FCWX and LTNM and Secretary, Department of Social Services (Social security second review)
[2025] ARTA 755
•16 June 2025
FCWX and LTNM and Secretary, Department of Social Services (Social security second review) [2025] ARTA 755 (16 June 2025)
Applicants:FCWX and LTNM
Respondent: Secretary, Department of Social Services
Tribunal Numbers: 2024/8358, 2024/11340, 2024/11342, 2024/11343
Tribunal:Senior Member S Trotter (second review)
Place:Brisbane
Date:16 June 2025
Decision:The Tribunal affirms the decision under review.
Statement made on 16 June 2025 at 8:34am
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 201(1A) - 201(1B) of the Social Security (Administration) Act 1999.
Catchwords
Social security – age pension rejection – assessable assets – private company – asset attribution – genuine resignation – disposal of assets
Legislation
Social Security Act 1991
Social Security (Administration) Act 1999Cases
MDXJ v Secretary, Department of Social Services [2020] FCA 1767
Quiggin and Secretary, Department of Social Services [2019] AATA 3324
Re Duncan and Repatriation Commission [1996] AATA 112
Re Horyna-Stasi and Secretary to the Department of Family and Community Services [2002] AATA 1284
Re Mackintosh and Repatriation Commission [1997] AATA 575
Secondary Materials
Department of Social Services, Social Security Guide (Guides to Social Policy Law, version 1.329, 12 May 2025)
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017
Statement of Reasons
These applications are about whether Mr FCWX’s and Mrs LTNM’s assessable assets exceed the allowable assets limit for age pension to be granted in relation to claims they each made for age pension on 16 June 2022 and 18 December 2023.
On 1 October 2022, Services Australia – Centrelink on behalf the Respondent (Centrelink)[1] decided to reject Mr FCWX’s and Mrs LTNM’s 16 June 2022 claims for age pension on the basis that their combined assessable assets exceeded the applicable allowable assets threshold for homeowners who were members of a couple. Mr FCWX’s and Mrs LTNM’s assets were assessed to include Mr FCWX’s interest in a private company (the Company), which meant their assets exceeded the threshold.
[1] Services Australia delivers social security payments and services and is overseen by the Department of Social Services. The Respondent is responsible for the overall management and administration of the Department of Social Security. Centrelink is the Government Agency that delivers social security payments and services as part of Services Australia and as the Agency with whom pension and benefit applicants/ recipients interact, the Respondent may be variously referred to as Centrelink or the Respondent throughout these Reasons.
Mr FCWX and Mrs LTNM requested a review of these decisions and, on 18 December 2022, a Centrelink authorised review officer affirmed the decisions.
On 24 April 2024, Centrelink decided to reject Mr FCWX’s and Mrs LTNM’s 18 December 2023 claims for age pension on the basis that their combined assessable assets exceeded the applicable allowable assets threshold for homeowners who were members of a couple. Again, Mr FCWX’s and Mrs LTNM’s assets were assessed to include Mr FCWX’s interest in a private company (the Company) which again meant that their assets exceeded the threshold.
Mr FCWX and Mrs LTNM requested a review of these decisions and, on 28 and 29 May 2024, a Centrelink authorised review officer affirmed the decisions.
On 17 September 2024, following application for first review of the decisions, the AAT in its then Social Security and Child Support Division (SSCSD), affirmed the decisions to reject Mr FCWX’s and LTNW’s 16 June 2022 and 18 December 2023 claims for age pension. The decision was forwarded to Mr FCWX and Mrs LTNM by email on 30 September 2024.
On 11 October 2024 and 13 December 2024 respectively, Mr FCWX and Mrs LTNM lodged applications with the AAT seeking second review of the decision of the SSCSD. On 27 March 2025 the time for making an application for review in relation to the 13 December 2024 applications was extended to 13 December 2024 by a Registrar of the Tribunal.
On 14 October 2024, the AAT became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024, proceedings in the AAT that were not finalised before 14 October 2024 are taken to be continued and finalised by the Tribunal. Anything done in relation to the proceeding before 14 October 2024 is taken to have been done by the Tribunal.
Mr FCWX and Mrs LTNM, their son (referred to hereafter as the Son) and the Respondent’s representative participated in a hearing before me on 14 May 2025, with Mr FCWX, Mrs LTNM and the Son giving sworn evidence.
In addition to the oral evidence at hearing and oral submissions at hearing, the following documents were before me and marked as Exhibits (or for identification) as follows:
(a)Email from Mr FCWX to the Tribunal dated 27 December 2024, marked A1;
(b)Tax Return and Financial Statements of the Company for the financial year 2020/2021, marked A2;
(c)Tax Return and Financial Statements of the Company for the financial year 2021/2022, marked A3;
(d)Tax Return and Financial Statements of the Company for the financial year 2022/2023, marked A4;
(e)Document headed “American Express Business loan’, marked A5;
(f)Undated letter from Imagine Accounting to Centrelink (attaching appraisal of BCI Business Brokers dated 3 December 2019), marked A6;
(g)Documents provided by the Respondent pursuant to section 37 of the then Administrative Appeals Tribunal Act 1975 (the AAT Act) in relation to Mr FCWX’s 1 October 2022 claim, numbered pages 1 to 274, marked R1;[2]
(h)Documents provided by the Respondent pursuant to section 37 of the AAT Act in relation to Mrs LTNM’s 1 October 2022 claim, numbered pages 1 to 258, marked R2;[3]
(i)Documents provided by the Respondent pursuant to section 37 of the AAT Act in relation to Mr FCWX’s 18 December 2023 claim, numbered pages 1 to 165, marked R3;[4]
(j)Documents provided by the Respondent pursuant to section 37 of the AAT Act in relation to Mrs LTNM’s 18 December 2023 claim, numbered pages 1 to 79, marked R4;[5] and
(k)Respondent’s Statement of Issues, Facts and Contentions dated 26 February 2025, marked R5 for identification.
[2] Referred to as Bundle 1- Mr FCWX in the Respondent’s SFIC.
[3] Referred to as Bundle 1 – LTNW in the Respondent’s SFIC.
[4] Referred to as Bundle 2 – Mr FCWX in the Respondent’s SFIC.
[5] Referred to as Bundle 2 – LTNW in the Respondent’s SFIC.
ISSUES
The legislation and instrument relevant to these applications are the Social Security Act 1991 (the Act) and the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (the Principles). Unless stated otherwise references to legislative provisions in these Reasons are references to the Act.
I also had regard to the Social Security Guide (the Guide) where relevant. As recognised by the Federal Court in MDXJ v Secretary, Department of Social Services [2020] FCA 1767:
The part which a governmental policy should ordinarily play in the determinations of the Tribunal is a matter for the Tribunal to determine, in the context of the particular case, informed by considerations of the desirability of consistency of administrative decisions, but balanced against the ideal of justice in the individual case (Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20: (2010) 182 FCR 115 at [43]). Further, it is well-established that the Tribunal must make the correct or preferable decision in each case on the material before it and that the Tribunal is at liberty to adopt whatever policy it chooses, or no policy at all, in fulfilling its statutory function (Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 642-643 per Brennan J). The important matter is compliance with the terms of the relevant statute itself Minister for Home Affairs v G [2019] FCAFC 79; (2019) 266 FCR 69.
I acknowledge that in the absence of any statutory indication to the contrary, any lawful executive policy enacted to guide the exercise of a statutory power is a relevant factor for me to take into account in performing the review task and that a lawful approach allows the adoption of appropriate policy as a guide but not so as to control the making of the decision.
Section 36 of the Administration Act requires a claim for a social security payment to be determined by either granting or rejecting the claim.
The power to grant a claim is contained within section 37 of the Administration Act which provides that the claim can only be granted if the decision-maker is satisfied that both the person is qualified for the payment and that the payment is payable to the person.
As regards whether age pension is payable, section 55 requires that the rate of age pension payable to a person be determined in accordance with the Rate Calculator in section 1064. The method statement in the Rate Calculator, at point 1064-A1, provides for both an income test and an assets test to be applied in order to calculate the correct entitlement of a person to age pension. The lower of the 2 rates calculated after applying these tests is the correct rate of pension. When a person is a member of a couple, the income and assets or their partner are also taken in account in the rate calculation.
Pursuant to section 44, age pension is not payable if a person’s rate of payment would be nil.
At issue is whether Mr FCWX’s assets, and therefore also Mrs LTNM’s assets, as at the date of their age pension claims on 16 June 2022 and 18 December 2023, are to be assessed for determining their respective entitlements to age pension as including Mr FCWX’s interest in a private company (the Company). It is not in dispute that Mr FCWX was a long-time shareholder and director of the Company (with him holding 50% of the issued shares and his brother holding the other 50% of the issued shares but not playing any active role in the operation of the Company) and that Mr FCWX formally resigned as a director of the Company on 21 April 2022[6]. It is further not in dispute that Mr FCWX sold 5,000 shares in the company to the Son on 5 December 2019 for $5,000 and, on 8 January 2020, transferred his remaining 5,000 shares in the company to the Son for no consideration.
[6] Exhibit R1, page 222.
There are a number of provisions of the legislation dealing with the treatment of assets for the purposes of assessing a person’s assessable assets.
Assets are defined in section 11 as property or money. Assets for social security purposes include household contents, vehicles, money owed to a person, investments, real estate and business assets.
Section 9, amongst other things, deals with deprived assets. A deprived asset is an asset, which has been disposed of and as such can be treated as an asset of a person in some circumstances.
Division 2 of Part 3.12 of the Act sets out provisions dealing with the disposal of assets. Section 1123 sets out the circumstances in which a person is taken to have disposed of an asset. Under subsection 1123(1), a person disposes of assets if they engage in a course of conduct that directly or indirectly disposes some or all of their assets and receives no or inadequate consideration in terms of money or money’s worth.
Section 1124 provides that where a person disposes of an asset for which they have not received any consideration, then the amount of that disposal is an amount equal to the value of the asset so disposed or if insufficient consideration, then the value of the assets less the value of the consideration.
Of further potential relevance Division 2 of Part 3.12 of Chapter 3 of the Act provides, amongst other things, that if an age pension claimant or recipient gives away assets, the value of all or part of the assets given away may still count towards the assets test depending upon the application of ‘gifting rules’ in the legislation. Broadly speaking, any monies gifted in excess of $10,000 per financial year (limited, however, to $30,000 per any rolling 5-year financial period) continue to be assessable (sections 1126AC and 1126AD). The disposal provisions are often colloquially referred to as the “gifting rules”.
Part 3.18 of the Act sets out a system for the attribution to individuals of the assets and income of private companies and private trusts. For an asset or income to be attributed to an individual:
(a)the company must be a designated private company or the trust must be a designated private trust (sections 1207N and 1207P); and
(b)the company must be a controlled private company in relation to the individual or the trust must be a controlled private trust in relation to the individual (sections 1207Q and 1207V); and
(c)the individual must be an attributable stakeholder of the company or trust (section 1207X).
Section of the Guide relevantly states the following as regards the valuation of the assets of designated private trusts and designated private companies:
Attributable assets of designated private trutsts & designated private companies
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.
Assessing shares in designated private companies
Under the new rules, shares in a designated private company will not be assessed as having any value for social security purposes. This rule also applies to shares held in designated private companies by non-attributable stakeholders.
Explanation: This is to avoid double counting, as the assets of the company are FULLY attributed to the attributable stakeholder/s via the attribution process under SSAct Part 3.18.
Mr FCWX in a 2 November 2022 letter[7] and 27 December 2024 email[8] sets out the background circumstances in relation to his involvement in the Company and his submissions in relation to the assets of the Company as follows:
[7] Page 79 of Exhibit A3.
[8] Exhibit A1.
2 November 2022
I am requesting a formal review of the Centrelink's Specialist assessment. Specifically, 1. "Net assets from the balance sheet as$ 1,081,071. As no adjustment are required this is the assessable gifting amount."
Attached is a valuation I requested before the sale of my shares. The report/assessment of the company was made by BCI Business Brokers in December 2019 and was the bases of the price/value of the business that I used to sell my shares. The report in detail values all aspect of the business. Centrelink 's specialist only assessed net assets over liabilities which does not correctly show the value of the shares/ business. For example, profitable (unfortunately this business has been unprofitable for a number of years) and the important fact that the inventory figure stated in the balance sheet did not allow for adjustments /revaluation /write downs due to the condition and age of the inventory. (See page 4 of the attached report -less 66% of stock value). I was also diagnosed with Parkinson which made this sale a "Fire Sale" as I needed to exit the business as soon as possible.
I ask (sic) for a review of Centrelink's Specialist assessment.
Specifically, 2
"Net assets from the balance sheet are $1,081,071 as no adjustments are required this is the assessable gifting amount. As the customer has not received adequate consideration for the sale of their share, gifting of ($1,081,071 as an equal shareholder less $5,000 consideration) $535,535 is assessable."
Above I dispute/disagree with assessment to the value of the shares and ask for a review. However even before reconsidering the correct value of the shares I ask to also review Centrelink's gifting figure which does not account for the sale of half of my share in 2019.
Centrelink's assessable gifting amount $1,081,071
Half share I owned (less $5,000 consideration). 535,535
Sale of half my shares in December 2019 should leave an assessable amount of $270,267 without making any allowance for reasons for dispute Nol-- value of the shares.…
27 December 2024
Main reason we were rejected for the age pension is the “gifting” of shares $535,000.
Believe other assets may have been over estimated but we dispute the value of shares used by Centrelink. We acknowledge that the figures came from our accountant, but it was inevitable that the damage done to business was irreversible.
I was the CEO for over 45 years – responsible for collecting and paying millions of dollars to the ATO. In 45 years, no improprieties apart from some late payments.
In 2010 I was diagnosed with Parkinsons (sic) Disease, an incurable degenerative disease that affects both the mental and physical abilities.
From that time on I made some incomprehensible business decisions that led to the company’s demise. In 2018 we relocated the warehouse to Ingleburn to downsize and cut overheads.
I sought to sell the company but due to the damage that was done I was unable to. [the Son] took over as acting CEO and tried to save the business.
The pandemic had just started, and the future was unknown. We were able to continue with the assistance of the government financial support.
Unfortunately, the issued was our stock – which the company shares/equity were based on – I purchased products that I would not have if not under heavy medication and suffering from Parkinson’s (sic) of which was unsaleable and worthless.
Before the transfer of the shares to [the Son], I met with our accountants to lower the cost of the inventory but was advised it would come out in the wash. I also employed the services of an independent auditor to report on the financial position of the company.
This is very important, as it disputes the value/equity $535,000 used by Centrelink and the actual value that was held in stock/equity – not cash or gold but in fishing tackle/inventory was worth much less.
Please note that we submitted both letters from our accountant and the independent auditor.
Timeline:
2018 – 2019: Family intervention to expose my mental health
2019-2020: Value of share gift as per accounts $535,00 incorrect due to Parkinson’s
Profit $27,0002020-2021: Pandemic – Government assistance and small profit of $59,000
2021-2022: [the Son] works hard, has a profit but saleable inventory depleted Profit
$6,2122022-2023: Reality as what we thought would have happened in 2019 – sustained heavy loss of $499,000
2023-2024: Further loss = no equity
ATO accepts all of our accounts – Centrelink refuses to accept/believe and allow for corrections. Accounts clearly show no one benefited from the transfer of shares.
Other
·Applied for aged pension only when we became aware of the financials
·Asked Centrelink for special consideration to resubmit our application once we became aware that the new application criteria had changed and the gifting of shares would be null and void.
·It has been two years since we applied for the aged pension. The stress and anxiety has caused my deterioration from Parkinson’s to accelerate and put enormous strain on my wife and I relationship.
·The Australian Tax Office does not dispute the loss of equity.
·No one benefitted from the transfer of shares – the $5000 I received was only due to the accountant advising there had to be some monetary value with the transfer.
·Parkinson’s is an expensive disease and we cannot afford treatment
·If I have stayed in charge of the business it would have led to millions of dollars in loss and debt. Believed it is important to note that no one benefited from the share transfer and I did what I thought was right.
·By transferring the shares to [the Son], all taxes and entitlements have been paid.
Centrelink by not accepting our explanation of the value of gifted shares is stating I am lying. 45 years of business with no improprieties, paying and collecting taxes and strived to be a loyal model Australian citizen. I did not ask for Parkinsons (sic), and I honestly was unaware of the incomprehensible and irreversible decisions I made to destroy my business. Parkinsons (sic) is a cruel degenerative disease that has affected me emotionally, mentally, and physically inept.
Appeal/Mercy
We did ask the first tribunal for consideration and to be allowed to lodge our application for the aged pension using the current application documentation criteria.
My capacity has declined because of Parkinsons (sic). Considering the Tribunals history of leniency I humbly implore that we may be given the benefit of the doubt and approve our application.
In Conclusion
The Tribunal must adjudicate on the following:
1.Was the value of the share transfer Centrelink used or was the reasons we submitted warrant a change. I explained that after 45 years running the business I knew that the errors made destroyed the business ...meaning the value of equity as submitted in year 2019 - 2020 was incorrect. As support evidence we offered an independent valuation report done at the time of the share transfer.
2.Is the tribunal going to allow the indisputable evidence of retrospect that clearly show that the equity (as explained the stock valuation) used by Centrelink was not correct. The evidence we provided and is accepted by the A TO (Australian Tax Office). Timming (sic) was longer than expected (due to the pandemic) as [the Son] tried extremely hard to stop the company's destruction.
3.My Parkinson disease. Truly the cause of it all. Parkinson’s changed me both physically and mentally. I made and acted totally out of character.
May I and my wife make a plea that if your decision is to agree with Centrelink may we please be allowed to submit a new application using the current forms. We did not expect to apply for the aged pension but the destruction of the company and my Parkinsons (sic) has left us in serious financial stress/difficulties.
In summary therefore it can be seen that Mr FCWX’s and Mrs LTNM’s position is that Mr FCWX ceased being an attributable stakeholder of the company from late 2019/ early 2020 when he transferred his remaining shares in the Company to the Son. Further, they contend that the value of the company as at the date of their respective claims for age pension was less than shown in the financial statements. Mr FCWX’s evidence and submissions at hearing included that in 2019 he knew the assets of the Company were not worth the value they were being carried in the books for and he discussed the issue with his accountant. He was concerned about the Company remaining solvent and of his responsibilities in that regard. In hindsight he sees that leading up to this time, likely including because of the impact of Parkinson’s upon him, he had been making unjustified decisions which impacted the Company. He looked at other alternatives including selling the business or merging with another entity but that did not work out.
The Respondent’s position is that:
(a) Mr FCWX was an attributable stakeholder of the Company until 21 April 2022 when he resigned as a director, the assets of the company were therefore to be attributed to Mr FCWX for social security purposes until that date and Mr FCWX deprived himself of the attributable assets of the Company on 21 April 2022[9]; and
(b) The value of Mr FCWX’s interest in the Company is as represented in the 2020/2021 Balance Sheet for the company, showing net assets of $1,081,072.
[9] Paragraph 39 of the Respondent’s SFIC (marked R5).
It follows that the issues to be determined by me are:
(a) When did Mr FCWX cease to be an attributable stakeholder of the Company?; and
(b) What is the value of the assets of the Company to be taken into account?
CONSIDERATION
Issue 1: When did Mr FCWX cease to be an attributable stakeholder of the Company?
Mr FCWX and Mrs LTNM do not dispute, as submitted by the Respondent, that the Company, having consolidated revenue of less than $25 million and consolidated gross assets of less than $12.5 million, is a designated private company pursuant to section 1207N of the Act[10], that the Company is a controlled private company within the meaning of section 1207Q with Mr FCWX exercising control over the company on account of his role as managing director and part shareholder. Further it is not disputed that prior to his resignation, Mr FCWX was an attributable stakeholder of the Company within the meaning of section 1207X having regard to the Principles[11] and that when an attributable stakeholder, he had a 50% asset and income attribution of the Company owning half of the issued shares of the Company (with his silent partner brother holding the other half of the issued shares) prior to sale/transfer of his shares to the Son in 2019 and 2020.[12] It follows and I find that Mr FCWX was an attributable stakeholder of the Company pursuant to subsection 1207X(1) with a 50% income and asset attribution of the Company. At issue is when Mr FCWX ceased to be an attributable stakeholder.
[10] Paragraph 47 of the Respondent’s SFIC (marked Exhibit R5).
[11] Paragraphs 48 and 51 to 66 of the Respondent’s SFIC (marked Exhibit R5).
[12] Paragraph 49 of the Respondent’s SFIC (marked Exhibit R5).
The Respondent, at paragraph 67 of their SFIC, contends that Mr FCWX met all of the social security requirements of genuine resignation from the Company on 21 April 2022 such that 50% of the assets of the Company were to be attributed to Mr FCWX and Mrs LTNM as assessable assets until 20 April 2022, and thereafter that Mr FCWX is to be assessed as depriving himself of assets (his 50% attribution of the net assets of the Company) with that deprivation being subject to the disposal of assets provisions in Division 2 of Part 3.12 of Chapter 3 of the Act.
Mr FCWX’s position, however, is that even though he did not formally resign as a director of the Company until 2022, from the time he sold 5,000 shares to his son, on 5 December 2019, the Son took over the control of the Company, he no longer received a salary and was no longer an employee. Mr FCWX’s evidence was that he was paid the benefits owed to him (holiday pay, long service leave, whatever was owed to him). Mr FCWX said that he continued to help the Son because he wanted the Company to succeed for the Son but he was not receiving a salary anymore and was no longer an employee. Mr FCWX said that prior to this time, his salary was probably approaching $100,000 per year, quite substantial after having worked with the Company for 45 years.
I discussed with Mr FCWX that his individual tax return for the year ended 30 June 2021,[13] shows that Mr FCWX had a total income of $114,163 in that financial year. Mr FCWX’s evidence was that it is possible that instead of receiving his last salary and entitlements from the Company in the 2019/2020 financial year, they were received in the 2020/2021 financial year therefore showing up in his tax return that year. On cross-examination, Mr FCWX agreed that even though he continued as a director of the Company after December 2019, the Son was running the Company. His formal resignation in April 2022 was on the advice of Centrelink – Centrelink pointed out to him that he actually had to resign – it was 100% an error on his part not doing that formally prior to April 2022. However, practically speaking he had ceased to have responsibility and make decisions regarding the Company from December 2019. Mr FCWX said he sometimes gave the Son advice or made deliveries for the Company but the Son took over total responsibility and control from December 2019. Mr FCWX agreed that he helped where he could and was consulted on important decisions but the Son would make the final call.
[13] Pages 158 to 164 of Exhibit R2.
Mr FCWX’s repeated evidence was that he ceased having any management of the Company from late 2019/ early 2020 and it was only when he first claimed age pension, that it was brought to his attention by Centrelink that he needed to formally resign as a director of the Company. It was noted that the date of the resignation on 21 April 2022 was prior to Mr FCWX’s first claim for age pension on 16 June 2022 and on cross-examination Mr FCWX acknowledged that the issue may have been raised when the accountant completed the financials for the Company for the 2020/2021 financial year, noting that Mr FCWX signed those statements on behalf of the Company on 31 March 2022.[14] Mr FCWX said his accountant may have raised the issue, querying why he was still signing the documents (as director) instead of the Son and that may have led to the formal resignation on 21 April 2022.
[14] Pages 1 and 10 of Exhibit A2.
It was put to Mr FCWX that when he signed the 2020/2021 financial documents and tax returns for the Company on 31 March 2022 he acknowledged, in signing them, that the statements were correct and that they fairly presented the Company’s financial position as at 30 June 2021. Mr FCWX said the statements were correct but the write down (of the stock) hadn’t started to come through at that stage. Mr FCWX said that he cannot now recall if he discussed the statements with the Son before signing them. Mr FCWX agreed further that he signed the minutes of meeting forming part of the statements declaring a dividend of $30,000.[15] Mr FCWX did not disagree with the proposition put to him that signing the minutes as a chairperson of a meeting of directors on 31 March 2022 suggested that Mr FCWX at that point still had some control of the Company. However, Mr FCWX said that nonetheless the Son was making the decisions for the Company at that time. His signature was on the documents and it was his error in not changing things officially prior to that time but practically speaking he did not have control – the Son did.
[15] Page 12 of Exhibit A2.
Mr FCWX was referred to payslips for him for the pay periods ending 3 March 2022 and 10 March 2022,[16] and it was suggested to Mr FCWX that he was continuing to be paid by the Company as at that time. Mr FCWX said he was only being paid for the work he was doing; he was charging the Son just for what he was doing at that time. He said he was not receiving a salary. Mr FCWX submitted that payslips showing he was being paid for a 38-hour week for those weeks support that he was not the managing director at that time; if he had been the managing director, he would simply have taken the money he wanted.
[16] Pages 100 and 101 of Exhibit R1.
The Son’s evidence at hearing included that prior to him taking over in 2019, the way things were unfolding, including because of his father’s health issues, he was taking over more and more – his father’s behaviour was becoming erratic. It was a gradual change, not black and white, but by late December 2019/ early January 2020 he was taking over.
As regards the signing of the financials and tax returns for the Company, the Son said that once his father officially resigned, he took over signing everything, but previously he would ask for his father’s help. He said that prior to his father’s official resignation he was dealing with the accountant but then the documents would have been passed to his father for signing because he was still officially a director. It was probably that process that alerted them to the need for his father to formally resign – they hadn’t even considered that prior to that time. It was put to the Son on cross-examination that the signing of the 2020/2021 financials by his father in March 2022 was consistent with his father still having control over aspects of the Company. The Son responded that he wouldn’t agree that this father had control – his father was present when he needed assistance but he didn’t have control. He, the Son, was working his ‘butt off’ to try to keep the company going. He agreed that he was consulting with this father quite a bit, really as a mentor, but he was the one controlling things. His father was unwell and some days were good and some days were very tough for him.
The Son’s evidence was that the 2023/2024 financials for the Company are currently with the accountant and he is expecting that like the 2022/2023 financial year, there will be a significant loss. He said that the business is still technically running but there are no real transactions going through and he is not deriving any income from the business now. From October/ November 2024, the Company has not been able to pay him and he has been living off savings. He and his wife are now looking for employment.
In addition to the oral evidence at hearings, the documents in evidence relevant to this issue include:
(a) Australian Security Investments Commission (ASIC) records showing Mr FCWX resigned as a director of the Company on 21 April 2022;[17]
[17] Page 222 of Exhibit R1.
(b) Statement dated 30 August 2022 by Mr FCWX regarding his resignation as director of the Company as follows:[18]
[18] Page 57 of Exhibit R2.
I declare that to the best of my knowledge my answers to the questions are true and correct. I understand there are penalties for deliberately giving false or misleading information.
1.I genuinely resigned from [the Company]. A private company.
2.Relinquished all formal roles and control. Directorship and all other roles i.e., Secretary.
3.Relinquished/ transferred all shares.
4.Made a written declaration (see attached) that I do not have any control over or benefit in any way from [the Company] the private company.
5.A copy of the above written declaration is attached.
6.I confirm that I relinquished all formal roles in the company and sold my shares to my son [the Son] … for a nominal amount in December 2019. I have Parkinson disease which makes work impossible.
7.To assist in determine whether any further assessment is required please find attached [the Company]'s financial/balance sheet for 2018/19.
(c) Declaration dated 30 August 2022 by Mr FCWX regarding his resignation as director of the Company as follows:[19]
I [Mr FCWX] hereby declare that I do not exert any control or benefit in any way from [the Company].
[19] Page 58 of Exhibit R2.
Section 4.12.9.10 of the Guide provides policy guidelines for when a genuine resignation will be accepted as having occurred as follows:
Genuine resignation
A genuine resignation will be accepted as having occurred where both the attributable stakeholder and their partner:
· relinquish ALL formal roles and control in respect of the entity, AND
· if applicable, relinquish their shares and directorships, AND
· relinquish all beneficial interest i.e. they cannot be income or asset beneficiaries of the entity. This could be evidenced by an alteration to the trust deed stipulating that they could not be an income or asset beneficiary or by creating a separate deed to renounce the beneficial interest of the person and their partner in the trust, AND
· make a written declaration that they will not exert any control over, or benefit in any way from, the entity.
It is not in dispute that it was not until 21 April 2022 that Mr FCWX relinquished his formal roles/ shares/ directorship of the Company. It was not until 30 August 2022 that Mr FCWX declared in writing that he that he did not have any control over or benefit in any way from the Company. That declaration refers to him having genuinely resigned from the Company and having relinquished all formal roles and having sold his shares to his son from December 2019. Notably, the Guide indicates that a genuine resignation will be accepted as having occurred when all listed requirements have occurred such that it is open to find that Mr FCWX did not genuinely resign from the Company until 30 August 2022 when he made a written declaration to that effect. The Respondent has nonetheless previously accepted that Mr FCWX genuinely resigned from the Company from 21 April 2022 and not from 30 August 2022 and submits, at paragraph 67 of its SFIC, that Mr FCWX is deemed to have met all of the social security requirements of genuine resignation from the Company on 21 April 2022. The Respondent in oral submissions noted that its interpretation was a favourable interpretation for Mr FCWX and it was not being contended that the relevant date is 30 August 2022, as could be contended on a strict interpretation of the Guide.
Although the Guide suggests that all requirements need to be met prior to genuine resignation, which would lead to a finding that Mr FCWX could not be found to have genuinely resigned until 30 August 2022, I am not bound to follow the Guide. Rather, consistent with the Respondent’s submissions, I find that Mr FCWX genuinely resigned as a director of the Company from 21 April 2022 and from that date was no longer an attributable stakeholder of the Company. I accept that Mr FCWX was playing a lesser and lesser role in the operations and control of the Company from late December/ early January however the evidence shows that he was continuing to exercise at least some control in relation to the Company, including signing off on the financials of the Company on 31 March 2022 and acting as the Chairperson of directors for meetings. I therefore cannot find as submitted by Mr FCWX that a genuine resignation occurred from late 2021/early 2022.
Issue 2: What is the value of the assets of the Company to be taken into account?
Mr FCWX’s position is that the appraisal of the Company by BCI Business Brokers (BCI) on 3 December 2019, and in particular the value of the inventory of the Company for the purposes of assessing his and Mrs LTNM’s age pension claims should be accepted. He submitted that the inventory shown in the financial statements was valued at cost rather than market value such that his equity in the company was not correct and that this has ultimately been borne out by the losses of the Company as shown in the 2022/2023 financial statements.
Mr FCWX’s evidence was that it was identified in 2019 that the stock of the Company was being carried at an inflated value and that a write down was required. The advice he received from the accountant in 2019 was that it was going to take a number of years before the write down of the inventory/stock of the business crystallised when it was sold. It should have shown up within 12 to 24 months but because of the COVID-19 pandemic that was not the case. The pandemic skewed everything. Mr FCWX said the first year of actual trading after the write down (in 2019) was the 2022/2023 financial year, with the financial statements of the Company in that year showing a massive loss and justifying what he had done in 2019. Usual trading in between did not occur because of the pandemic. The stock had to be sold to realise the loss but for the first year or so, they didn’t have to sell the stock because the government was injecting COVID-19 supplements in to the business. That is why the loss of the devalued stock did not show up straight away.
Mr FCWX referred to an (undated) letter from his accountant referring to the BCI appraisal of the business dated 3 December 2019.[20] The accountant’s letter included as follows (unedited):
[20] Marked as Exhibit A6.
We act as accountant and tax agent for the abovenamed, and have done so for the past 9 years. We have been asked to prepare a letter to further help explain the circumstances in relation to the sale of [Mr FCWX]’s shares in [the Company], his family business.
We understand that Centrelink has assessed the value of [Mr FCWX]’s shares in [the Company] at the time of transfer of his shares (in 2019) at approximately $500,000 (being equal to 50% of the value of the net assets of the company at that time).
We refer to the attached appraisal of the business, which was completed by an independent business valuer – BCI Business Brokers, dated 3rd December 2019.
This appraisal supports the information provided by [Mr FCWX], confirming that the value of the stock shown in the financial statements of [the Company] was well in excess of the realisable market value for this stock, and hence the value of the shares being nominal at the time of transfer.
Some additional notes in this regard as provided by our client are as follows:
1. The value of the company is based 90% plus on the value of inventory. Our business of over 40 years valued inventory always the same way......correctly except in late 2019-2022 onwards because of the pandemic and the incorrect decisions made by me (which I believe were a manifestation of my Parking Disease).
2. The implosion / effect would of course take time.... we of course worked extremely hard to counter/survive.
3. We tried to sell the business but as the value of the business was its inventory we were not successful. We also looked to merge.
4. I was deteriorating and was a liability of the company. If it was going to have any chance of survival it required committed management. I clearly understood that the company prospects were limited and the value limited and the potential of being negative were very real.
5. I resigned and as I no longer had any control there was a real possibility that the company could easily be bankrupt or worse I could not accept that possibility. The business was imploding and the possibility of becoming insolvent/ worse .( not able to meet financial liabilities ) = the share owned could quickly become a liability instead of an asset made the value of my share nebulas.
I made the decision to transfer my shareholding to my son (…) as I was unable to sell the business---the business was starting to lose money and the prospects negative. I believe that I should close the business but [the Son] wanted the opportunity to reestablish. We discussed and agreed there was little value in the shares and so I sold at the token value of $5,000.
The value of the company as of today would be less than the $5,000 received.
Based on the above, the attached appraisal, and our clients (sic) financial situation, we urge you to consider reassessment of our clients (sic) eligibility to the Aged Pension and other potential entitlements.
BCI’s 3 December 2019 appraisal[21] relevantly includes as follows (unedited):
[21] Pages 83 to 86 of Exhibit R2.
Stock
Stock is valued at around $1.3M on the books.
However, the owners believe that "there's not much value in it. Similar to the fashion industry, fishing stock loses value once it's out of season." The amount of value that is lost once stock goes out of season is critical here. The owner's opinion is highly relevant as they operate in this business all the time and know what discount they need to apply at the end of season.…
The business is not profitable and when that is the case, one must rely on an asset valuation. There are many types of asset valuation methods. The three main ones here are:
Fire Sale Value
Orderly Sale Value
Going Concern ValueFire Sale Value is what you would have to sell the assets for if there was to be an immediate sale of the assets, mainly stock. The value here is its cost price less a discount to achieve immediate sale.
Orderly Sale Value is where you are selling the assets, mainly stock, in an orderly fashion without an urgency about the sale. A discount to retail would be expected.
Going Concern Value is where you sell the assets along with the business to a buyer who might want to purchase all as a going concern.
Considering the owner's view as to the value of their assets, I am going to choose a value that is closer to the Fire Sale. I am assessing that the stock would have to be discounted by somewhere between 50 and 25%. I choose the figure of 33%k. The business has a value as follows:
Stock at Cost $1,327,817 Less 66% $889,637 Sale Value $438,179 Now let's look at Balance Sheet considerations. I have been briefed as follows:
As at November 2019
Debtors $81,608 Creditors $373,424 Loan from Directors $201,400 The value of the company is the sum of its assets minus its liabilities. For the purpose of this calculation, we reproduce the situation of the company below.
Stock $438,179 Debtors $81,608 Creditors $373,424 Loan from directors $201,400 Company value -$55,037 The business has negative asset value.
The above valuation is based on the following assumptions:
The business is not profitable enough to apply a profit multiple that would make the business worth than its asset value.
Any goodwill associated with the client base, relationship with supply chain, years of establishment etc is eroded by the fact that the asset value is high compared to what profit or potential profit there is.
Mr FCWX’s evidence was that throughout 2021 and 2022, there was no pressure to sell the stock because the government was propping everything up through the pandemic years and that is why the stock is retained at similar values in the statements for those years. This was not something that they had foreseen in 2019 when he knew and decided that the stock had to be written down. It was only when the Company when back to actual trading that the equity write down was realised.
As regards the appraisal by BCI dated 3 December 2019, Mr FCWX agreed that he would have provided the assumptions (listed in the appraisal) upon which the fire sale valuation was based and acknowledged that the appraisal was therefore affected by those assumptions.
I discussed with Mr FCWX that the BCI appraisal noted that there are three main ways to value assets of a business being 1) fire sale value, 2) orderly sale value and 3) going concern value. I noted that the appraisal gave a fire sale value figure only and queried whether an orderly sale value or going concern value had ever been provided. Mr FCWX’s evidence was that they would have looked at the different scenarios and discussed those other values but there was nothing in writing on them. From memory they decided on one value and kept it consistent. Mr FCWX said the need for the write down was identified in 2019 but as discussed with the accountant, that would not make its way through the books until they sold the stock, and that was unexpectedly delayed because of the pandemic and didn’t crystalise until 2023. I suggested at hearing that another option may have been to immediately write down the stock in 2019 when the issue was identified. The Son responded that he was still hopeful at that stage that they might have been able to turn things around, he just wanted to try and bring it (the Company) back. He obtained finance (an American Express business loan of $90,000) to invest more money into the business (Exhibit A5) because he was hopeful he could turn the business around. He was looking more to bring in good stock that he could sell at a good value – he knew the then stock was worth very little. It was more about bringing in new stock to keep the company going. He wanted to do everything he could to give the business a go. The business had been his grandfather’s and then his father’s and he didn’t want to see it disappear. It was more than just a business; it was part of his life.
The Son’s evidence included that he now actually thinks the fire sale appraisal value was an optimistic value. When the shares were put in his name, his father did not want any money because his view was the business was gone but the accountant said that a figure had to be put on it and they came up with $5,000. But for the COVID-19 pandemic and the injection of funds by the government to businesses, the ongoing lack of viability of the business would have become apparent earlier.
In response to my query as to whether there was any discussion at the time, 2019, of an immediate accounting recognition in the Company’s books for the reduced value of the inventory, the Son said he did not recall any such discussion. He, like his father, just remembers that the accountant said it would flow through eventually. He did not have an accounting background and he was just doing his best to digest it all and to try to figure it out.
The Son’s evidence was that his understanding from discussions with BCI is that the other values, the orderly sales value and the going concern values would have been less that the fire sale value. I suggested that that would not be consistent with BCI’s explanation of the three different ways of valuing.
Mr FCWX’s and Mrs LTNM’s claims for age pension were made on 16 June 2022 and 18 December 2023 and consideration is therefore required of the value of their combined assets as at those dates.
I have found that Mr FCWX was no longer an attributable stakeholder of the Company from 21 April 2022 and the income and assets of the Company were therefore not attributable to Mr FCWX (and also not part of Mrs LTNM’s combined assets) pursuant to Part 3.18 of the Act at the time of either the 16 June 2022 or at the time of the 18 December 2023 claims. However, relevantly, section 1208M provides as follows:
1208M Individual ceases to be an attributable stakeholder of a company or trust
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.
Section 4.12.9.10 of the Guide relevantly states as follows:
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).
As already noted, pursuant to section 1123 (and following sections) within Division 2 of Part 3.12 of the Act, amongst other things, a person disposes of an asset where the matters set out in the section apply. Section 1123 provides as follows:
1123 Disposal of assets
(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.
It is not in dispute that Mr FCWX disposed of 5,000 shares in the Company on 5 December 2019 and gave a further 5,000 shares in the company to the Son for no consideration on 8 January 2020. ASIC records show that there are 20,000 issued shares in the Company.[22] Consistent with section 4.12.4.10 of the Guide, the shares in a designated private company, as distinct from its assets, are not assessed as having any value for social security purposes. As a 50% attributable stakeholder of the Company up until 21 April 2022, it is 50% of the value of the assets of the Company up until that date which is attributed to Mr FCWX and to which the deprivation provisions will apply from the date of resignation.
[22] Page 223 of Exhibit R1.
As regards how the value of the assets of a private company should be approached, there is no statutory provision specifying a method. Section 4.12.4.10, as previously referred to, includes that the value of the assets of a designated entity is determined by the current market value…less any allowable liabilities.
Previous cases provide guidance as to the approach to be taken as follows:
(a) Re Horyna-Stasi and Secretary to the Department of Family and Community Services [2002] AATA 1284 (Horyna-Stasi) where it was recognised that there may be a need for flexibility in valuation methods, particularly in relation to privately owned businesses and the desirability of expert evidence on appropriate methods; and
(b) Re Mackintosh and Repatriation Commission [1997] AATA 575 (Mackintosh) where the Tribunal relied upon the balance sheet of the company, which had been certified by the directors as giving a true and fair view of the state of affairs of the company, in assessing the value of the company. Of note the Tribunal acknowledged that there was some evidence that the principal assets of the company were loans in relation to which there was no capacity to repay, but with no provision noted in the accounts for such a loss or contingent loss in respect of those loans, it was appropriate to rely upon the statement by the directors.
The Respondent’s position is that the most probative evidence of the value of the Company is the balance sheets/verified financial records for the Company. As regards the BCI appraisal, the Respondent submits that the date of the valuation was 2 and a half years prior to Mr FCWX’s resignation on 21 April 2022 and, further, was based on assumptions including an assumption that the business was not profitable and was running at a loss. Further, it provides a fire sale value (only) of the assets.
Relevant extracts from the financial records of the Company include as follows:
Profit before tax and dividends paid (years ended)
30/06/2017[23]
30/06/2018[24]
30/06/2019
30/06/2020[25]
30/06/2021[26]
30/06/2022[27]
30/06/2023[28]
Profit before tax
27,401
69,295
6,212
(435,431)
[23] Pages 212 to 213 of Exhibit R1.
[24] Pages 212 to 213 of Exhibit R1.
[25] Exhibit A2.
[26] Exhibit A2.
[27] Exhibit A3.
[28] Exhibit A4.
Opening and Closing Stock (years ended)
30/06/2017
30/06/2018
30/06/2019
30/06/2020
30/06/2021
30/06/2022
30/06/2023
Opening Stock
1,215,028
937,944
1,080,748
1,068,523
Closing Stock
937,944
1,080,748
1,068,523
365,000
Balance Sheets (as at dates)
30/06/2017
30/06/2018
30/06/2019
30/06/2020
30/06/2021
30/06/2022
30/06/2023
Current Assets:
Inventory
1,295,991
1,519,308
937,944
1,080,748
1,068,523
365,000
Other
69,642
82,107
125,817
168,558
114,602
322,442
1,365,633
1,601,415
1,063,761
1,249,306
1,183,125
687,442
Non-current Assets
236,883
202,821
178,833
146,578
129,666
185,860
Total Assets
1,602,516
1,804,236
1,242,594
1,395,884
1,312,791
873,302
Liabilities
543,109
847,022
260,818
344,812
255,508
359,184
Net Assets
1,059,407
957,214
981,776
1,051,072
1,057,283
514,118
Equity
20,000
20,000
20,000
20,000
Shares
961,776
1,031,072
1,037,284
494,118
Retained profits
981,776
1,051,072
1,057,284
514,118
As can be seen, the net assets of the Company for the financial year ending 30 June 2021, the financial year ending immediately prior to Mr FCWX resigning as a director on 21 April 2022, from when he is deemed to have disposed of his attributable share of the assets in the company, were $1,051,072. The Respondent contends (and it was not disputed on first review) that a loan of $30,000 representing a loan to Mr FCWX’s brother for which there was no substantiating documentation is also required to be included for a value of the Company as per the balance sheet of $1,081,072. The net assets include inventory of $1,080,748 as at 30 June 2021. Mr FCWX and Mrs LTNM submitted that the assets should be recognised as only being valued at $438,179 pursuant to the BCI appraisal and as is borne out ultimately by the losses that crystalise from the 2023 financial year on account of the overvalued stock.
In considering what reliance could be placed upon the BCI appraisal, I had regard to Re Horyna-Stasi where then Member Carstairs stated as regards valuation methods:
A policy must be flexible to adapt to the circumstances of particular cases, otherwise a claimant could never assert that assets were unrealistically stated in company balance sheets and lead expert evidence to show that was so.
I accept that a balance sheet may unrealistically assert the value of company assets as recognised in Re Horyna-Stasi. However, as discussed at hearing, I have a number of concerns with the appraisal of BCI. As submitted by the Respondent, the appraisal pre-dates the relevant date by 2 and a half years. Further, the appraisal, after having identified three different valuation methods, only provides a fire sale appraisal, with a fire sale stated to be the ‘immediate sale of the assets … value here is its cost price less a discount to achieve immediate sale’. However, no such fire sale of the assets occurred. The appraisal did not assign values for either an orderly sale basis or a going concern basis, with arguably what has subsequently occurred being an orderly sale. Of further concern, BCI is not a valuer but rather is identified as a business broker. It is not a formal valuation.
Of further relevance, I have had regard to the financial records of the company. The financial statements of the company were signed for the relevant year by Mr FCWX certifying that the accounts represented a true and fair view of the state of affairs of the company. I accept that Mr FCWX based his certification on the advice of his accountant, including the advice that the undervalued inventory, would eventually crystallise. Nonetheless the value of the Company represented and certified in the financial statements includes inventory of $1,080,748, not $438,179, as at 30 June 2021. Of further note, the Notes to the signed and certified Financial Statements for the Company for the year ended 30 June 2021 include the following note as regards Inventories:[29]
[29] Page 17 (page 8 of 12 of the Financial Statements) of Exhibit A2.
Inventories
Inventories are carried at the lower of cost or net realisable value. Cost is based on the first-in, first out method and includes expenditure incurred in acquiring the inventories and bringing them to the existing condition and location.
Similarly, as in Mackintosh, no qualification or provision was made in the notes in relation to the basis upon which the inventory value is carried as contended by Mr FCWX, as could have been done. Nor, as discussed at hearing, was there an immediate accounting write down of the inventory in 2019, as could have occurred.
In the circumstances, I conclude that the best evidence of the value of the assets disposed of by Mr FCWX is half the net assets of the company as certified to be true and correct in the 2020/2021 financial statements for the Company, that is 50% of $1,081,072 being $540,536.
There was no consideration paid upon Mr FCWX resigning/handing over control in April 2022, however arguably the $5,000 paid by the Son in December 2019 was past consideration as part of the process, albeit a process that took some time, of Mr FCWX resigning and handing over control. The Respondent has accepted that $5,000 as consideration and deducted it. I likewise find that $5,000 should be deducted as being consideration received, albeit years ago, leaving $535,436. Pursuant to section 1126AC, the amount disposed of is reflected for five years from the date of disposal, 21 April 2022, with $10,000 deducted each financial year (up to a maximum of $30,000 for five years).
Mr FCWX’s and Mrs LTNM’s other assessable assets as at the date of their 16 June 2022 and 18 December 2023 claims have been variously stated from time to time, including as follows:
(a) Both Mr FCWX’s and Mrs LTNM’s total combined assets are stated to be $1,026,373.76 in the letters of 1 October 2022 rejecting their 18 June 2022 claims for age pension;[30]
(b) Both Mr FCWX’s and Mrs LTNM’s total combined assets are stated to be $1,005,644.42 and $1,056,080 respectively in the letters of 24 April 2024 rejecting their 18 December 2023 claims for age pension;[31]
(c) Mr FCWX’s and Mrs LTNM’s assets, other than attributable from the Company, declared at the time of claims were, as noted by the Tribunal on first review, to be $500,837 and $530,545 respectively; and
(d) The Respondent in its SFIC states that Mr FCWX’s and Mrs LTNM’s combined assets at the date of claims were $1,026,372 ($525,536 + $500,836) and $1,056,080 ($525,536 + $530,544).
[30] Page 267 of Exhibit 1 and Page 251 of Exhibit 2.
[31] Page 271 of Exhibit 1 and Page 255 of Exhibit 2.
I am satisfied having taken that the value of Mr FCWX’s and Mrs LTNM’s assets as at the date of the claims were $500,836 and $530,544 respectively.
Taking into account Mr FCWX’s and Mrs LTNM’s other assets, their combined assets for the purposes of 16 June 2022 claim were $1,026,372[32] and at the time of the 18 December 2023 claim were $1,056,080,[33] which exceeded the allowable assets limits of $901,500 and $1,012,500 as at those respective dates. It follows that the rate of age pension payable to Mr FCWX and Mrs LTNM was nil and age pension was not payable to them pursuant to section 44 in relation to either claim such that both of Mr FCWX’s and Mrs LTNM’s 16 June 2022 and 18 December 2023 claims for age pension must be rejected.
[32] Paragraph 82 of the Respondent’s SFIC.
[33] Paragraph 83 of the Respondent’s SFIC.
If follows that the decision under review is affirmed.
OTHER MATTERS
Although Mr FCWX and Mrs LTNM have not made a claim for financial hardship and no issue in this regard therefore arises for consideration by the Tribunal (Quiggin and Secretary, Department of Social Services [2019] AATA 3324), as the Respondent has addressed these provisions in their submissions, I note that section 1129 provides for a person to whom a pension is not payable by virtue of application of the assets test, to seek consideration of severe financial hardship on the basis that an asset assessable against them is an unrealisable asset. There are a number of requirements that must be met for this provision to apply and in noting this provision, I make no assessment of whether Mr FCWX and Mrs LTNM would meet the requirements. Notably, the Respondent contends, at paragraph 79 of its SFIC, that Mr FCWX’s and Mrs LTNM’s combined assets as at the date of their claims were above the financial hardship thresholds. That is a matter that may be tested at any point in time, including in relation to any future claim for age pension that Mr FCWX and Mrs LTNM may elect to make to retest their eligibility. In any event, before consideration may be given to those provisions, a request that the provision apply must be lodged in the approved form pursuant to paragraph 1129(1)(d). Section 1129 provides:
Access to financial hardship rules – pensions
(1) If:
(a)either:
(i) a social security pension is not payable to a person because of the application of an assets test; or
(ii) a person's social security pension rate is determined by the application of an assets test; and
(b)either:
(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or
(ii) the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(c)the person, or the person's partner, has an unrealisable asset; and
(d)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person; the Secretary must determine that this section applies to the person.
Finally, I observe that a number of references have been made by Mr FCWX throughout the documentation and the evidence at hearing to him being ‘punished’, it being suggested that he is lying or that Mr FCWX and the Son are not honourable men or men of integrity. As discussed at hearing, the outcome in relation to this matter is based upon the evidence and application of the law to that evidence. It has not been and is not contended that Mr FCWX or any other person has lied or there has been any wrongdoing. Rather a decision is required based on, ultimately, the value of the Company at a point in time having regard to the law and the evidence. For the reasons outlined above, I have found that the best evidence of that at the relevant date is the Company’s financial records and I have rejected the other evidence.
DECISION
The Tribunal affirms the decision under review.
Date of hearing: 14 May 2025 Representative for the Applicant: Self-represented Solicitor for the Respondent:
Mr M Gauci, Hunt & Hunt Lawyers
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