Fischer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2009] AATA 586

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 586

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/5247

GENERAL ADMINISTRATIVE DIVISION		)
Re		JENNIFER FISCHER

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms N Bell, SENIOR MEMBER

Date 7 August 2009

PlaceSydney

Decision The Tribunal varies the decision under review so that an amount of $9,005.56 is to be recovered from Ms Fischer, that amount being a portion of a debt of overpayment of Disability Support Pension for the period 30 June 2004 to 21 April 2008.

……........SGD.............................

Ms N Bell, SENIOR MEMBER

CATCHWORDS 

SOCIAL SECURITY – Overpayment and Debt recovery of Disability Support Pension – Whether the Applicant’s deemed income from financial investments was correctly calculated for the purpose of the income test under section 1064 of the Social Security Act 1991- No Special Circumstances – Portion of the Debt Waived due to Sole Administrative Error - The Decision under Review is varied.

Social Security Act 1991

Repatriation Commission v Harrison v Another (1997) 46 ALD 193

Secretary, Department of Family and Community Services v Draper [2003] FCA 1409

REASONS FOR DECISION

7 August 2009 Ms N Bell, SENIOR MEMBER      

1.      Ms Fischer has been in receipt of Disability Support Pension (DSP) since September 2002 and later the payment was backdated to 1999.  A number of letters were sent to Ms Fischer by Centrelink advising her of her notification obligations.  On 20 February 2008, Ms Fischer notified Centrelink that the net value of her shares was $145,361.  Further information was requested from her and after some further communication and suspension of payments Ms Fischer provided various margin loan statements from CommSec.  On 18 June 2008 a Centrelink officer decided to raise and recover a debt of overpayment of DSP for the period 30 June 2004 to 21 April 2008.

2.      A debt of overpayment was originally calculated in April 2008 as $16,164.00.  On 21 August 2008, an Authorised Review Officer decided there was no debt from 13 April 2008 (sic) to 29 June 2004; that a debt was recoverable from 30 June 2004 to 18 March 2008; and that a portion of the debt from 19 March 2008 to   21 April 2008 was attributable solely to administrative error and would be waived.

3.      The Social Security Appeals Tribunal affirmed that a debt of $16,062.30 was recoverable from Ms Fischer.  Ms Fischer’s father, Mr Thomas Fischer, handles Ms Fischer’s financial affairs and spoke on her behalf at the hearing before this Tribunal.

issues

4.      The issue for me to consider is the correct calculation of deemed income from Ms Fischer’s financial investments.  The Secretary maintains that the value of the margin loan secured over Ms Fischer ’s shares cannot be deducted from the value of Ms Fischer ’s financial assets for the purpose of calculating her deemed income.  Ms Fischer contends that that the amount of the margin loan should be deducted from the value of her shares and the deemed income should be calculated on the basis of net value

5.      If I conclude that Centrelink’s calculation of deemed income is correct and a debt of overpayment is owed by Ms Fischer, then I will consider whether recovery of the debt or any portion of it should be waived.

should the amount of the margin loan be deducted from the value of the shares when calculating deemed income?

6. Pension Rate Calculator A which follows section 1064 of the Social Security Act 1991 (the Act) provides that the rate of a person’s pension must be calculated using the income and assets tests and that whichever rate is the lowest must be applied.  At all times Ms Fischer’s rate was calculated using the income test.

7.      Sections 1076 to 1084 of the Act govern the calculation of deemed income from financial assets.  In section 9(1) of the Act “financial assets“ is defined to include listed securities and public unlisted securities.

8.      Section 1076 of the Act provides a formula for determining the deemed income on financial assets earned by a person and requires the value of a person’s financial assets to be multiplied by a particular deeming rate.  The result is the “deemed income” and is taken to be ordinary income for the purpose of the income test.

9.      The value of the financial assets held by Ms Fischer is central to the calculation of her deemed income and the question arising here is whether the loan she had against the shares could be deducted from the value of the shares.

10.     Section 1121 of the Act provides that the value of an asset may be reduced by the value of any charge or encumbrance over the asset.  However the provision specifically excludes ”Division 1B of part 3.10 of the Act”.  This is the Division of the Act that contains sections 1076 to 1084, governing the calculation of deemed income from financial assets.  These words were inserted in an amendment that came into force on 25 March 2004 following the Federal Court’s decision in Secretary, Department of Family and Community Services v Draper [2003] FCA 1409 in which the Court held that margin loans should be considered as encumbrances and should therefore reduce the value of financial assets for the purpose of the calculation of deemed income.

11.     I note Mr Fischer’s submission that, notwithstanding the amendment to section 1121, section 1076 refers to “the total value of the person’s financial assets” and this “total value” must mean the net value after deduction of any loan amount.  Mr Fischer also urged me to give the words their ordinary meaning and noted a definition of “value” in the Oxford Dictionary as “worth”.

12.      Ms Schuster for the Secretary referred me to section 11(2) of the Act, which defines “the value of a particular asset of a person” as, “if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person's interest in the asset”.  On this basis, she submitted that the value of an asset, before the application of any other provision of the Act, is the value of the person’s interest in the asset unaffected by the existence of any encumbrance and is therefore the gross value of the interest in the asset.  This view is supported by the decision of the Federal Court in Repatriation Commission v Harrison v Another (1997) 46 ALD 193 which considered provisions in the Veterans’ Entitlements Act 1986 (s.52C) in the same terms as section 1121 of the Act.  The Court concluded that “it unduly strains and extends the language used in s 41-F1 to treat the reference to assets as in effect “all assets less all liabilities”, especially where there is reference to the making of specific limited deductions from the value of assets in ss52C and 52CA.”

13.     Ms Schuster also noted that section 1121 of the Act excludes only calculations to determine deemed income from financial assets.  That means that, in calculations for the purposes of the assets test (as opposed to the income test in relation to deemed income from financial assets) the value of any encumbrance or charge over the asset may be deducted from the value of the interest in the asset.

14.     I agree with the Secretary’s submission and I consider it clear that the effect of section 1121 of the Act, as amended, is that an encumbrance or charge on shares cannot be deducted from the value of an interest in those shares for the purpose of the calculation of deemed income.  That means that the amount of Ms Fischer’s debt to the Commonwealth is $16,062.30 as affirmed by the Social Security Appeals Tribunal.

Recovery

15.     There are two avenues available to Ms Fischer for waiver of recovery of the debt: waiver for administrative error under section 1237A of the Act; and waiver for special circumstances under section 1237AAD of the Act.

16.     The Secretary has conceded that during the period 25 May 2007 to 21 April 2008 Centrelink had notice from Ms Fischer of an increase in the value of her shares and did not act on that notice.  The Secretary concedes that any overpayment of DSP should be waived in respect of this period on the basis that the overpayment is attributable solely to the administrative error of the Commonwealth.

17.     In respect of all other periods of overpayment, the Secretary contends that any administrative error was not solely attributable to the Commonwealth because Ms Fischer failed to notify of increases in the value of her shares during those other periods.

18.     I agree that there was administrative error on the part of the Commonwealth of the kind required by section 1237A of the Act and that it resulted in the overpayments for the period 25 May 2007 to 21 April 2008.  It follows that any debt arising during that period should be waived.  I accept that this reduces the amount to be recovered to $9,005.56.

19.     It is not disputed by Ms Fischer that notices concerning her notification obligations were sent to her and she did not respond to them until May 2007.

20.     The only other avenue for waiver of the debt that is open to Ms Fischer is section 1237 AAD of the Act which allows for waiver where there are special circumstances (other than financial hardship alone) that make it appropriate to waive the debt.

21.     The only circumstance raised by Mr Fischer on Ms Fischer’s behalf was the effect of the share market crash in 2008 on the value of Ms Fischer’s financial investment.  He added that she has never had the benefit of the value of her investment at its peak at the time of the overpayments of DSP.

22.     I consider that all shareholders have been affected to varying degrees by the global economic crisis and that it is therefore not an extraordinary or special circumstance within the meaning of the Act. None other of Ms Fischer’s circumstances is extraordinary or special.

decision

23.      The Tribunal varies the decision under review so that an amount of $9,005.56 is to be recovered from Ms Fischer, that amount being a portion of a debt of overpayment of Disability Support Pension for the period 30 June 2004 to 21 April 2008.

I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member.

Signed:         .............................SGD...................................................
  Felicia Daniele: Associate

Date/s of Hearing  15 July 2009
Date of Decision   7 August 2009  
Solicitor for the Applicant           Self - Represented
Solicitor for the Respondent      Ms Schuster, Centrelink