Drago Makaric and Secretary, Department of Education, Employment and Workplace Relations
[2012] AATA 105
•22 February 2012
[2012] AATA 105
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2011/2059
Re
Drago Makaric
APPLICANT
And
Secretary, Department of Education, Employment and Workplace Relations
RESPONDENT
DECISION
Tribunal Senior Member A K Britton
Date 22 February 2012 Place Sydney The decision under review is affirmed.
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Senior Member A K Britton
Catchwords
SOCIAL SECURITY – Newstart Allowance – eligibility – asset value limit – disposal of asset – whether contract worker could reasonably have expected to qualify for Newstart Allowance at time of disposal – deprived asset – decision under review affirmed
Legislation
Social Security Act 1991 (Cth) – ss 9, 9(4), 1123, 1127(a), 1127(b)
Cases
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
REASONS FOR DECISION
Senior Member A K Britton
8 February 2012
Mr Drago Makaric seeks review of a decision made by a Centrelink Authorised Review Officer and affirmed by the Social Security Appeals Tribunal (SSAT), to refuse his claim for Newstart Allowance on the grounds that the total value of his assets exceeds the “asset value limit”. Whether the value of Mr Makaric’s assets exceeds that limit turns on whether the $346,000 he transferred to his children in September 2007, constitutes a “deprived asset” within the meaning of the Social Security Act 1991 (Cth) (the Act). If the answer to that question is yes, Mr Makaric will be ineligible for Newstart Allowance unless, prior to making the transfer he could not reasonably have expected to qualify for that allowance (s 1127(b)).
WAS THE TRANSFERRED MONEY AN ASSET OF MR MAKARIC?
The Act defines a “financial asset” to include a “deprived asset” (s 9).
Section 9(4) 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 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC or 1126AD or an amount is included in the value of the person's assets in respect of the disposal by section 1126E (so far as that section relates to section 1126AA, 1126AB, 1126AC or 1126AD).
Section 1123 provides that a person disposes of assets if:
(a)the person engages in a course of conduct that directly or indirectly:
(i) …
(ii) disposes of all or some of the person's assets;
(iii) … 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) …
(iii) …
There is no argument that Mr Makaric received no consideration for transferring the $346,000 (the disputed money) to his children. The issue in dispute is whether prior to the transfer, the money was an asset of Mr Makaric. The respondent Secretary contends that it was; Mr Makaric on the other hand contends that he was merely the “transitional guardian” of the disputed money. To put this argument in context it is necessary to sketch in the background to the transfer.
Mr Makaric’s wife died in January 2006. Under the terms of her will, Mr Makaric was the sole beneficiary of her entire estate. In early March 2007, just over $380,000 was transferred to Mr Makaric from his wife’s estate. That amount represented the sum inherited by Mr Makaric’s wife from her mother in 2002, plus interest.
In September 2007, Mr Makaric transferred the disputed money to his two children, which they used as a deposit to purchase an apartment. On Mr Makaric’s account, the six month delay in transferring the money was caused by problems finding a suitable property.
Mr Makaric testified that an understanding existed between him and his wife that on her death, the money she had inherited from her mother would pass to their children. He said that his wife had not taken steps to amend her original will — prepared some years before she came into her inheritance — because after her mother’s death, she was unwell and somewhat “mentally unstable”. In a letter apparently prepared for the proceedings before the SSAT, Mrs Makaric’s treating doctor, stated that she had a history of depressive illness and mental impairment.
According to Mr Makaric, he did not regard and has never regarded himself as the owner of the disputed money and at all times saw it as belonging to his wife’s family and ultimately their children. On his account, had it not been for the technicalities relating to probate, consistent with his wife’s wishes the disputed money would have by-passed him and gone straight to the children. In an undated statement tendered in proceedings before the SSAT, the sister of Mr Makaric’s late wife stated that Mrs Makaric intended to leave the money inherited from her parents to her children.
Mr Makaric contends that his understanding of the ownership of the money is entirely consistent with the terms of the respective wills prepared by his wife and mother-in-law (his wife’s last surviving parent). Under the former, Mrs Makaric gave her whole estate to her husband unless he failed to survive her by 30 days, in which case it was given to any surviving child in equal shares. Mr Makaric’s mother-in-law’s will also contained a similar survivorship requirement and provided that her estate passed to her daughters in equal shares unless they failed to survive her in which case their share passed to their surviving children.
I accept that Mr Makaric saw himself as the custodian of the disputed money. However, his subjective assessment does not determine its character. The money was left to him unencumbered on the death of his wife. His children did not assume a legal or beneficial interest in their mother’s estate even if accepted that her will did not properly reflect her wishes. The disputed money did not become their asset until transferred to them by their father.
Mr Makaric is not assisted by the survivorship requirement contained in the wills of his wife and mother-in-law. That requirement does nothing more than make a period of survivorship a pre-condition for the passing of the estate to the stated beneficiary. They do not, as I understand Mr Makaric to contend, give his children any rights to the disputed money.
Nor as he contends, is Mr Makaric assisted by the Guide to Social Security Law (the Guide). The Guide is produced for the Department by the Department of Families, Housing, Community Services and Indigenous Affairs and intended to assist with decision making (see “Guides to Social Policy Law: Purpose”). The Tribunal is not bound to apply the policy expressed in the Guide, but may do so and, indeed, will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60).
Headed, “Deprivation Related to Deceased Estates and Separation”, chapter 4.1.5 of the Guide contains a table explaining how the change in “disposition amounts” applies where one member of a couple dies. It states that if the asset was owned by the deceased partner, the amount of disposition held against the surviving partner “is reduced to zero”. The Table does not address the facts of this case, where the deceased partner bequeaths the asset to their surviving partner. That is addressed at the commencement of the chapter which provides:
Person is beneficiary of deceased estate
Deprivation provisions apply to a person's interest in a deceased estate IF the person:
• waives their right to their interest in the deceased estate and the person obtains no, or inadequate consideration, OR
…
• gives their interest in the deceased estate to a third party after the estate has been finalised for no or inadequate consideration.
That Mr Makaric considered himself to be the custodian of the disputed money is to his credit but does not change its legal character. I am satisfied that prior to its transfer, Mr Makaric was the owner of the disputed money and that it was subject to his legal control. There is no argument that in transferring the $346,000 to his children, Mr Makaric disposed of the asset for no consideration. Accordingly the disputed asset constitutes a “deprived asset”.
CAN THE DISPOSITION BE DISREGARDED?
The disposition of an asset can be disregarded if it occurred more than five years before the person became qualified for a social security benefit (s 1127(a)), or, if it occurred less than five years before the person became so qualified, the person satisfies s 1127(b). The disputed transfer took place three-and-a-half years before Mr Makaric became qualified for Newstart Allowance and therefore it can only be disregarded if s 1127(b) is satisfied, which provides:
Disposition more than 5 years old to be disregarded
This Division does not apply to a disposition of an asset that took place:
...
(b) less than 5 years before the time referred to in paragraph (a)[ when the person became qualified for a social security benefit] and before the time when the Secretary is satisfied that the person who disposed of the asset could reasonably have expected that the person, the person's partner or the other person, as the case may be, would become qualified for such a pension or benefit.
Section 1127(b) requires an assessment of whether Mr Makaric could “reasonably have expected” that he would become qualified for Newstart Allowance within five years of transferring the disputed money, and if so, whether he held that expectation prior to the transfer.
When Mr Makaric transferred the money to his children he was engaged as a contractor by an employment agency to provide services to Cat Media Pty Limited. His contract with the agency stated that the minimum term of the contract was three weeks. It also stated that either party could elect to terminate the contract on one weeks’ notice. Mr Makaric started work in April 2007 and the engagement was terminated in December 2007 following a restructure within Cat Media. Subsequently Mr Makaric was contracted on similar terms by two other companies. There was a significant gap between each engagement.
I accept, as claimed by Mr Makaric, that prior to the disputed transfer he had every confidence that if the engagement with Cat Media came to an end, given his significant experience and excellent employment history, any period of unemployment was likely to be relatively short. I also accept that Mr Makaric was committed to finding employment and based on his past experience had a reasonable expectation that if his engagement with Cat Media or any future “employer” was to come to an end, he would be able to secure another position without undue delay. In addition I accept as claimed, that the primary reason Mr Makaric claimed Newstart Allowance shortly after his engagement with Cat Media ceased, was to avail himself of the services provided by Centrelink to job seekers. Nonetheless s 1127(b) is not directed at whether the person could reasonably have expected that that they would apply for the particular social security benefit, but rather whether they had a reasonable expectation that they might qualify for such benefit. Given the contractual nature of the work undertaken by Mr Makaric, it is likely that prior to disposing of the disputed money, he could reasonably have expected that he would become qualified for Newstart Allowance at some point within five years of the disposition. Whether he intended to apply for Newstart Allowance if that eventuality were to occur, or believed that any period of qualification would be short, is irrelevant. Accordingly he cannot rely on s 1127(b).
CONCLUSION
Mr Makaric is plainly an honourable man who in transferring the disputed money to his children acted in accordance with the wishes of his wife and her family. Nonetheless, for the reasons as given, the disputed money constitutes a deprived asset and must be counted towards his total assets. It follows that the decision under review must be affirmed.
I certify that the preceding 20 (twenty) paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.
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Associate to Senior Member A K Britton
Dated 22 February 2012
Date(s) of hearing 10 February 2012 Applicant In person Solicitors for the Respondent J Maclean, Centrelink Program Litigation and Review Branch
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