in their respective properties since purchase and made regular payments to the Trust in rent, which was used to pay down the mortgages.
If the children had an expectation of future ownership of the Mooroobool and Westcourt properties, this was on the condition that each child would discharge their portion of the mortgage. As evidence by an email sent to Martin Bryars and Nicola Parker on 22 October 2013, Mr Bryars stated that if either child wanted to purchase their house from the Trust, the only requirement would be to repay half of the amount owing on the bank loan at the time. Mr Bryars referred to any missed payments of rent being considered a debt to the Trust.
Payments made by Mrs Parker and Martin Bryars in relation to the properties suggests that at the time the properties were purchased by the Trust, there was no common intention that the children would be the beneficial owners of their respective properties.
In April 2015, Martin Bryars entered into a general tenancy agreement in relation to the Mooroobool Property with the Trust as the lessor. The tenancy agreement required Martin Bryars to pay $400.00 in rent per week. Payments received by Martin Bryars are referenced as “holly St Rent” in the bank statements of the applicants.
Mrs Parker described her regular payments as payments of interest on the mortgage. However, the payments made by both Martin Bryars and Mrs Parker do not correlate with the interest payments on the mortgage. At hearing, it was confirmed that the payment amounts of $500 to $600 a week for Mrs Parker and $400 a week for Martin Bryars were reflective of market rental for the properties. The payment values were reflective of what they used to pay in rent prior to the purchase of the properties. The fact that payments made by the children were used to pay down the Westpac mortgages does not demonstrate that there was a common intention that the children possessed a complete beneficial interest in the properties.
Martin Bryars has provided consistent information about his living situation/ownership in a claim for sickness allowance dated 7 April 2015; in a claim for Newstart Allowance dated 2 November 2015; and, in a claim for family tax benefit dated 15 January 2019. He stated that he did not own a home; he was not paying a mortgage for a home in which he was living; and his home was not owned by a trust in which he had an interest. This evidence did not appear to be disputed by Martin Bryars as he said he was unsure how else to explain or declare his situation.
As already stated, between 2008 and 2019, the Trust declared rental income from both properties to the Australian Tax Office. Mr Bryars does not dispute that the trust declared the payments made by the children as rent, as he did not know how else to record the payments. All other payments made in respect of the houses were claimed as expenses by the Trust.
As for whether Martin Bryars and Nicole Parker acted to their detriment on the basis of the common intention as to the beneficial ownership of the property, this cannot be established in circumstances where they both had the benefit of living in the properties. At the same time, they were making regular payments to the applicants in rent, which were used to make payments on the mortgage. The evidence demonstrates that Martin Bryars and Mrs Parker also withdrew money from the mortgage account to pay for rates, insurances, other bills and improvements to their respective properties.
While the evidence suggests that there was an informal family agreement that either child could decide to purchase the Mooroobool and Westcourt properties from the Trust if they were in a financial position to do so, the properties were legally owned by Mr Bryars, in his capacity as trustee of the Trust.
For these reasons, I am not satisfied that a constructive trust existed in respect of either the Mooroobool or Westcourt Property. The properties were assets of the Trust at the time of their sale to Martin Bryars and Nicole Parker, and therefore were assets of the applicants.
Disposal of Assets
Section 1208L in Part 3.18 the SS Act deals with the disposal of assets by a trust. If an attributable stakeholder disposes of an asset of a private trust and does not receive adequate financial consideration for the disposal, the deprivation rules under Division 2 of Part 3.12 of the SS Act apply, subject to the attribution percentage of the attributable stakeholder.
As already detailed, both the Mooroobool Property and Westcourt Property were assets disposed of by the Trust and were sold to Martin Bryars and Mrs Parker for less than their market value. As such, the Trust received inadequate consideration for the disposal, satisfying subparagraph 1208L(6)(b)(ii). When a trust receives consideration for the disposal of an asset, the amount of the disposal is the value of the assets disposed of less the amount of the consideration received by the trust. The amount of the disposal for the Mooroobool Property was $96,032.40 and $242,398.73 for the Westcourt Property (disposal amounts).
One-half of the disposal amounts (less $10,000.00) are to be considered as part of each of the applicants’ assets for a period of five years starting from the date of the disposal; paragraph 1126AC(2)(b). Accordingly, at the time of their AP claims on 9 August 2020, the applicants’ total assets, including the disposal amounts, was $1,039,062.00. This exceeds the cut-off limit for the assets test of $876,500.
Importantly for the applicants, I note that the five years will expire on 27 February 2024 in relation to the Westcourt Property; and on 10 March 2024 in relation to the Mooroobool Property.
Decision
The decisions under review are affirmed.
The applicants may apply for AP again in the future, subject to them meeting other qualification and criteria for AP, it appears they may be eligible for part AP from 26 February 2024.
48. I certify that the preceding 47 (forty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak
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Associate
Dated: 6 March 2024
Date(s) of hearing: 9 November 2023 and 23 November 2023 Applicant(s): Self-represented Solicitor for the Respondent: Dr S Thompson, Sparke Helmore Lawyers
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