Fortune and Secretary, Department of Education, Employment and Workplace Relations
[2010] AATA 950
•26 November 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 950
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/1530
GENERAL ADMINISTRATIVE DIVISION ) Re JULIE FORTUNE Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Mr Egon Fice, Senior Member Date26 November 2010
PlaceMelbourne
Decision The Tribunal affirms the decision made by the Social Security Appeals Tribunal on 10 March 2009 [sgd] Egon Fice
Senior Member
SOCIAL SECURITY – Newstart Allowance – assets limit – partners asset limit – income test – apprehension of bias – qualifications for the receipt of newstart allowance – qualification criteria – member of a couple – homeowner – principal home – rented premises – trust interest – company interest – real estate other than the principal home – asset attribution rules – current market value of property – valuations – encumbrances – mortgage – borrowing – drawings – attributable stakeholder – ordinary income – income tax returns – rental payments
Corporations Act 2001 s 45A(2)(a)
Social Security (Administration) Act 1999 s 13(1)
Social Security Act 1991 ss 8(1), 8(2), 11A, 11(4), 593, 611(1), 612, 612(1), 643, 1068, 1068-G1, 1118(1), 1118(1)(b), 1121, 1207, 1207N(1), 1207P,1207V(1), 1207V(2), 1207V(3), 1207X, 1207X(1), 1207X(2), 1209E
Social Security (Attributable Stakeholders’ and Attribution Percentages) Principles 2000 s 6
Re Julie Fortune and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 283
Shi v Migration Agents’ Registration Authority (2008) 235 CLR 286
The Shorter Oxford English Dictionary
REASONS FOR DECISION
26 November 2010 Mr Egon Fice, Senior Member 1. On 3 June 2008 Ms Julie Fortune lodged a claim for Newstart Allowance (NA). Her claim was rejected because her assets and those of her partner, Mr Michael Gullquist, exceeded the allowable assets limit.
2. Dissatisfied with the decision of the Secretary, Department of Education, Employment and Workplace Relations (the Secretary), Ms Fortune sought review by an authorised review officer (ARO). On 29 September 2008 an ARO rejected Ms Fortune’s claim for NA on the basis that her and her partner’s assets exceeded the assets limit for the payment of NA. Ms Fortune sought review of that decision by the Social Security Appeals Tribunal (SSAT). On 10 March 2009 the SSAT affirmed the decision of the ARO. Ms Fortune now seeks review of the SSAT decision by this Tribunal.
3. In this proceeding before the Tribunal Ms Fortune was represented by her husband, Mr Michael Gullquist, a solicitor. Mr Gullquist appeared before me on 25 February 2010 when the hearing of this matter first commenced. At that time, he made an application that I disqualify myself from hearing this matter on the grounds of apprehension of bias. My decision to refuse to disqualify myself may be found in Re Julie Fortune and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 283. Ms Fortune did not appear at the hearing.
4. I resumed hearing this matter on 30 August 2010. By that time, the Secretary, had lodged with the Tribunal an amended Statement of Facts and Contentions. The Secretary submitted that Ms Fortune did not qualify for NA on the grounds that she could not satisfy the assets tests or the income test, thereby precluding her from receiving that allowance.
5. Neither Mr Gullquist nor Ms Fortune appeared at the resumed hearing. Mr Richard Knowles of counsel appeared for the Secretary. The Tribunal received a letter from Ms Fortune dated 30 August 2010 indicating that she would not attend the hearing on that day essentially for financial reasons which were set out in some detail. Instead, I was asked to accept her written submissions, which I agreed to do.
6. No witnesses appeared on behalf of Ms Fortune. Mr Gullquist made it clear on the first day of hearing this matter in February 2010 that he intended to rely on an affidavit made by Mr Barry Stevens, an accountant. I had explained to Mr Gullquist that Mr Stevens’ affidavit would not be admitted into evidence without him attending the hearing and being available for cross-examination. Mr Stevens did not attend the resumed hearing on 30 August 2010 and therefore his statement was not admitted into evidence. All of the other documents provided by Mr Gullquist over the protracted period of this application were admitted into evidence. The matter proceeded before me by Mr Knowles making submissions about the evidentiary material.
7. The issues which I must determine are whether Ms Fortune’s assets at the time of her application for NA exceeded the asset value limit for the payment of an allowance. If the value of her assets exceeded the limiting value, then that would be the end of the matter. However, if I find that they do not, then I will need to examine whether Ms Fortune is able to satisfy the income limits test.
ASSETS LIMIT
8. Section 593 of the Social Security Act 1991 (the Act) sets out the qualifications for receipt of NA. In essence, Ms Fortune would satisfy the qualification for NA if she was unemployed throughout the period for which she applied for the allowance; if she satisfied the activity test; if she was prepared to enter into a Newstart Employment Pathway Plan and, if required, to comply with the requirements of that plan. There was no dispute about the fact that at the time Ms Fortune made her claim for NA on 3 June 2008, she qualified for NA. The only question is whether NA was payable.
9. Section 611(1) of the Act provides:
(1) A newstart allowance is not payable to a person if the value of the person’s assets is more than the person’s assets value limit.
10. A question may arise regarding whether qualification for NA must be established at the date of lodgement of the claim or at some later date.
11. The High Court of Australia in Shi v Migration Agents’ Registration Authority (2008) 235 CLR 286 made it abundantly clear that the Tribunal is not ordinarily confined to evaluating material that was before the primary decision maker, nor is it constrained to a consideration of events that occurred up until the time of the decision. However, as Kirby J said at 300:
Sometimes, it may be inherent in the nature of a particular decision that review of that decision is confined to identified past events. If, for example, under federal legislation, a pension is payable at fortnightly rests, by reference to particular qualifications that may themselves alter overtime, a “review” of an administrative “decision” to grant or refuse such a pension, by reference to statutory qualifications, may necessarily be limited to the facts at the particular time of the decision.
12. In my opinion, the nature of a decision regarding the payment of NA is the type of decision which is confined to past events. That is because the recipient of NA must continuously meet the qualification criteria for that allowance during a fortnightly period for which the allowance is paid. Therefore, I accept the Secretary’s submissions that in calculating the assets limits of Ms Fortune, I am required only to examine the facts as they existed at the time of the claim and the following two week period. In fact, because Ms Fortune enquired of Centrelink on 22 May 2008 about making a claim for NA, and she lodged a claim for NA within 14 days after that contact, her claim is deemed to have been made on 22 May 2008 (see s 13(1)) of the Social Security (Administration) Act 1999 (Administration Act).
13. Ms Fortune’s asset value limit will depend upon whether she is partnered, that is, whether she is a member of a couple, and whether she is a homeowner as that expression is defined in the Act. There was no dispute about the fact that Ms Fortune is partnered. The expression homeowner is defined in s 11(4) of the Act. Insofar as the expression is used in respect of a person who is a member of a couple, it is defined as:
(4) For the purposes of this Act:
(a)…
(b) a person who is a member of a couple is a homeowner if:
(i)the person, or the person’s partner, has a right or interest in one residence that is:
(A) the person’s principal home; or
(B) the partner’s principal home; or
(C) the principal home of both of them; and
(ii)the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home; …
14. Although the expression principal home is defined in s 11A of the Act, the definition contained in that section simply expands the expression as it is ordinarily understood, where the principal home is a dwelling house, to include additional land adjacent to the dwelling and other structures used primarily for private or domestic purposes in association with a flat or home unit. The ordinary meaning of the word home is:
2.A dwelling-place, house, abode; the fixed residence of a family or household; one’s own house; the dwelling in which one habitually lives, or which one regards as one’s proper abode (The Shorter Oxford English Dictionary).
The qualifying adjective, principal, ordinarily means: 1. First in rank or importance. Therefore the expression principal home in the context in which it appears in s 11(4) of the Act is simply a reference to the principal dwelling where a person or the person’s partner habitually lives or resides.
15. The significance of establishing whether a person who is a member of a couple is a homeowner lies in the fact that the right or interest of the person or the person’s partner in the principal home is disregarded when calculating the value of the person’s assets (see s 1118(1) of the Act). Section 612(1) of the Act makes it clear that where a person is a member of a couple and the person’s partner is not in receipt of a social security or service pension; or an income support supplement; nor is the partner in receipt of a social security benefit; then the value of the person’s assets includes the value of the partner’s assets.
16. There was no dispute about whether Mr Gullquist can be properly described as Ms Fortune’s partner. He was not in receipt of a social security pension or income support supplement, nor was he receiving a social security benefit in May 2008 when Ms Fortune’s claim was deemed to have been made. Therefore, I find that the value of Mr Gullquist’s assets must be included when valuing Ms Fortune’s assets.
17. At the heart of this dispute is a residential property situated at 25 Two Bays Crescent, Mount Martha (the Mount Martha property). The Super Fortune Trust was the owner of the Mount Martha property at the relevant time. Jusbec Pty Ltd ACN 109046915 (Jusbec) is the Trustee of the Super Fortune Trust. Its directors and shareholders are Ms Fortune and Mr Gullquist. Mr Gullquist is also the proprietor of a property at 10 Brown Street, Chatswood, New South Wales.
WAS MS FORTUNE A HOMEOWNER
18. I have already referred to the definition of homeowner in the Act and the reference to the meaning of the expression principal home. The first contentious issue which arises in this matter is whether the Mount Martha property was the principal home of Ms Fortune and Mr Gullquist in late May and early June 2008.
19. The Secretary contended that on 22 May 2008 when Ms Fortune notified Centrelink she intended to make a claim for NA, neither she nor her husband were homeowners because their principal home was a rented unit at 2202/90 Lorimer Street, Docklands. In support of that contention, the Secretary produced a lease agreement between Ms Fortune and the real estate agent, Lucas Real Estate, dated 10 July 2007. That lease agreement recorded the lease of the property at 2202/90 Lorimer Street, Docklands to Ms Fortune for the period 22 July 2007 to 21 July 2009. Furthermore, all of the documents lodged with Centrelink regarding her application for NA record her residential address as 2202/90 Lorimer Street, Docklands. That address is also recorded as the residential address of Mr Gullquist. However, in a document lodged with Centrelink on 6 June 2008 regarding details of Jusbec, although Mr Gullquist and Ms Fortune noted their residential address was Lorimer Street Docklands, they also stated: moving to 25 Two Bays Crescent, Mount Martha.
20. Centrelink has recorded that Ms Fortune commenced living at the Mount Martha property on 24 August 2009. Ms Fortune disputes that fact. However, in an attachment to an affidavit of Mr Gullquist which was received by the Tribunal on 24 February 2010, Mr Gullquist makes it clear that he accepts both he and Ms Fortune were renting the premises at Docklands between 2007 and 2009. In a letter dated 12 January 2010 to the Tribunal, Mr Gullquist stated that he agreed with the proposition that Ms Fortune commenced living at the Mount Martha property on 24 August 2009, although he stated that there was part-time occupancy of the Mount Martha property which was ongoing since February 2008. Other than Mr Gullquist’s statement, there was no other evidence which supports that contention.
21. The Secretary referred to numerous documents which, he submitted, established that Ms Fortune was residing at the Docklands premises at the time she applied for the NA. Those documents include:
(a)National Australia Bank documents dated 17 May 2007 regarding a loan application indicating that his residential status was renter and had been at that address since December 2003;
(b)a National card application dated 25 May 2007 made by Mr Gullquist in respect of Alisun Australia Pty Ltd (Alisun) of which Mr Gullquist and Ms Fortune are directors;
(c)Mr Gullquist’s tax return for the year ended 30 June 2007;
(d)Ms Fortune’s tax return for the year ended 30 June 2007;
(e)Ms Fortune’s NA Customer Declaration form dated 3 June 2008;
(f)a tenancy agreement for the Docklands’ property commencing 22 July 2007 for a fixed term of 12 months and a further term of 12 months terminating on 21 July 2009;
(g)Ms Fortune describing herself as a non homeowner in her NA Customer Declaration form which she declared was complete and correct;
(h)Ms Fortune declaring in her NA Customer Declaration form that she had a trust or company interest but no interest in real estate other than the home in which she lived;
(i)Ms Fortune’s claim for job network assistance dated 3 June 2008 indicating her address as the Docklands’ premises;
(j)details provided by Ms Fortune and Mr Gullquist regarding the Super Fortune Trust, stating their postal address and residential address to be at Docklands;
(k)Ms Fortune’s NAB E-banking account statements between August 2007 and July 2009 which are all addressed to the Docklands’ address;
(l)NAB Visa Gold card in the name of Ms Fortune where all statements are addressed to the Docklands’ address;
(m)Ms Fortune’s NAB Visa Gold card indicating transactions essentially around South Melbourne and Docklands, but not at Mount Martha;
(n)Ms Fortune’s NAB Gold Master card is addressed to the Docklands’ address;
(o)Ms Fortune’s transactions on her NAB Gold Master card between June 2007 and August 2008 are all around the Melbourne area but not Mount Martha;
(p)NAB statements relating to Mr Gullquist’s home loan for the period 3 August 2007 to 31 March 2009 all addressed to the Docklands’ address;
(q)Mr Gullquist’s NAB E-banking account and NAB Smart Direct account between August 2007 and August 2009 all of which are addressed to the Docklands’ address;
(r)Mr Gullquist’s National Visa One account statements between June 2007 and July 2009 all addressed to the Docklands’ address;
(s)transactions on Mr Gullquist’s Visa card mostly in the Melbourne precincts and suburbs including Docklands;
(t)Mr Gullquist’s NAB Gold Master card statements addressed to the Docklands’ address;
(u)Ms Fortune’s NAB E-banking account statements recording rental deposits in respect of the Mount Martha property; and
(v)in a document lodged with the Australian Securities and Investments’ Commission notifying a change of company details for Alisun on 31 December 2009, Mr Gullquist noted the company’s address to be the Docklands’ address and in the annual company statement dated 4 January 2010, Mr Gullquist noted that the address of the company offices, namely himself and Ms Fortune, was the Docklands’ address.
22. It is clear from the above documents that between 22 May 2008 and 5 June 2008, being the relevant two week period, there can be little doubt that Ms Fortune and Mr Gullquist resided at the Docklands’ apartment. There was no objective evidence before me that they resided at the Mount Martha property nor did Mr Gullquist or Ms Fortune give any indirect evidence of residing elsewhere during that period. Accordingly, on the balance of probabilities, I find that Ms Fortune was not a homeowner during the relevant period. Therefore, as was submitted by the Secretary, her asset value limit at that time was $357,500 which was the asset value limit set out in column 3B of the Assets Value Limit Table in the Act.
VALUE OF MOUNT MARTHA PROPERTY
23. Having found that the Mount Martha property was not the principal residence of Ms Fortune during the two week period following her claim for NA, s 1118(1)(b) of the Act cannot apply to Ms Fortune. In other words, it cannot be disregarded when valuing Ms Fortune’s assets for the purposes of her application for NA.
24. While the Secretary accepted that Mount Martha property was held by the Super Fortune Trust, he nevertheless contended that the asset attribution rules set out in Part 3.18 Division 1 of the Act applied. As is set out in s 1207 of the Act, Part 3.18 sets up a system for the attribution to individuals of the assets and income of private companies and private trusts. The attribution provision commenced on 1 January 2002 and therefore it applies to Ms Fortune. For assets or income to be attributed to an individual:
(a)the trust must be a designated private trust;
(b)the trust must be a controlled private trust in relation to the individual, and
(c)the individual must be an attributable stakeholder of the trust.
25. A trust will be a controlled private trust if the individual passes a control test or a source test.
26. Mr Gullquist conceded that Jusbec satisfied the provisions of s 1207N(1) of the Act and was therefore a designated private company. Mr Gullquist also conceded that the Super Fortune Trust satisfied the test for a designated private trust as that expression is defined in s 1207P of the Act.
27. The control tests for private trusts is set out in s 1207V(2) and the source test in s 1207V(3) of the Act. It was not disputed that Ms Fortune is the appointor under the Super Fortune Trust Deed and that Ms Fortune and Mr Gullquist are the sole beneficiaries under the trust. Therefore, Ms Fortune satisfies the control test set out in s 1207V(1) of the Act. Having satisfied that section, she is not required to satisfy the source test.
28. Mr Gullquist did not dispute the fact that both he and Ms Fortune are each an attributable stakeholder as that expression is defined in s 1207X of the Act. Ms Fortune did not dispute the fact the she and Mr Gullquist should each be attributed with 50 per cent of the assets of the Super Fortune Trust.
29. The attribution rules set out in s 1207 of the Act also apply to the assets and income of private companies.
30. A designated private company is one in which the consolidated revenue for the financial year of the company and its subsidiaries was less than $25 million or any other amount prescribed by the regulations made for the purposes of paragraph 45A(2)(a) of the Corporations Act 2001. There was no question that the consolidated revenue for the financial year in question of Alisun was less than 25 million dollars. There is also no question that the company has fewer than 50 employees. It therefore satisfies the test for a designated private company.
31. Because its directors are Ms Fortune and Mr Gullquist, Alisun passes the test for a controlled private company. Therefore, s 1207X attributes 100 per cent of the assets or income of the company to Ms Fortune.
32. In a document lodged with Centrelink on 6 June 2008, Ms Fortune declared that the estimated current market value of the Mount Martha property was $950,000. In a letter to the Tribunal dated 29 June 2009 Mr Gullquist submitted that the value of Mount Martha was $900,000. This appears to be the valuation which he supplied to the NAB on a commercial card application form lodged on 25 May 2007. However, and not disclosed by Ms Fortune or Mr Gullquist to Centrelink, was a sworn valuation provided by the Hay Property Group which valued the property at $1,050,000. Although I was not provided with a copy of that valuation, it is referred to in a NAB memorandum prepared on 1 April 2008.
33. Although there was some dispute about the value of the Mount Martha property at the relevant time, given fact that the NAB relied upon the valuation provided by HAY Property Group in April 2008, being immediately prior to Ms Fortune’s application for NA, I am of the view that it is the appropriate valuation to form the basis on which to determine the value of Ms Fortune’s assets.
ENCUMBERANCES ON MOUNT MARTHA PROPERTY
34. Section 1121 of the Act provides:
(1)If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.
Note: this section does not apply to an asset to which section 1121A (primary production assets) applies.
(2)Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:
(a)the charge or encumbrance is a collateral security; or
(b)the charge or encumbrance was given for the benefit of a person other than the person or the person’s partner.
35. Although the expression collateral security is not defined in the Act, the expression is commonly understood in financial terms to mean security given over one asset for a loan in respect of the purchase of another asset. In the context of the Mount Martha property, it means where the Mount Martha property has been used or given as security for a loan in respect of the purchase of other assets or other borrowings.
36. Unfortunately, Mr Gullquist has not provided details of the purchase of the Mount Martha property other than to state that it was acquired some years ago. There was no evidence before me as to who the purchaser was, the purchase price or any mortgage securing the loan monies for the purchase of the Mount Martha property. However, it is likely that Jusbec was the purchaser of the Mount Martha property and that it borrowed some $300,000 which appears to be related to its purchase. This evidence was obtained from an NAB National Choice Home Loan Interest Only Account Number 85-584-2334. The account was opened on 3 August 2007 and the loan sum of $300,000 was drawn down on 6 August 2007.
37. In April 2008 Mr Gullquist and Ms Fortune approached the NAB for the purpose of borrowing $675,000. These borrowings were to be secured by the Mount Martha property, the Chatswood property and personal guarantees given by Mr Gullquist and Ms Fortune.
38. A memorandum regarding consumer and personal investment lending credit produced by NAB and dated 1 April 2008 explains that the borrowings are for the purpose of a restructure of all of the business debts currently in the name of Alisun and Jusbec. The existing home loan in the name of Jusbec for $300,000 was to be paid out, re-written and consolidated with the $675,000 loan proposal. The restructured debts of Alisun amounted to $196,847. Allowing for the re-written Jusbec loan and the restructuring of the Alisun loans, from the balance ($178,000) Ms Fortune’s Master card and Visa card debts were to be repaid together with Mr Gullquist’s Visa card debt. In addition, there was to be a $20,897 payment to the Australian Taxation Office for outstanding GST. After payment of those sums, there would be a surplus of about $83,000, which was to be retained by Alisun for incidentals.
39. A new account was opened for Jusbec (No 81-298-7322) on 17 April 2008 and on the following day, the sum of $675,000 was lodged in that account. On the same day, the $675,000 was transferred from Jusbec’s account to Alisun’s account (No 86‑433‑6863) and Alisun transferred $75,000 back to Jusbec. The result was that Jusbec’s home loan interest only account was in debit in the amount of $600,000 which was secured by the Mount Martha property. However, it should be apparent that $375,000 of the $675,000 advanced by the bank on 18 April 2008 was used for purposes other than payment for the Mount Martha property. In other words, the Mount Martha property was used as collateral security for those borrowings which were for the business purposes of Alisun, the payment of the credit card debts of Ms Fortune and Mr Gullquist, and GST owing by Alisun. Surplus monies were to be retained by Alisun for its business purposes. Although Mr Gullquist submitted that the entire $675,000 loan made by the NAB on 18 April 2008 was a housing loan in respect of the Mount Martha property, the documentary evidence is as I have stated above. Therefore, I cannot accept Mr Gullquist’s submission about that.
40. In his written submissions, Mr Gullquist referred to the balance sheet of the Super Fortune Trust as at 30 June 2007. He pointed to the fact that the trust had a current liability described as unpaid trust distributions in the sum of $548,314. This was in addition to a non-current liability being the bank loan for $300,000. The trust distribution statement for the year ended 30 June 2007 records capital introduced to the trust in 2006 in the sum of $527,179. The Secretary submitted that the characterisation of the $527,179 as introduced capital and the $532,125 as an unpaid trust distribution was simply nonsense. That is because capital can only be introduced to a trust by way of settlement, gift or loan. With respect to the accountants who drew up Super Fortune Trust financial statements, what the Secretary says is plainly correct. Except for the bank loan of $300,000, there was no evidence before me of any loans made to the trust by Ms Fortune or Mr Gullquist. If any monies were provided to the trust (or the trustee) for purposes of the purchase of the Mount Martha property, they must have been by way of settlement on the trust, a gift or by way of loan. There are no documents which evidence any of those means of providing additional capital to the trust.
41. Mr Gullquist provided a copy of the minutes of the meeting of directors of Jusbec held on 25 November 2005 in which it was noted that the initial contributions of capital to the trust by Ms Fortune and himself were at all times to remain the capital of the contributors in the respective amounts contributed. However, that statement is clearly, by itself, nonsense. Any contributions by Ms Fortune and Mr Gullquist could not, at the same time, be the capital of the trust and be their capital as well. In the end, it matters not whether monies were settled on the trust for the purchase of the property, whether they were gifted or whether they were lent. This is because if those monies were in fact a loan and therefore a liability of the trust, they would be an asset in the hands of Ms Fortune or Mr Gullquist. It would make no difference when calculating the net assets of Ms Fortune because her partner’s assets must also be included as belonging to her for the purposes of the Act.
42. As I have previously found, the value of the Mount Martha property at the relevant time was $1,050,000. From that figure must be subtracted the value of the encumbrance over that property, but not including any encumbrance to the extent that it is a collateral security. Assuming that Ms Fortune and Mr Gullquist either settled or gifted monies to the trust at the time of purchase, then the value of the Mount Martha property for the purposes of the assets test under the Act must be $1,050,000 less $300,000, which $750,000. As I have said, if Ms Fortune and or Mr Gullquist lent monies to the trust for the purchase of the Mount Martha property, then the sum lent would be their asset and would need to be added to the net value of the Mount Martha property. The outcome would not be any different. Accordingly, on the basis of the net value of the Mount Martha property alone, I find that the assets of Ms Fortune, which includes the value of Mr Gullquist’s assets as required by s 612 of the Act, exceeded the maximum allowable limit by $392,500. For that reason alone, Ms Fortune was not entitled to be paid NA.
43. I have of course, for the purposes of coming to my conclusion above, attributed 100 per cent of the value of the Mount Martha property to Ms Fortune, taking into account Mr Gullquist’s interest in that property. In doing so, I have taken into account the fact that under s 1207X(1) of the Act, Ms Fortune can be described as an attributable stakeholder because the Secretary had not determined otherwise. Should it be necessary to justify the Secretary’s decision to determine Ms Fortune was an attributable stakeholder for the purposes of the Act, I need to briefly say something about the Social Security (Attributable Stakeholders’ and Attribution Percentages) Principles 2000 (Principles), which is a legislative instrument made by the Secretary on 11 December 2000. This instrument was made pursuant to s 1209E of the Act which provides that the Secretary may, by legislative instrument, formulate decision making principles to be complied with in making a decision under s 1207X of the Act.
44. Section 6 of Principles provides that if, but for a determination made by the Secretary, an individual would be an attributable stakeholder of the company or trust, 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 in an attributable stakeholder; and
(b)the circumstances mentioned in Part II of the Principles.
The circumstances mentioned in Part II of the principles include:
(a)circumstances affecting the relationship with the company or trust;
(b)contribution to the company or trust;
(c)past benefit from distributions by the company or trust;
(d)future benefit from distributions by the company or trust;
(e)benefit from assets and income of the company or trust;
(f)existing attribution to the individual; and
(g)other circumstances.
45. As the Secretary submitted, Ms Fortune, when submitting details of the private trust to Centrelink on her application for NA, stated that in the past five years, neither she nor any other person had gifted, transferred or sold for less than market value, any investments, services, real estate or other assets to the trust. Rent paid by the tenants of the Mount Martha property was paid to Ms Fortune’s NAB account No 85-580-4901. Those payments can be described as benefits or distributions by the trust. There is also the fact that the interest payments on Jusbec’s loans are made by Alisun from its NAB account No 86-443-6863. Other expenses regarding the Mount Martha property also appear to have been paid by Alisun or Ms Fortune. I agree with the Secretary that these factors point to the conclusion that for the purposes of Part III dealing with the determination of assets attribution percentage in the Principles, the Secretary’s decision not to determine the asset attribution percentage of Ms Fortune to be less than 100 per cent was correct.
46. Although my findings regarding the attribution of the Mount Martha property to Ms Fortune would end this matter, for the sake of completeness, I have also looked briefly at the Chatswood property and also Ms Fortune’s income.
CHATSWOOD PROPERTY
47. The Chatswood property is owned by Mr Gullquist. The property has been rented since 1999 and in his 2007 tax return, Mr Gullquist stated the gross rent from that property was $20,831.
48. At the time of refinancing all of the loans provided to Ms Fortune, Mr Gullquist, Jusbec and Alisun, the market value of the Chatswood property was said to be $411,274. However, in a commercial credit card application for Alisun, Ms Fortune recorded that property as being valued at $500,000.
49. Mr Gullquist borrowed $450,000 from the NAB, drawing that sum down on 6 August 2007. These borrowings were secured by a mortgage over the Chatswood property as well as the mortgage held over the Mount Martha property. Alisun paid the interest on the $450,000 loan and rent from the property was paid to Mr Gullquist. The security given over the Chatswood property is collateral for borrowings by Mr Gullquist for business purposes, and not for the purchase of the Chatswood property. Therefore the total value of the Chatswood property must be taken into account for the purposes of the assets test. Whether this value is $411,274 or $500,000 matters not. Its value needs to be added to the net value of the Mount Martha property for the purpose of establishing Ms Fortune’s assets under the Act and her eligibility to be paid NA. Quite plainly, this property, by itself, would cause Ms Fortune to exceed the assets test limit.
50. While I am aware that the Secretary also lists loans to Alisun by Ms Fortune and Mr Gullquist as well as some other sundry assets to Ms Fortune, I mean no disrespect in not setting out in detail my findings in relation to those assets. That is because it is wholly unnecessary to do so. This is even though it throws into serious doubt the accuracy of the statements made by Ms Fortune and Mr Gullquist concerning the value of their entire assets for the purposes of claiming NA.
INCOME
51. The first thing to note is that s 1207X(1) and (2) dealing with attributable stakeholders applies equally to income. For the reasons I have already explained above, Ms Fortune is an attributable stakeholder for the purposes of s 1207X of the Act. Therefore, if Alisun and or Jusbec satisfy the attribution requirements under s 1207 of the Act, then the income of those entities can be attributed to Ms Fortune. The same of course applies to the income of Mr Gullquist by reason of the fact that his income must be taken into account when working through Module G in s 1068‑G1 of the Act. Section 643 of the Act provides that a person’s NA rate is to be worked out using the Benefit Rate Calculator B at the end of s 1068.
52. Section 1068-G1 provides that the method statement in that section is to be used to work out the effect of a person’s ordinary income, and the ordinary income of a partner of the person, on the person’s maximum payment rate.
53. The expression ordinary income is defined in s 8(1) of the Act and it means:
… income that is not maintenance income or an exempt lump sum.
Income is defined in that section to mean:
…
(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
The exclusions referred to above do not apply to Ms Fortune’s case.
54. Section 8(2) of the Act provides that:
(2)A reference in this Act to an income amount earned, derived or received is a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).
55. The expression income amount is defined in s 8(1) of the Act and it means:
(a)valuable consideration; or
(b)personal earnings; or
(cmoneys; or
(d)profits;
(whether of a capital nature or not).
56. It should be noted that the definition of income for the purposes of the Act is significantly broader than that which is to be found in the Income Tax Assessment Act.
57. Ms Fortune’s tax returns for the years ended 2006 and 2007 disclose zero income in both years. Mr Gullquist’s tax returns for the 2006 and 2007 years disclose losses of $20,135 and $17,069 respectively. In the rental property schedule attached to his 2006 tax return, Mr Gullquist disclosed rental income of $20,112, that being rental from the Chatswood property.
58. Alisun’s trading, profit and loss statement for the year ended 30 June 2007 discloses an operating profit before income tax of $129,515 for 2006; and $114,856 for 2007.
59. In a statement provided to Centrelink on 3 June 2008, Ms Fortune declared that in the preceding two years, she had mostly been doing paid work. In answer to a question regarding how many hours she mostly worked per week, she entered 35 hours or more. This is despite what was recorded in her previous two years tax returns.
60. Despite Ms Fortune indicating nil income for the years 2006 and 2007, and Mr Gullquist returning losses for both of those years, Ms Fortune was the lessee of the unit at Docklands where the couple resided for some three years. Furthermore, Ms Fortune and Mr Gullquist declared to the NAB that her income after tax was $4,000 per month. As the Secretary submitted, Ms Fortune’s income tax returns cannot be relied upon as an accurate reflection of her income.
61. The Secretary submitted that because Ms Fortune was paying $2,600 in rent per calendar month for the Docklands’ unit in the 2008 financial year, she and Mr Gullquist must have had ordinary income exceeding $31,200 for that financial year. There was no evidence of a loan for the payment of the rent. There is no question that Ms Fortune is the tenant listed in the tenancy agreement which appears to have been in existence during that financial year. The rental amount on that agreement is listed at $2,600 per calendar month. There was no evidence that the rental for the Docklands property was not paid in that financial year. Accordingly, I accept the Secretary’s submission in respect of that sum. Ms Fortune was able to satisfy the rental liability for the Docklands property during that financial year, irrespective of where the monies came from. It clearly falls within the definition of an income amount earned, derived or received as set out in s 8(2) of the Act. There can be no doubt that those monies were applied for Ms Fortune’s benefit.
62. Ms Fortune’s bank statements for account number 858-580-5901 disclose that all rentals received from the Mount Martha property was paid into her account directly by the real estate agent dealing with that property. Ms Fortune’s account indicates that $7,084.14 was paid into her NAB Smart Direct account for the 2008 financial year. As was submitted by the Secretary, this amount must be deemed to be Ms Fortune’s income during that year. Because the interest on all of the loans provided by NAB are paid by Alisun, those expenses, if it were possible to apportion them to the Mount Martha property, cannot be claimed by Ms Fortune. However, as the Secretary submitted, Ms Fortune did pay land tax, repairs and cleaning fees totalling $1,709.25 for that year. Therefore, the net amount to be attributed to Ms Fortune as her income should be $5,374.89.
63. Ms Fortune’s NAB Smart Direct account also records the sum of $2,500 credited to her account during the 2008 financial year as repayment of directors’ loans. The Secretary submits, and I agree, that sum is the ordinary income of Ms Fortune for the purposes of the Act.
64. I have already referred to the loan made by the NAB in the sum of $675,000 to Jusbec. Part of those monies was used to pay out Ms Fortune’s Master card and Visa card accounts. According to the NAB documents, those payments were $29,520 and $31,411 respectively. Ms Fortune has not had to meet the interest expenses on the loan. Accordingly, she has had the benefit of the sum of $62,080.37 without incurring any expenses against that sum. Therefore, as the Secretary submitted, that sum should be regarded as Ms Fortune’s ordinary income for the 2008 year.
65. The Secretary submitted that Ms Fortune was a card holder under Alisun’s NAB Business Access Visa. The statements in evidence regarding that account clearly disclose Ms Fortune as a cardholder of that business Visa card. It is also clear from the entries on that card account that the card was in fact used to pay for Ms Fortune’s private expenses to a significant degree. While it is not possible to determine precisely the benefit derived by Ms Fortune during the 2008 financial year, it is not an insignificant amount.
66. The Secretary also pointed to a number of other smaller payments which were made on behalf of Ms Fortune. They included a rental payment on the Docklands’ unit made by Alisun; the payment of an American Express card account in October 2007 by Alisun, which also appears to be a payment of rent for the Docklands’ unit; a payment by Alisun of an NAB issue fee for a bank guarantee which appears to relate to the lease of the Docklands’ unit; and other identifiable rental payments in respect of the Docklands’ unit.
67. The cut-out amount is the name commonly given to the point at which a pension or allowance ceases to be payable under the income test. This is ordinarily calculated at a fortnightly rate and for partnered applicants, at the present time, the cut-out amount occurs at $800 per fortnight which is equivalent to income of $20,800 per annum. Quite plainly, Ms Fortune’s ordinary income at the time of her application for NA exceeded the cut-out amount by a substantial sum without taking into account Mr Gullquist’s fortnightly income. Where a partner’s ordinary income exceeds the partner income free area ($62.00), the person has a partner income excess. The partner income excess reduces the person’s right to payment by 60 cents for every dollar of excess over the partner income free area. While it is unnecessary for the purposes of this decision to examine Mr Gullquist’s ordinary income for the 2008 financial year, because the Secretary has examined Mr Gullquist’s income, I propose to deal briefly with that.
MR GULLQUIST’S ORDINARY INCOME FOR THE 2008 FINANCIAL YEAR
68. The NAB consumer and personal investment lending credit memorandum dated 1 April 2008 records Mr Gullquist’s employment status as self employed. In a statement for an NAB Commercial card application made on 25 May 2007, Mr Gullquist declared that his monthly personal income after tax was $4,000 and that his partner’s monthly income after tax was also $4,000. He also declared that he received $1,500 monthly income after tax from rent. Those figures alone suggest that Mr Gullquist’s income at that time was about $66,000 per annum. Mr Gullquist’s tax return for the financial year ended 2007 stated his only income was rent in the amount of $20,831; other business income of $1,971 and that after deducting interest, capital works and other rental expenses, he recorded a taxable income loss of $17,069.
69. The Secretary submitted that Mr Gullquist’s income tax returns were not a reliable indicator of his income. This is for a number of reasons which I have set out briefly below.
70. Although Mr Gullquist disclosed rental income from the Chatswood property, he set off against that income the interest expenses on borrowings used to acquire that property. The problem is, as the Secretary submitted, although Mr Gullquist received rent from the Chatswood property, he did not pay the interest expense. Interest payments were made from Alisun’s NAB account 86-433-6863. Those regular interest payments indicate that they relate to interest charged on Mr Gullquist’s NAB account 85-584-0603. Furthermore, those payments of interest in respect of Mr Gullquist’s borrowings do not appear on Alisun’s profit and loss statement for the financial year ended 2008. Although the Secretary contended that the interest for that year was included in bank charges, from the documents before me, I am not able to determine that to be the case. Nevertheless, I agree with the submission that Mr Gullquist most certainly did not pay the interest on loans to him in respect of the Chatswood property. I also agree with the Secretary’s submission that the rent he in fact received in the 2008 financial year was $22,219.41 rather than the stated figure of $20,831. Allowing for deductions for depreciation on plant and a special building write-off in the amount of $7,264, the balance, $14,955.41, is Mr Gullquist’s income for the purposes of the Act.
71. Mr Gullquist’s 2008 tax return indicates he received $6,500 in income from legal services. Against that income he deducted $7,800 for rent and $1,356 in other expenses. The Secretary submitted that Mr Gullquist did not pay rent in respect of any premises. The Secretary submitted that the online register of legal practitioners’ maintained by the Legal Practice Board of Victoria discloses Mr Gullquist’s professional address as Suite 2A, Como, 299 Toorak Road, South Yarra. That is also the registered office address for Alisun and its principal place of business as disclosed in its annual statements. Furthermore, Alisun’s account number 86‑433‑6863 discloses that rental payments for the Como property were made from that account. Therefore, as the Secretary submitted, the sum of $5,144 was Mr Gullquist’s income for the purposes of the Act.
72. The Secretary also pointed to a number of cash payments made in the 2008 financial year to Mr Gullquist’s bank account number 85-596-9087 totalling $1,352.71. There was also a deposit of $10,000 on 24 January 2008. The Secretary submitted that these sums should be regarded as Mr Gullquist’s ordinary income. There being no evidence to the contrary, I must accept the Secretary’s submission.
73. On 18 April 2008, Alisun paid $3,771.57 on Mr Gullquist’s personal Visa card. The Secretary submitted that this should be regarded as ordinary income of Mr Gullquist for the 2008 financial year. There being no contrary evidence, I agree.
74. Mr Gullquist was a card holder of Alisun’s NAB Business Visa account. The Secretary submitted that Mr Gullquist purchased goods and made cash withdrawals on numerous occasions, those purchases and cash withdrawals being for his personal use. The Secretary identified some $2,134 for the 2008 financial year which should be regarded as Mr Gullquist’s ordinary income. Having examined the visa account statements in question, I agree.
75. The above sums were aggregated by the Secretary to be around $40,000. I find this to be correct. Accordingly, I accept the Secretary’s submission that Mr Gullquist’s income alone would have precluded any payment of NA to Ms Fortune in the two weeks following her application for that social security payment.
76. Although the Secretary also proceeded to analyse Ms Fortune’s and Mr Gullquist’s income for the 2009 financial year, I find it unnecessary to do so because Ms Fortune’s claim for NA and the first fortnightly period following that claim occurred in the 2008 financial year. However, if I am wrong about that, I accept the submissions made by the Secretary as the conduct described above for the 2008 financial year continued unabated into the following financial year. Ms Fortune’s and Mr Gullquist’s private expenses continued to be paid by Alisun. Furthermore, on 26 March 2009, Jusbec drew down $39,325 on its home loan account and, in the absence of any evidence to the contrary, that sum is ordinary income of Ms Fortune for the purposes of the Act. Also, Mr Gullquist received payments from TAB Corp Holdings which were paid into Alisun’s bank account in the 2009 financial year. At the hearing before the SSAT, Mr Gullquist explained that he was doing consultancy work one day a month for approximately $2,200 per day. The Secretary contended that those payments should be attributed to Mr Gullquist. There was no evidence about that to the contrary.
CONCLUSION
77. Even if Ms Fortune qualified for NA at the time of her application on 22 May 2008, because she exceeded the maximum asset limit for a partnered non‑homeowner and her income exceeded the cut-out amount under the income test let alone when her income was combined with that of Mr Gullquist’s, I find that NA was not payable to Ms Fortune at the time of her application or at any time during the 2008 or 2009 financial years. Accordingly, I find that the decision made by the SSAT on 10 March 2009 was correct. I affirm that decision.
I certify that the seventy-seven [77] preceding paragraphs are a true copy of the reasons for the decision herein of
Senior Member Egon FiceSigned: ............... ..Elise Montalto…......................................
AssociateDate of Hearing 25 February 2010 & 30 August 2010
Date of Decision 26 November 2010Representative for the Applicant No appearance
Counsel for the Respondent R. Knowles
Solicitor for the Respondent L. Dobelsky, DLA Phillips Fox
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