Dalianis and Secretary to the Department of Family and Community Services

[2003] AATA 1053

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 1053

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2003/459

GENERAL ADMINISTRATIVE  DIVISION

Re:VASILIOS DALIANIS

Applicant

And:       SECRETARY TO THE
  DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       G.D. Friedman, Member

Date:             17 October 2003

Place:            Melbourne

Decision:The Tribunal affirms the decision under review. 

(sgd) G.D. Friedman
  Member

SOCIAL SECURITY ‑ application for disability support pension ‑ private discretionary trust ‑ position as appointor ‑ effective control ‑ assets test ‑ lack of knowledge of legislative changes

Social Security Act 1991 s117, 1064, 1207V(1), 1207V(2), 1207X(2), 1207X(5), 1209E(1), 1209E(1)

Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies-Integrity of Means Testing) Bill 2000

REASONS FOR DECISION

17 October 2003  G.D. Friedman, Member

1.      This is an application by Vasilios Dalianis (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 25 March 2003.  The SSAT affirmed the decision of an authorised review officer of Centrelink dated 19 November 2002 to refuse the applicant’s claim for disability support pension because his assets exceeded the allowable limit.

2.      At the hearing on 13 October 2003 the applicant represented himself, assisted by an interpreter in the Greek language.  Mr M. Todd, a Centrelink advocate, represented the Secretary to the Department of Family and Community Services (the respondent).

3. The Tribunal received into evidence the documents lodged under s37 of the Administrative Appeals Tribunal Act 1975 (T1-T34).

BACKGROUND

4.      On 2 February 1995 Mr M. Dalianis, the applicant’s son, established the Vasmike Discretionary Trust (the trust) with Cosprint Pty Ltd as the Trustee.  Mr Dalianis and Ms D. Dalianis, the applicant’s daughter, were the primary beneficiaries, together with the applicant’s wife.  The applicant was named as the appointor (or principal or guardian).

5.      On 3 April 2002 the applicant lodged a claim for disability support pension.  On 5 July 2002 Centrelink refused the claim because the applicant’s assets exceeded the allowable limit for the grant of the pension.  On 7 August 2002 an authorised review officer reduced the level of assets to be taken into account, and on 19 November 2002 the authorised review officer affirmed the decision to refuse the claim.

6.      On 17 January 2003 the applicant sought review of the Centrelink decision by the SSAT.  Following the decision by the SSAT, the applicant lodged an application with the Tribunal on 2 May 2003 for review of the SSAT decision.

EVIDENCE

7.      In oral evidence the applicant stated that the trust was set up to minimise his son’s tax obligations, and belongs to his son.  He said that he contributed $250,000 in 1996 or 1997, but has had no other dealings with the trust, has received no money from it and has exercised no effective control over it.  He said that until the refusal of his application for disability support pension he was unaware that he had been designated as appointor of the trust.  The applicant told the Tribunal that at the time of the introduction of the Goods and Services Tax he asked his accountant to keep him informed of any developments that might affect the trust, and was told that he should resign as director of the trustee company.  He said that he instructed the accountant to make the necessary arrangements, but after 1 January 2002 he realised that this had not occurred.  The applicant stated that he did not know whether action against his accountant was possible.

8.      The applicant stated that although he has resigned as director of the trustee company, he has been advised that he would not be eligible for a pension for five years.  He said that his involvement in the trust had been for the purpose of protecting his children’s interests, and he believed that he was being penalised for matters that were beyond his knowledge or control. 

9.      Mr M. Dalianis, the applicant's son, gave oral evidence and confirmed that, on the advice of a solicitor, he had established the trust as a tax minimisation vehicle for himself, with named beneficiaries, such as the applicant and the applicant’s wife.  He said that the trust distributed $42,698 to the applicant’s wife in 2000/2001, but this transaction was a formality and no money actually changed hands.  Mr Dalianis noted that the assets of the trust included several investment properties in Jenkins Street, Brunswick East, and that there was a loan to the trust of about $80,000 in the name of the applicant’s wife, but that this was an accounting device.  He did not dispute the value of the assets held by the trust at the relevant time.  

10.     Mr Dalianis maintained that he and the applicant should have been informed directly by Government agencies about the legislative changes that came into effect on 1 January 2002.  He stated that at the end of 2001 he was working long hours and did not see the News Release dated 20 December 2001 (the News Release) by the then Minister for Family and Community Services announcing the changes to the relevant law.

11.     Under cross‑examination Mr Dalianis agreed that his accountant should have brought the changes to his attention at a time when the impact on the applicant’s eligibility for disability support pension could have been addressed.  Mr Dalianis also said that the applicant had played no part in the operation of the trust and did not exercise effective control.  Although there was no dispute as to the value of assets held by the trust, he said that, for similar reasons, the attribution percentage for the applicant should be nil, which would bring the value of the applicant’s assets within the allowable limit for the grant of disability support pension.

CONSIDERATION OF THE ISSUES

12. Section 117 of the Social Security Act 1991 (the Act) provides that the rate of disability support pension is calculated in accordance with the Pensioner Rate Calculator in s1064 of the Act, and takes into account the value of assets held by the applicant and his wife. At the time of the claim the allowable limit was $433,500.

13.     The relevant sections of the Act are:

1207V(1)  For the purposes of this Part, a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and:

(a)      the individual passes the control test set out in subsection (2); or

(b)      the individual passes the source test set out in subsection (3).

1207V(2)  For the purposes of this section, the individual passes the control test in relation to a trust if:

(a)the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)), is the trustee, or any of the trustees, of the trust; or

(b)a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or

(c)a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or

(d)the aggregate of:

(i)the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and

(ii)the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);

is 50% or more; or

(e)a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or

(f)a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or

(g)a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or

(h)a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.

…

1207X(2)  Trust  For the purposes of this Part, if:

(a)a trust is a controlled private trust in relation to an individual; and

(b)the trust is not a concessional primary production trust in relation to the individual (see section 1208U);

then:

(c)the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and

(d)if the individual is an attributable stakeholder of the trust — the individual’s asset attribution percentage in relation to the trust is:

(i)100%; or

(ii)if the Secretary determines a lower percentage in relation to the individual and the trust — that lower percentage; and

(e)if the individual is an attributable stakeholder of the trust — the individual’s income attribution percentage in relation to the trust is:

(i)100%; or

(ii)if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage.

…

1207X(5)  In making a determination under this section, the Secretary must comply with any relevant decision-making principles.

…

1208E(1)  For the purposes of this Act, if:

(a)an individual is an attributable stakeholder of a company or trust at a particular time on or after 1 January 2002; and

(b)at that time, the company or trust owns a particular asset (whether alone or jointly or in common with another entity or entities); and

(c)if, at that time, that asset had been owned by the individual instead of by the company or trust, the value of the asset would not be required to be disregarded by any express provision of this Act; and

(d)at that time, the asset is not an excluded asset (see subsection (2));

there is to be included in the value of the individual’s assets an amount equal to the individual’s asset attribution percentage of the value of the asset referred to in paragraph (b).

…

1209E(1)  The Secretary may, by writing, formulate principles (decision-making principles) to be complied with by him or her in making decisions under:

(a)       section 1207X…

14.     In reaching its decision the Tribunal takes into account the oral and written evidence and the submissions made at the hearing.  The Tribunal finds that at the time of the claim the assets of the trust were valued at $1,331,668.  The Tribunal also finds that for the purposes of s1207V of the Act the trust was a designated private trust and the applicant was an appointor of the trust.  Therefore, he passes the control test.. Under s1207X(2) of the Act the applicant is an attributable stakeholder. In exercising its discretion with respect to the applicant’s income attribution percentage, the Tribunal notes that s1209E(1) of the Act requires the Tribunal to comply with the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 (the principles).  These provide that if a person meets one or more of the following factors then the attribution percentage may be less than 100 per cent if such a decision is warranted:

·circumstances arising from the legal structure of the trust;

·circumstances arising from the administrative arrangements of the trust;

·whether the individual can reasonably be expected to exercise effective control in relation to the trust-and the extent of any control;

·whether the individual has made a contribution to the trust;

·past benefits from any distribution;

·any future benefit from a distribution;

·whether the individual derives any other benefit from the trust;

·whether the individual is an attributable stakeholder of any other trust or company; and

·any other circumstances that affects the involvement of the individual with the company or the trust.

15.     The Tribunal notes that under a discretionary trust an appointor generally has the power to dismiss or appoint a trustee, veto a trustee’s decision, exercise control over the trustee in another manner or change the terms of the trust deed.  Therefore, the applicant could be seen to exercise significant control of the trust.  In addition, there is no dispute that the applicant contributed a significant sum of money to the trust in 1996 or 1997.  On the other hand, the Tribunal accepts the evidence from the applicant and Mr Dalianis that the applicant has not had day‑to‑day involvement in the trust or exercised effective control, and was not aware of his nomination of appointor at the time of his claim.  The Tribunal also accepts that the only distribution by the trust was to the applicant’s wife in 2000/2001.  Having applied the Principles to these circumstances, the Tribunal concludes that the appropriate asset attribution percentage for the applicant is fifty per cent.  Fifty per cent of the value of the assets amounts to $665,834, which exceeds the allowable limit of $433,500, for eligibility for the disability support pension.

16.     With respect to the submissions by the applicant and Mr Dalianis concerning their lack of knowledge of the legislative changes, the Tribunal notes that in the Second Reading Speech in connection with the Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies-Integrity of Means Testing) Bill 2000 on 13 November 2000 the Minister stated:

The fundamental change being proposed under this measure is that when a private trust or private company is recognised as a designated private trust or company, the assets and income of these private trusts and private companies may be attributed to a person who controls or has contributed to these structures…

The implications of the proposed legislative changes were outlined in the News Release, which also referred to a three‑month extension of time to allow persons affected by the changes to transfer control of their private trusts.  The applicant and Mr Dalianis could reasonably expect that their accountant would keep them informed of relevant developments and legislative changes. The Tribunal does not accept that Mr Dalianis' work commitments at the time, or the applicant's lack of knowledge of the impact of legislative changes upon him or Mr Dalianis, are relevant to the asset attribution percentage in respect of the applicant.

17.     For these reasons the application cannot succeed.

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, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  13 October 2003

Date of decision:  17 October 2003
Advocate for applicant:                Self‑represented
Advocate for respondent:            Mr M. Todd, Centrelink