Franich and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2011] AATA 324
•12 May 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 324
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/4753
GENERAL ADMINISTRATIVE DIVISION ) No 2010/4754 Re Ante Franich
Karmela FranichApplicant
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
Respondent
DECISION
Tribunal C Walsh, Senior Member Date 12 May 2011
Place Perth
Decision The Tribunal affirms the decisions under review.
.......(sgd) C Walsh...
Senior Member
CATCHWORDS
Social security – age pension – disability support pension - whether investment in superannuation fund is an assessable asset or an asset which can be disregarded – pension age - assets test – assets value limit – combined assets - reduction in rate of age pension – alleged incorrect financial advice by bank and Centrelink – compensation sought
LEGISLATION
Social Security Act 1991 (Cth) – section 11(1) - section 23(5C)- section 55- section 1064 – section 1064-A1 – section 1064-G1 – section 1064-G3 – section 1064-G4 – section 1064-G5- section 1118
Social Security (Administration) Act 1999 (Cth) – section 79
REASONS FOR DECISION
12 May 2011 C Walsh, Senior Member Introduction
1. Mr Ante Franich, 76 years of age, immigrated from Yugoslavia to Fremantle, Australia in 1961. In 1966, Mr Franich married Karmela Franich (ne Cukrov), 64 years old, also an immigrant of Yugoslavia. Mr and Mrs Franich became Australian citizens in 1968 and 1981 respectively.
2. In 2005, Mr and Mrs Franich sold some of their land for approximately $800,000 and on 13 July 2007 they invested the proceeds from the sale of that land in Colonial First State on the advice of a financial planner with the Commonwealth Bank. The majority of the proceeds from the sale of their land in 2005 were invested in Mrs Franich’s name in a superannuation fund (the “Colonial First State FirstChoice Wholesale Personal Super”) and the balance was invested in Mr Franich’s name in an allocated pension (the “Colonial First State FirstChoice Wholesale Allocated Pension”).
3. On 20 July 2007, Mr Franich lodged a claim for and was granted age pension and Mrs Franich lodged a claim for and was granted disability support pension.
4. Some years later, on 10 June 2010, Mrs Franich lodged a Transfer to Age Pension – Income and Asset Review form with Centrelink whereby she requested that she be transferred from a disability support pension to an age pension.
5. On 21 June 2010 Centrelink issued Mrs Franich with a notice advising her, among other things, that:
·she would be paid age pension and that her disability support pension would be cancelled effective 3 July 2010 (being the date on which Mrs Franich turned 64 years old and which constitutes her ‘pension age’ for social security purposes);
·she would be paid age pension of $225.61 on payday 15 July 2010 (for the payment period from 30 June 2010 to 13 July 2010) but that her regular payment of age pension from 29 July 2010 would be $143.00; and
·that the information used for calculating the regular payment of her age pension was total combined assets of $772,122.12 and total combined annual income of $27,551.89.
6. Also on 21 June 2010, Centrelink issued Mr Franich with a notice advising him, among other things, that:
·his payment of age pension on payday 15 July 2010 (for the payment period from 30 June 2010 to 13 July 2010) would be $225.61 and that his regular payment of age pension from payday 29 July 2010 would be $143.00;
·the information used for calculating the regular payment of age pension was total combined assets of $772,122.12 and total combined annual income of $27,551.89; and
·his rate of age pension had been reduced because the combined value of his and his wife’s assets had increased.
7. On 12 August 2010 sought a review of the decision made by Centrelink to reduce his rate of age pension. On 20 August 2010, a Centrelink Customer Service Advisor wrote to Mr Franich stating that the decision concerning his rate of pension was correct and should not be changed because:
“…prior to 03/07/2010 before your wife was Age Pension age the Colonial First State Personal super fund was considered an exempt asset and not taken into consideration when assessing your rate of Pension. Once your wife turned Pension Age on 03/07/2010 the super fund became an assessable asset and was therefore taken into account when assessing your rates of Pension.”
8. Mr Gonzalez, a welfare rights advocate with the Fremantle Community Legal Service, subsequently wrote to Centrelink, on Mr Franich’s behalf, seeking a further review of Centrelink’s decision to reduce Mr Franich’s rate of age pension by a Centrelink Authorised Review Officer (ARO).
9. On 7 September 2010, a Centrelink ARO affirmed the decision to treat Mrs Franich’s investment in the Colonial First State superannuation fund as an assessable ‘asset’ (such that it was included in calculating Mr and Mrs Franich’s ‘joint assets’), resulting in a reduction in both Mr and Mrs Franich’s rate of age pension.
10. Dissatisfied, on 10 September 2010 Mr and Mrs Franich applied to the Social Security Appeals Tribunal (SSAT) for a review of the decision made by the Centrelink ARO on 7 September 2010.
11. On 8 October 2010 the SSAT affirmed the decision of the Centrelink ARO.
12. Mr and Mrs Franich now seek a review of the decision of the SSAT by this Tribunal. In Mr Franich’s application for review he stated as the ‘Reasons for Application’ as:
“I disagree with the SSAT decision because the [SSAT] did not take into account that I was advised that Superannuation would not impact on our pension when my wife turn pension age. In about 2007 I spoke to the Commonwealth Bank and Centrelink and [they] said that if we left the superannuation in Colonial First State Fund it will have no impact on our pensions. It was not made plainly clear to me in any event. This has impacted adversely on my and my family health.”
Mrs Franich’s ‘Reasons for Application’ were stated in almost identical terms.
Is Mrs Franich’s investment in the Colonial First State FirstChoice Wholesale Personal Super an assessable or an exempt asset for the purpose of determining Mr and Mrs Franich’s rate of age pension?
13. Section 55 of the Social Security Act 1991 (Cth) (Act) provides that a person's age pension rate is worked out using Pension Rate Calculator A at the end of section 1064 of the Act.
14. Broadly, subsection 1064A-1 of the Act provides that a person’s age pension rate is a daily rate calculated using either the ‘ordinary income test’ (in Module E of Pension Rate Calculator A) or the ‘assets test’ (in Module G of Pension Rate Calculator A), whichever gives the lower rate. For present purposes, the ‘assets test’ is the relevant test. Where two people are ‘members of a couple’ (as is the case with Mr and Mrs Franich), they are treated as pooling their resources (income and assets) and sharing them on a 50/50 basis: section 1064A-2 of the Act.
15. The ‘assets test’ in Module G of Pension Rate Calculator A provides that if the value of a person’s assets exceeds that person’s ‘assets value limit’ (as defined in section 1064-G3 of the Act) the person’s maximum payment rate of age pension is reduced. The term ‘asset’ is defined in subsection 11(1) of the Act as ‘property or money (including property or money outside Australia)’. Section 1064-G4 of the Act details how a person’s pension rate is reduced for assets in excess of that person’s ‘assets value limit’ and section 1064-G5 of the Act provides that the assets excess is the value of a person’s ‘assets’ less that person’s ‘asset value limit’. Section 79 of the Social Security (Administration) Act 1999 (Cth) states that if the Secretary is satisfied that rate at which a social security payment (which includes an age pension) is being, or has been, is more than the rate provided for under the Act, the Secretary must determine that the rate is to be reduced to the rate provided for in the Act.
16. As at 1 July 2010, a member of a couple who is a homeowner may have combined assets of up to $258,000 before the rate of age pension is reduced: Table G-1 in section 1064-G3 of the Act.
17. Section 1118 of the Act provides for certain assets to be disregarded in calculating the value of a person's assets for the purposes of the Act. Relevant for present purposes is subsection 1118(1)(f) of the Act which states:
“1118 Certain assets to be disregarded in calculating the value of a
person’s assets
(1) In calculating the value of a person’s assets for the purposes of this Act….., disregard the following:
……..
(f) the value of the person’s investment in:
(i) a superannuation fund; or
(ii) an approved deposit fund; or
(iii) a deferred annuity; or
(iv) an ATO small superannuation account;
until the person:
(v) reaches pension age; or
(vi) starts to receive a pension or annuity out of the fund;” [Emphasis added]
18. “Superannuation fund” is defined in section 9(1) of the Act to mean, among other things:
“(a)a fund that is or has been a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993 in relation to any tax year; or
(b)an Australian superannuation fund (within the meaning of the Income tax Assessment Act 1997) that is not a complying superannuation fund mentioned in paragraph (a) in relation to any tax year; or
(c)a scheme for the payment of benefits upon retirement or death that is constituted by or under a law of the Commonwealth or of a State or Territory;…”
19. The “Pension age for women” is set out in the Table in section 23(5C) and (5D) of the Act. For a woman born in the period from 1 January 1946 to 30 June 1947 the ‘pension age’ is 64 years.
20. The relevant evidence before the Tribunal, which evidence is not disputed, is as follows:
· Mrs Franich was born on 3 July 1946 and turned 64, and, therefore, became ‘pension age’ pursuant to section 23(5C) of the Act, on 3 July 2010. Mrs Franich was granted a disability support pension by Centrelink effective 20 July 2007.
· Mr Franich was born on 22 March 1935 and he was granted age pension by Centrelink effective 20 July 2007.
· On 13 July 2007, Mrs Franich invested in 410,493.6560 units with Colonial First State First Choice Wholesale Personal Super (which had a total fund value of $$538,157.18). That investment was made using the proceeds from the sale of land, owned by her and her husband, in 2005. On 2 June 2010, the total value of that investment was $538,157 and as at 3 August 2010, the total value of that investment was $534,048.38.
·Mrs Franich’s investment with Colonial First State constitutes an investment in a ‘superannuation fund’ as defined in section 9(1) pf the Act and for the purposes of section 1118(1)(f)(i) of the Act. Consequently, Mrs Franich’s investment with Colonial First State is an ‘asset’’ within the meaning of section 11 of the Act.
· On 13 July 2007 Mr Franich invested 106,225.3432 units with Colonial First FirstChoice Wholesale Allocated Pension. On 3 August 2010, the total balance of that pension account was $148,481.78.
· On 10 June 2010 Mrs Franich lodged a “Transfer to Age Pension – Income and Asset Review” application form to be transferred from a disability support pension to an age pension. Based on the information provided in that form, as at 10 June 2010, Mr and Mrs Franich’s combined assets, and the value of those assets, comprised at least the following:
(i)Mrs Franich held 410,493.65 units in Colonial First State FirstChoice Wholesale Super (which had a total fund value of $538,157);
(ii)Mr Franich held 106,225.3432 units in Colonial First State FirstChoice Wholesale Allocated Pension;
(iii)Mr and Mrs Franich held investments with the Commonwealth Bank with a total value of $75,646 (comprising a joint term deposit with a balance of $72,698 and a deeming account with a balance of $2,948); and
(iv)Mr and Mrs Franich owned other assets totalling $9,000 (comprising household and personal effects with a total value of $5,000 and a car valued at $4,000).
· Mr and Mrs Franich are ‘homeowners’ as defined in section 11 of the Act and that their principal residence should be disregarded for the purpose of the ‘assets test’ in section 1064 of the Act pursuant to section 1118(1)(b) of the Act.
· Centrelink transferred Mrs Franich from disability support pension to age pension from 3 July 2010 in response to her application to make that transfer dated 10 June 2010.
21. The issue for determination by the Tribunal is whether Mrs Franich’s investment in Colonial First State FirstChoice Wholesale Personal Super is an ‘asset’ which should be disregarded under subsection 1118(1) of the Act, in which case it should not taken into account in performing the ‘assets test’ in Module G of Pension Rate Calculator A at the end of section 1064 of the Act and, importantly, in calculating their ‘assets value limits’ pursuant to section 1064-G3 of the Act.
22. Mr Franich informed the Tribunal (with the assistance of an interpreter) that in 2007 he and his wife went to the Commonwealth Bank to seek advice about their future financial security. In particular, they sought advice from the Commonwealth Bank on the best way to invest the money they already had in the bank from the sale of their land in 2005 for their retirement. Mr Franich told the Tribunal that he and his wife had acted on the advice of Mr Troy Davey, a financial planner at the Commonwealth Bank, Spearwood branch in investing their money in an allocation pension and in superannuation. He claimed that he had been advised by Mr Davey that his wife’s investment in the Colonial State superannuation fund would have no future impact on their pensions. He said that he and his wife would never have invested in the Colonial First State FirstChoice Wholesale Allocated Pension and the Colonial First State FirstChoice Wholesale Personal Super, respectively, if they knew that his wife’s investment in superannuation would later, upon his wife turning ‘pension age’ (64 years old), result in a reduction in the rates of their age pensions. Specifically, Mr Franich stated that they would never have been so “stupid” as to allow their money to be invested in a superannuation fund if it would subsequently affect their Centrelink payments. Rather, Mr Franich said that his preference would have been to invest some of the proceeds from the sale of their land in 2005 in another, cheaper, parcel of land (specifically, 15 acres of land in Baldivis) and for he and his wife to live off the balance of the proceeds of sale, without having to rely on Centrelink payments. According to Mr Franich, he was “grabbed like a fish in a net” by the Commonwealth Bank. He believes that he did nothing wrong and was given incorrect advice by both the Commonwealth Bank and Centrelink. He said that the Commonwealth Bank and Centrelink had “tricked” him, had been very bad to him and his wife, had destroyed his family and had effectively “put him under the ground”. He believes that what he asked for from the Commonwealth Bank and Centrelink and what they did were two different things. Mr Franich said that as a consequence of what had happened, he now had marital problems and that his son had moved out because of all of the arguing at home. He also said that he no longer felt welcome coming home. Further, Mr Franich told the Tribunal that had worked very hard for over 50 years, including cutting sugar cane in Queensland for many years, and that as a consequence of acting on the incorrect advice he had received from the Commonwealth Bank and Centrelink (and making the relevant investments in Colonial First State) he now had nothing to pass on to his children, which is part of what he had worked for all of his life.
23. Mr Franich told the Tribunal that he wants to be compensated by the Commonwealth Bank and Centrelink for what he has lost, namely the land in Baldivis that he claims he would have bought from the proceeds of sale from the land he and his wife sold in 2005 (i.e. had he not been misled by the Commonwealth Bank and Centrelink and told that his wife’s investment in superannuation would have no future impact on their pensions). He also seeks compensation for the stress this incorrect advice has caused himself and his family. Mr Franich said that he was “fighting for his life and his family” in making this application to the Tribunal.
24. In contrast, before the Tribunal the Secretary submitted that whilst Mr and Mrs Franich’s situation is extremely unfortunate the fact remains that under section 1118(1)(f) of the Act a person’s investment in a superannuation fund is an exempt asset, but only until that person reaches age pension age or starts to receive a pension or annuity from the fund concerned. Since Mrs Franich became ‘pension age’ (64 years old) on 3 July 2010, from that date her investment in the Colonial First State superannuation became an assessable asset (and could no longer be disregarded under section 1118(1)(f) of the Act) for age pension purposes. It was further submitted by the Secretary that Mr and Mrs Franich had never approached Centrelink for advice concerning Mrs Franich making an investment in the Colonial First State superannuation fund before making that investment. Rather, the Secretary asserted that Mrs Franich had already invested in the Colonial First State superannuation fund by the time she and Mr Franich applied to Centrelink for their disability support and age pensions, respectively. Accordingly, from the Secretary’s perspective, Centrelink had not misled Mr and Mrs Franich regarding their pensions. The Secretary said that in the circumstances the Tribunal had no jurisdiction to grant Mr and Mrs Franich any compensation and that if they sought compensation from the Commonwealth Bank for incorrect advice, the appropriate course would be for them to make a compensation claim through the banking ombudsman.
25. Based on the evidence before the Tribunal (as detailed in paragraph 20 above), the combined assets owned by Mr and Mrs Franich on 10 June 2010 exceed both of their ‘assets value limits’ of $258,000 such that both Mr and Mrs Franich’s rate of age pension, as calculated under section 1064 of the Act, should be reduced effective 3 July 2010, being the date on which Mrs Franich became ‘pension age’ (64 years old) pursuant to the Table in section 23(5C) of the Act, thereby making her investment in the Colonial State superannuation fund an assessable asset and no longer one which could be ‘disregarded’ under section 1118(1) of the Act, by virtue of paragraph (f) of that section. Consequently, the decision made by the SSAT on 8 October 2010, affirming the decision made by the Centrelink ARO on 7 September 2010, is, in the Tribunal’s opinion, the correct one.
26. As regards Mr Franich’s claim for compensation, whilst the Tribunal sympathises with Mr and Mrs Franich’s predicament, the Tribunal is not the appropriate forum for Mr Franich to pursue such a claim.
Decision
27. For the reasons provided above, the Tribunal affirms the decisions under review.
I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: .......(sgd) T Chater
AssociateDate/s of Hearing 4 May 2011
Date of Decision 12 May 2011
Representative for the Applicants Self-represented
Representative for the Respondent Ms M Conlon
Centrelink Legal Services Branch
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