Earl; Secretary, Department of Education, Employment and Workplace Relations and
[2008] AATA 367
•6 May 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 367
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/1072
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS Applicant
And
GEOFFREY EARL
Respondent
DECISION
Tribunal J.W. Constance, Senior Member Date6 May 2008
Place Canberra
Decision 1. The reviewable decision of the Social Security Appeals Tribunal made 6 March 2007 is set aside and in substitution it is decided that pursuant to section 1207X of the Social Security Act 1991 (Cth) Mr Earl is an attributable stakeholder to the trust established by the last will of the Late Patricia Margaret Anne Keenan who died on 28 February 2003.
2. The matter is remitted to the Secretary, Department of Employment and Workplace Relations to calculate the asset attribution percentage of Mr Earl to the trust in accordance with the Reasons for this Decision.
………….......[Signed].......................
J.W. Constance, Senior Member
CATCHWORDS
SOCIAL SECURITY – Appeal from Social Security Appeals Tribunal – Respondent a beneficiary of a trust - whether Respondent ‘attributable stakeholder’ for purpose of Act – assets attributable to Respondent.
Social Security Act 1991 s 1207X
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000
Cocks v Secretary, Department of Family and Community Services (2002) 72 ALD 306.
REASONS FOR DECISION
INTRODUCTION
3.Mr Earl has applied to Centrelink for a Newstart Allowance. As he is a beneficiary of a trust it is necessary to decide how much (if any) of the assets of the trust should be attributed to him for the purpose of determining his eligibility for the Allowance.
4.The Social Security Appeals Tribunal has decided that Mr Earl is not an “attributable stakeholder” within the meaning of the Social Security Act 1991 (“the Act”) and consequently none of the trust assets are attributable to him. Under the Act a person who is the beneficiary of a trust is an “attributable stakeholder” unless the Secretary determines otherwise.
5.The Secretary of the Department has sought a review of the Tribunal’s decision. For the reasons which follow I have decided that the decision l should be set aside. In substitution it will be decided that there shall not be a determination that Mr Earl is not an attributable stakeholder. The matter will be remitted to the Secretary to determine the percentage of assets to be attributed to Mr Earl in accordance with these Reasons.
FINDINGS OF FACT
6.Unless otherwise stated the following findings of fact are based on the evidence of Mr Earl. I am satisfied of the facts found on the balance of probabilities.
7.Mr Earl is a beneficiary of the estate of the late Ms Keenan who died on 28 February 2003. Her last will was dated 23 July 2001.[1]
[1] T6.
8.The relevant provisions of the will are:
3. I GIVE the whole of my estate to my Trustees upon the following trusts and directions:
(i) I GIVE the following directions to my Trustees regarding my house and land situate and known as ‘Valley View’, Eualdrie Road, Grenfell (“my land”) and the plant, machinery and equipment used in connection with my land (which shall not include my sedan motor vehicle)(“my plant, machinery and equipment”) and stock and the household contents in the house (“my household contents”):
(a) I GIVE my Toyota Hilux utility (or any other utility purchased in its place and owned by me at the date of my death) and my stock to my friend GEOFFREY ARTHUR EARL absolutely.
(b) My friend GEOFFREY ARTHUR EARL (“my friend”) may occupy my land and have the use of my plant, machinery and equipment and my household contents as long as he wishes PROVIDED THAT he keeps my house clean and tidy and in good tenantable condition, fair wear and tear excepted, my plant, machinery and equipment in good serviceable repair fair wear and tear excepted and looks after that part of my land that consists of my farming and grazing land in a good and husband like manner;
(c) Upon the death of my friend, or upon my friend not occupying the house on my land for a continuous period of at least six (6) months, or upon his failing to comply with the conditions of his occupation of my land after notice in writing has been given to remedy any such failure and he fails to comply with such notice within a period of three months from the date of such notice, THEN my land and my plant, machinery and equipment and my household contents shall be sold and the proceeds thereof shall form part of my residuary estate as hereinafter defined.
(ii) My Trustees shall hold the balance of my estate to set up a fund (“fund”) to consist of:-
(A) the balance of my estate excluding my land, my plant, machinery and equipment and stock and my household contents and after payment of all my just debts funeral and testamentary expenses;
(B) the proceeds of my superannuation policies or policies which I direct shall be paid to my estate; and
(C) any income added to the fund from time to time;
(iii) I DIRECT my Trustees:-
(a) to invest the fund as authorised by law or any clause in this will;
(b) to pay the capital and income from the proceeds of my superannuation policy or policies to or for the benefit of my friend by regular monthly instalments in the sum of $1,000.00 indexed annually for inflation from the date of my death by the Consumer Price Index (All Groups Sydney), the first of such instalments to be paid one month following receipt of such proceeds by my estate and thence monthly thereafter;
(c) to use the income an, if that is insufficient, then the capital of the balance of the fund to pay for the rates, insurance, repairs and maintenance of my land;
(d) to use the balance of income, if any, of the balance of the fund for the maintenance, advancement or benefit of my friend at such times and in such amounts as my Trustees in their absolute discretion may determine;
…
(f) Upon the death of my friend the balance of the fund, if any, together with any accrued income shall form part of my residuary estate.
The beneficiaries of the residuary estate are the siblings of Ms Keenan.
9.By her will Ms Keenan appointed Mr Earl, her sister Ms Smith (one of the residuary beneficiaries) and her accountant Mr Foster as the trustees of her estate. She declared that her trustees shall never be less than two in number. No trustee was given any power in excess of that given to the other trustees.
10.Mr Earl gave evidence. On the basis of his evidence I am satisfied of the following facts:
·part of the estate of the Late Ms Keenan is the farming property known as “Valley View”;
·Mr Earl has resided in the house on the property and cared for the property since Ms Keenan’s death;
·at present a neighbour runs some sheep on ”Valley View” in return for assisting Mr Earl with some work on the property;
·from time to time, but not always, Mr Earl has claimed from the Estate the cost of repairs he has carried out to the property and when claimed these costs have been reimbursed to him;
·since Ms Keenan’s death Mr Earl has received from the Estate payments of $1000 per month;
·the monthly payments to Mr Earl have not been indexed for inflation although the will provides for this.
11.Mr Foster gave evidence and provided a statement. [2] He said that in exercising his role as trustee he does not have regular discussions with the other trustees. Rather, the estate solicitors send a monthly statement to the trustees setting out the expenses of the estate for the month and the trustees then sign the necessary documentation to transfer funds from the Estate’s account to the solicitors’ trust account to meet those expenses. These expenses include the monthly payment to Mr Earl. The solicitors prepare the Estate accounts and Mr Foster prepares the Estate’s taxation return. The Estate has made some capital gains on its investments. Its income is limited to interest on its investments and the dividends on its shareholdings. I accept Mr Foster’s evidence.
[2] Oral evidence and statement being ex.R3 dated 27 March 2008.
12.Ms Reid also gave evidence and provided a statement.[3] She is a clerk employed by Carmody Crampton, the Estate’s solicitors. She has undertaken the administrative work in relation to the Estate. On the basis of her evidence I am satisfied that the Estate’s funds are held in the following:
·a wealth-e-account held by the trustees and administered by BT Portfolio Services Limited;
·a term deposit held by the trustees at the South West Slopes Credit Union;
·Carmody Crampton Trust Account.
[3] Ex.R4, dated 27 March 2008.
As at 26 March 2008 the balance of the wealth-e-account was $110,185.34 and the term deposit was $3,777.25; there was $979.58 in the trust account.
13.Further, on the basis of Ms Reid’s evidence, I am satisfied that the term deposit is held by the trustees as a working account and that funds are transferred from the investment account as required. Payments by the Estate are made by the trustees transferring funds from the term deposit to the trust account from which they are disbursed by the solicitors on behalf of the estate. This is confirmed by the Trust Account records.[4]
[4] Ex.R5.
14.A trust account statement prepared by Carmody Crampton [5] shows that the proceeds of the superannuation policies received by the Estate amounted to $186,127.89. These funds were mingled in the trust account with other receipts of the Estate including share dividends, bank account proceeds and other investments. On 18 April 2005 the sum of $160,000 was paid to the South West Slopes Credit Union as an “investment of part funds in term deposit”. [6] Statements from the Credit Union [7] show that interest earned was added to the deposit and from time to time some of the funds were transferred back to the trust account. On 11 April 2006 $130,000 was paid to BT Portfolio Service.
15. On the basis of the evidence to which I have referred I am satisfied that the trustees now hold or are entitled to the following Estate assets:
·the farm property “Valley View” on which the house is situated and which had a value of $260,000.00 in 2006;
·the plant, machinery and equipment and household contents;
·the fund set up pursuant to clause 3(ii) of the will comprising the wealth-e-account ($110,185.34) the Credit Union term deposit ($3777.25) and the funds held in the Carmody Crampton trust account ($979.58);
·shares ($5947).[8]
[5] T29.
[6] T29.
[7] T44-47.
[8] Ex.R4.
ISSUES FOR DETERMINATION
16.In order to determine whether Mr Earl is entitled to receive the Newstart allowance it is necessary to decide the percentage, if any, of the assets of the Estate which should be attributed to him for the purpose of calculating his entitlement. This requires a determination of the following issues.
1) Is Mr Earl an “attributable stakeholder” within the meaning of the Social Security Act 1991 (Cth)?
2) If so, what percentage of the assets is attributable to him?
LEGISLATION
17.The relevant provisions of the Social Security Act (1991) are set out in the following paragraphs.
18.1207X Attributable stakeholder, asset attribution percentage and income attribution percentage
Trust
(2) For the purposes of this Part, if:(a) a trust is a controlled private trust in relation to an individual; and
…
(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;
19.(5) In making a determination under this section, the Secretary must comply with any relevant decision‑making principles.
The relevant principles in the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 are set out in the Schedule to these Reasons
THE ARGUMENTS OF THE PARTIES
20.The parties agree that, within the meaning of the legislation, the trust created by the will is a “designated private trust” and a “controlled private trust “ in relation to Mr Earl. On the evidence I am satisfied that this agreement is appropriate. Once it is determined that the trust is a “controlled private trust” in relation to Mr Earl, he is an “attributable stakeholder” unless a determination otherwise is made by the decision-maker, in this case this Tribunal.[9]
[9] S.1207X(2)(c).
21.The Secretary argued that the correct approach is to consider the application of all the Principles having regard to the whole of Mr Earl's' circumstances. It was put that “…the fact that Mr Earl is entitled to such a vast proportion of the estate during his lifetime, without any intervention or exercise of control or discretion by himself or the other trustees is a factor weighing very largely against the exercise of discretion in his favour.” [10] Essentially, all of the estate assets should be attributed to Mr Earl.
[10] Applicant’s Statement of Facts and Contentions para.25.
22.On the other hand it was argued on behalf of Mr Earl that “Mr Earl benefits from the trust only by having a right to live on the property and use its assets, to receive $1,000.00 per month for his support and for exceptional expenses to be paid on his behalf should the other trustees agree.” [11] Counsel argued that in this situation a consideration of the Principles leads to the conclusion that it should be determined that Mr Earl is not an “attributable stakeholder”.
[11] Respondent’s Statement of Facts and Contentions para.14.
DETERMINATION OF THE ISSUES
Is Mr Earl an “attributable stakeholder” within the meaning of the Social Security Act 1991?
23.The Act does not provide any guidance other than that the decision-maker must comply with any relevant decision-making principles. The Principles are set out in the Schedule.
24.In order to comply with the requirement set out in the Act it is necessary to consider all of the Principles to ascertain those which are relevant to the facts before me. It is then necessary to decide whether the application of one or more of the circumstances set out in the Principles ‘provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the …. trust.” [12] This approach is consistent with that of the Tribunal in Cocks v Secretary, Department of Family and Community Services (2002) 72 ALD 306.
[12] Principle 6.
25.Principle 6 provides a general statement as to the application of the Principles in that it requires consideration of the circumstances set out in the relevant principles and “the reason why, but for a determination, the individual would be an attributable stakeholder”. [13]
[13] Principle 6 (2)(a).
26.In this matter Mr Earl would be an attributable stakeholder (if there is no determination otherwise) because the trust is a “designated private trust” under section 1207P [14] and the individual concerned (Mr Earl) passes the control test set out in the section. He passes the test for two reasons and both are to be taken in to account.
[14] The trust is a “designated private trust” because it is a trust which does not come within any of the exceptions set out in the section.
27.The parties have agreed that Mr Earl passes the test because he is a trustee and for this reason it was not necessary to consider any further facts for the purpose of deciding that the trust is a designated private trust. However the consideration of other grounds for reaching this conclusion is relevant under Principle 6 (2)(a). I accept the proposition put by Counsel for the Secretary that Mr Earl also passes the control test because his beneficial interest in the income of the trust is 50% or more. Mr Earl is entitled to the income of so much of the fund as consists of the superannuation proceeds [15] which were well in excess of 50% of the funds which were originally contributed to the fund. The other major asset of the trust, being the “Valley View” property, has earned little, if any, income.Presently it earns no income other than that represented by some unspecified assistance from a neighbour in return for the agistment of stock.
[15] Pursuant to clause 3(iii)(b) of the Will.
28.I turn now to consider the other circumstances mentioned in Part 2 of the Principles.
Principle 7: Circumstances affecting the relationship with the trust
29.It is required that consideration be given to whether any relevant circumstances make it inappropriate for the individual to be an attributable stakeholder. Included in “relevant circumstances” are the legal structure and administrative arrangements of the trust and whether the individual “can reasonably be expected to exercise effective control in relation to the … trust.”
30.Mr Earl is one of three trustees who have equal standing both in the legal structure and administrative arrangements of the trust, although understandably Mr Foster does not take the same interest in the day to day operation of the farm as do the others. Nothing in the formal arrangements for administering the trust prevent his taking a greater role in this regard.
31.As there are three trustees, one of whom is a residuary beneficiary and can be expected to protect the interests of those entitled to the residuary estate, I am not satisfied that Mr Earl can reasonably be expected to exercise effective control in relation to the trust. He has no power to over-rule any of the decisions of the other trustees and does not have any powers of appointment of trustees. There is no evidence to suggest that he has been, or is likely to be, permitted by the other trustees to make substantial decisions as to the operation of the trust without their agreement. Control is not an issue in relation to the major part of the fund as there is no discretion as to the payment to Mr Earl of the superannuation funds.
Principle 8: Contribution to trust
32.This principle is not relevant as there is no evidence that Mr Earl has made a contribution to the trust.
Principle 9: Past benefit from distributions from trust
33.It is clear that Mr Earl has benefited in the past by the distribution of $1000 per month from the trust. This benefit has been substantial (having been received regularly since the death of Ms Keenan in February 2003) and on his evidence it has provided Mr Earl with his living expenses. He has also had the benefit of distributions to reimburse him for expenditure on the maintenance of the house and property which he occupies.
Principle 10: Future benefit from distributions by trust
34.Presently there is almost $115,000 in the trust fund. Although (for reasons which I shall state later) not all these funds are available to meet the monthly payment to Mr Earl, there are sufficient funds to continue this payment for several years, bearing in mind that he is entitled to both the income and capital of the superannuation policies. In reaching this conclusion I take into account that on its past performance the fund can be expected to continue to earn an income. In addition there is the clause in the Will which permits the trustees to exercise their discretion to make further provision for him.[16] It is also reasonably foreseeable that Mr Earl will continue to receive distributions to assist in maintaining the house and property which he occupies of similar value to those which he has received in the past.
[16] Clause 3 (iii)(d).
Principle 11: Benefit from assets and income of the trust
35.Mr Earl enjoys a substantial benefit from both the assets and income of the trust in that he is provided a home and contents, the occupation of the farming land being part of “Valley View” and the use of the plant, machinery and equipment associated with the farm. The income of the trust also provides a benefit to him as it contributed to the maintenance of the house and farm.
Principle 12: Existing attribution to individual
36.This Principle is not relevant.
Principle 13: Other circumstances
37.There do not appear to be any relevant circumstances which have not been dealt with under the preceding Principles.
Consideration of all relevant Principles
38.A consideration of all the relevant Principles leads me to the conclusion that it is not appropriate to make a determination under section 1207X of the Act that Mr Earl is not an attributable stakeholder. There are no Principles which, when applied to the circumstances of Mr Earl, weigh heavily in favour of such a determination. On the other hand, the consideration of Principles 6, 9, 10 and 11 suggest that it is appropriate that there be no such determination.
What percentage of the trust assets is attributable to Mr Earl?
39.Part 3 of the Principles contains the principles applicable to the determination of the asset attribution percentage with which the decision-maker must comply in making a determination that an attributable stakeholder’s asset attribution percentage in relation to a trust is a specified percentage lower than 100%. The starting point is that the asset attribution is 100%.[17]
[17] Section 1270X(2) of the Act.
40.The Principles in Part 3 mirror the provisions of Part 2 and for this reason the text of Part 3 is not included in these reasons.
41.Having considered the Principles in Part 3 I have come to the conclusion that there should be a determination that the asset attribution to Mr Earl should be less than 100%. The assets which should not be included in the attributable assets are:
· that part of the trust fund that consists of funds referrable to money from sources other than the superannuation policies, and
· the shares.
Principle 16: Circumstances affecting relationship with trust
42.For the same reasons as I have already stated in relation to the application of Part 2 I am satisfied that there are no circumstances affecting the relationship of Mr Earl with the trust which would lead to the conclusion that Mr Earl has any role other than that of one of three trustees exercising equal powers. The evidence is that he is fulfilling his role expressed by the late Ms Keenan in her will.
Principle 17: Contribution to trust
43.Principle 17 is not relevant.
Principle 18: Past benefit from distributions by trust
44.It is clear from clause 3(ii) of the will that the fund is to consist of two parts. The first is the capital and income of the proceeds of the superannuation policies. This part of the fund is to be paid to Mr Earl in specified monthly payments during his lifetime. This is being done, save that the amount has not been indexed for inflation as provided by the will.
45.The second part of the fund is that consisting of the funds which came from assets other than superannuation policies and the income earned by that part. These assets were the AXA policy, the bank accounts and the Nissan motor vehicle referred to in the Inventory of Property attached to the Grant of Probate.[18]
[18] T6.
46.The only benefit Mr Earl has received from the second part of the fund is that the trustees have paid the rates, insurance and some of the repairs carried out on the house and land occupied by him. This is in accordance with the will which provides that Mr Earl is not responsible for “fair wear and tear” on the property but that otherwise he is required to keep the property in good condition. The expenditure from this part of the fund is primarily for the purpose of preserving the assets for the residuary beneficiaries rather than benefiting Mr Earl. Details of the payments appear in the trust records of Carmody Crampton.
Principle 19: Future benefit from distributions by trust
47.On the basis of the evidence as to what has happened to date it is reasonably foreseeable that the trustees will continue to make distributions from the trust to meet rates, insurance and the cost of repairs necessitated by fair wear and tear. This is required of them under the will. These distributions will be of limited benefit to Mr Earl and on the basis of past distributions are likely to be of similar amounts.
48.There is the potential for a direct benefit to Mr Earl from the second part of the fund in that there is provision for the trustees to use income of that part of the fund for his benefit. Such use of the fund is in the absolute discretion of the trustees.[19]
[19] Clause 3(iii)(d).
49.It is uncertain whether any payments would ever be made to Mr Earl under this provision, particularly in view of the provision already made for him. Mr Foster said that he would need to look very carefully at the need for such a payment.
Principle 20: Benefit from assets and income of trust
50.Mr Earl does not receive or derive any kind of benefit from the assets or income of the trust other than those already dealt with in these reasons.
Principle21: Existing attribution to individual
51.This principle is not relevant to Mr Earl.
Principle 22: Other circumstances
52.There are no other relevant circumstances which have not been dealt with under the preceding Principles.
Consideration of all relevant Principles
53.Weighing up the various considerations I am satisfied that there is a sufficient basis on which to decide that the shares and that part of the fund not consisting of the superannuation proceeds should not be included in the assets attributable to Mr Earl. It follows that there is a sufficient basis on which to determine an asset attribution percentage lower than 100%. I am satisfied that the past and likely future benefit to Mr Earl from the shares and the non-superannuation component of the fund is of such a limited extent that a 100% attribution of assets is not appropriate. The shares held by the trustees are part of those assets to be excluded as the evidence does not show any benefit to Mr Earl from those shares.
54.Counsel for Mr Earl has argued that the farm component of Valley View” should be treated as an asset not attributable to him. The whole property was valued at $260,000.00 in May 2006. The value of the house and curtilage was $190,000.00 and the remainder of the property (the farm area) was valued at $70,000.00.
55.Mr Earl is entitled to occupy all of “Valley View” (both the house and farm) and has the use of the farm machinery. He was also given the stock belonging to the Late Ms Keenan. Although the property is stocked by a neighbour at present this is a matter of choice by Mr Earl and he could use the farm to generate an income if he wished. Whilst ever he continues to occupy “Valley View” the only person who has the benefit of the whole property is Mr Earl. In these circumstances there is not a sufficient basis to include the farming part of the property in those assets which should not be attributable to Mr Earl.
Determination of the asset attribution percentage
56.The determination of the percentage which is the appropriate asset attribution percentage presents a number of practical difficulties. I am satisfied on the evidence of Mr Foster and Ms Reid that separate accounts of the superannuation and non-superannuation components of the fund have not been kept. Although the will provides for the setting up of “a fund”, as I have already stated the trustees are required to deal differently with the two parts of the fund. Further, depending on the longevity of Mr Earl, the superannuation component may be exhausted at a time when there are still funds remaining in the non-superannuation component to be used for the other purposes set out in the will. The trustees need to be in a position to know if this point is reached.
57.The asset attribution percentage in relation to Mr Earl is to be determined in accordance with the following formula:
AAP = AA÷TA x 100
where:
AAP is the asset attribution percentage;
AA is the value of the attributed assets being the total of the value of that part of the fund as consists of the proceeds of the superannuation policies (which includes the income earned by these proceeds and excludes the distributions which have been made to Mr Earl) and the value of “Valley View” after exclusion of those part or parts (if any) of the assets required by the Social Security Act.;
TA is the total value of the assets of the Estate after exclusion of those part or parts of the assets (if any) required to be excluded from the calculation by the Social Security Act.
The value of the assets is to be determined as at the date of calculation of the assets attribution percentage.
58.The evidence does not enable me to determine the asset attribution percentage as I am unable to determine the value of that part of the fund as consists of the proceeds of the superannuation policies. For this reason I propose to remit the matter to the Secretary to determine the percentage in accordance with these reasons. Mr Earl should assist the Secretary in this regard by requesting the trustees to provide the necessary information to allow the calculation to be made.
59.In calculating the superannuation component it is necessary to determine the amount of the total fund which was contributed to by the superannuation policies. This can be determined on the evidence before me.
60.The proceeds of the policies were:
Ausvest $120,872.68
Colonial First State $ 45,639.40
Norwich $ 19,615.81
TOTAL $186,127.89
61.The non-superannuation assets which were contributed to the fund were:
AXA policy $ 15,887.02
Security Credit Union A/c $ 974.22
Commonwealth Bank A/c $ 852.92
Health Fund refund $ 1,198.30
Nissan vehicle $ 2,500.00
TOTAL $ 21,412.46
These figures have been taken from exhibit R1, document T29.
62.The fund was established by the investment of $160,00.00 in the South West Slopes Credit Union on 18 April 2005.This was the first investment of funds obtained from the realization of estate assets. As this investment did not represent all of the estate funds it should be divided between the superannuation component and the non-superannuation component in proportion to the assets which contributed to it as set out in the preceding paragraph, i.e. 89.7% superannuation, 10.3% non-superannuation. From this starting point it will be necessary to allocate income of the fund between the two components in proportion to the amount in each component from time to time. It will also be necessary to allocate the various distributions between the two components. The fund has been held in three different accounts – the wealth-e account, the Credit Union account and the Carmody Crampton trust account.
63.Once this accounting exercise has been carried out the amounts in the superannuation component and the non-superannuation component at the date of this decision will be able to be determined. The asset attribution percentage applicable to Mr Earl can then be determined in accordance with the formula previously set out.
DECISION
64.The reviewable decision of the Social Security Appeals Tribunal made 6 March 2007 is set aside and in substitution it is decided that pursuant to section 1207X of the Social Security Act 1991 (Cth) Mr Earl is an attributable stakeholder to the trust established by the last will of the Late Patricia Margaret Anne Keenan who died on 28 February 2003.
65.The matter is remitted to the Secretary, Department of Employment and Workplace Relations to calculate the asset attribution percentage of Mr Earl to the trust in accordance with the Reasons for this Decision.
I certify that the 65 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J.W.Constance, Senior Member.
Signed: ................................[Signed}.......................................
Peter Horobin
AssociateDate of Hearing 28 March 2008
Date of Decision 6 May 2008
Counsel for the Applicant Justin Smith
Solicitor for the Applicant Sarah Arthur
Blake Dawson.
Counsel for the Respondent Mark Vincent
Solicitor for the Respondent Keith CarmodyCarmody Crampton
Schedule
Part 2Determination that individual is not attributable stakeholder
5 Purpose
This Part sets out decision-making principles with which the Secretary must comply in making a determination, under paragraph 1207X (1) (a) or (2) (c) of the Act, that an individual is not an attributable stakeholder of a company or trust.
6 Application
(1) This Part applies if, but for a determination by the Secretary, the individual would be an attributable stakeholder of the company or trust.
(2) The Secretary must consider the relationship between the individual and the company or trust having regard to:
(a) the reason why, but for a determination, the individual would be an attributable stakeholder; and
(b) the circumstances mentioned in this Part.
(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company or trust.
7 Circumstances affecting relationship with company or trust
(1) The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder of the company or trust.
(2) For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:
(a) circumstances arising from the legal structure of the company or trust;
(b) circumstances arising from the administrative arrangements of the company or trust;
(c) whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust.
8 Contribution to company or trust
If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:
(a) the value of the contribution; and
(b) the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and
(c) the effect of the contribution on the financial position of the company or trust; and
(d) if the individual received consideration for the contribution, the amount of consideration.
9 Past benefit from distributions by company or trust
(1) The Secretary must consider whether the individual has received a benefit from a distribution made by the company or trust.
(2) If an individual has received a benefit, the Secretary must also consider:
(a) the value of the benefit; and
(b) if the individual has received a benefit on more than 1 occasion, the frequency with which the individual has received benefits.
(3) For this section, a distribution includes distributions:
(a) in the case of a distribution by a company — of the capital or income, or both, of the company; and
(b) in the case of a distribution by a trust — of the corpus or income, or both, of the trust.
10 Future benefit from distributions by company or trust
(1) The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.
(2) If subsection (1) applies, the Secretary must also consider the likely value of the benefit.
(3) For this section, the Secretary must have regard to:
(a) the constituent documents of the company; or
(b) documents, if any, establishing the terms of the trust.
(4) For this section, a distribution includes distributions:
(a) in the case of a distribution by a company — of the capital or income, or both, of the company; and
(b) in the case of a distribution by a trust — of the corpus or income, or both, of the trust.
11 Benefit from assets and income of company or trust
(1) The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 9 or 10) from the assets or income, or both, of the company or trust.
(2) For this section, benefit:
(a) is not limited to a benefit to which the individual has a legal or equitable entitlement; and
(b) includes benefits received or derived in the form of property or services.
12 Existing attribution to individual
(1) The Secretary must consider whether the individual is:
(a) under the Act — an attributable stakeholder of any other company or trust; or
(b) under the Veterans’ Entitlements Act 1986 — an attributable stakeholder of the company or trust, or of any other company or trust.
(2) If subsection (1) applies, the Secretary must also consider:
(a) the asset attribution percentage attributed to the individual, if any; and
(b) the income attribution percentage attributed to the individual, if any.
13 Other circumstances
The Secretary must consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust.
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