GLOVER Applicant And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2010] AATA 565
•29 July 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 565
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/5933
GENERAL ADMINISTRATIVE DIVISION ) Re LYNETTE GLOVER Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr K S Levy RFD, Senior Member Date29 July 2010
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
..............................................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Disability support pension – Applicant medically qualified for disability support pension – Whether the applicant’s assets exceed the allowable limit – Assets of married persons combined and then apportioned equally to each – Assets exceed allowable limit – Decision under review affirmed.
Administrative Appeals Tribunal Act 1975 (Cth) s 34J
Social Security Act 1991 (Cth) ss 9, 11, 94, 98, 1064, 1118, 1121, 1122
Achkar and Department of Family and Community Services [2001] AATA 684
Berry and The Secretary, Department of Social Security [1995] AATA 238
Collins and Repatriation Commission (1980) 32 ALR 581
Re Ling and Secretary Department of Family and Community Services [1999] AATA 797
Repatriation Commission and Harrison (1997) 46 ALD 193
Unicomb v Secretary, Department of Social Security (1998) 50 ALD 405
REASONS FOR DECISION
29 July 2010 Dr K S Levy RFD, Senior Member INTRODUCTION
1. The applicant, Lynette Glover, applied for disability support pension (DSP) on 21 July 2009. She is medically qualified for DSP but was refused it on the basis that she had assets which exceeded the prescribed threshold. The decision was reviewed by an authorised review officer (ARO) at the request of Mrs Glover. The ARO affirmed the original decision on 8 October 2009. She subsequently appealed to the Social Security Appeals Tribunal (SSAT). That appeal was unsuccessful (see decision of SSAT on 24 November 2009). She now appeals the decision to this Tribunal.
2. This application is being determined ‘on the papers’ under s 34J of the Administrative Appeals Tribunal Act 1975 (Cth). This provides for hearing the matter in the absence of the parties where both parties consent. A written consent has been provided by both parties in this matter. There was also a telephone directions hearing on 14 July 2010 with the parties to clarify some issues in the papers.
ISSUES
3. The issue for determination by the Tribunal is whether the applicant’s assets exceeded the allowable threshold of $891,500.00 as at 14 July 2009.
EVIDENCE
4. It is not in dispute that Mrs Glover is medically qualified for DSP. Since childhood she has suffered from the condition of post polio syndrome. However, the decision to reject her claim for DSP is based on sharing the assets with her husband, Bruce Glover, which exceeds the statutory threshold when the assets and income tests are taken into account.
5. Mrs Glover has provided detailed submissions dated 16 May 2010. In those submissions she outlines the background to her circumstances which she says result from the ineffectiveness of Centrelink staff or the internal politics that impacted on them when dealing with her application. She has been thorough in considering her interaction with Centrelink and at the outset, points out Centrelink’s mission has been “… to provide easy and convenient access to high quality government and community services that improve the lives of Australian families, communities and individuals in need”.
6. Mrs Glover also provided a background to her medical condition which resulted from receiving a faulty polio immunisation at the age of 5 by Australian Government Medical Clinics. She describes a painful existence from childhood both physically and psychologically. She argues that “the Australian government have a definite moral and possible legal obligation to honour my application for disability support pension due to the fact that my Polio condition was factually Australian Government inflicted”.
7. The position in relation to the assets’ test is that the applicant’s husband had an overdraft of $400,000.00 with Tradewise Management Pty Ltd (Tradewise). He then entered into a deed of agreement on 11 August 2005 to extend his previous overdraft by $1.5 million on 11 August 2005. That resulted in an overdraft of $1.9 million which were “Tradewise trade dollars”. The loan was secured by two bills of sale – one over an original oil painting and another over a gold trophy. On 12 August 2005, Mr Glover then entered into a deed of loan agreement with Woodchopper Pty Ltd as trustee for the Woodchopper Trust for a loan of $1.5 million. The loan was secured by a charge over 115,000 Australian Grain Fund ordinary shares.
8. Following the applicant’s claim for DSP, a Centrelink Complex Assessment Officer (“CAO) examined a number of Mr Glover’s business arrangements in order to assess Mrs Glover under the assets test.
9. Some of the CAO’s considerations were in relation to the following business entities with which Mr and/or Mrs Glover were involved:
(1) Kingfisher Corporation Pty Ltd (“Kingfisher”)
(a)The company was held by the applicant and her husband in equal shares.
(b)From the applicant and her husband’s 2007/2008 tax returns it was noted that Kingfisher owned two apartments, each valued by the Australian Valuation Office (AVO) at $220,000.00, the applicant being the mortgage holder for both properties in her own name.
(c)The applicant had a loan of $4,477.00 to Kingfisher.
(d)The 2007/2008 profit and loss account showed Kingfisher had a net loss of $140,333.00.
(e)A number of loans were made to Kingfisher but there were no loan agreements (and, accordingly, could not be taken into account as liabilities for social security purposes).
(f)The total net asset value of Kingfisher was $93,872.00.
(2) Woodchopper Pty Ltd
The complex assessment officer determined that this company, owned equally by husband and wife, had assets of $10.00 only.
(3)Woodchopper Trust
The applicant and her husband own the trust in equal shares. According to the personal income tax returns, trust tax returns and, the financial statements for the 2007/2008 financial year:
(a)Mr Glover loaned $1.5 million to Woodchopper Trust.
(b)The loan was a recognisable liability of the Woodchopper Trust and reduces the net asset position of the Trust.
(c)The Trust disposed of certain shares in 2007/2008 and had income of $342,970.00
(4)BJ & LP Glover Family Trust
The assets and income of the Trust are for the benefit of the applicant and her husband in equal shares.
(a)There was a trading loss of the Family Trust for 2007/2008.
(b)The applicant and her husband each have a loan to the Family Trust in the amount of $13,025.00
(c)The applicant had a second loan to the Family Trust of $75,064.00
10. The total assessable assets were determined to be $1,778,054.00 (as advised to the applicant on 10 September 2009). The applicant then had the matter reviewed by an ARO. The ARO agreed on the amount of combined assessable assets and so the decision was affirmed that the applicant’s assets exceeded the allowable limit for DSP. Net assets included loans by the applicant and/or her husband to Kingfisher, to the Woodchopper Trust and to the Family Trust.
11. In addition, the ARO included an amount of $181,222.00 from Source Mortgage Management, which the applicant says is an available line-of-credit, but not an asset.
12. In the review by the SSAT, that Tribunal noted that even taking account only of the $1.5 million loan, the asset limit was exceeded.
CONSIDERATION
13. A person’s DSP is determined under s 94 of the Social Security Act 1991 (Cth) (the Act) and it is not in dispute here that Mrs Glover satisfies the requirements of that section of the Act. However s 98(1) relevantly provides that DSP is not payable to a person if the person’s DSP rate would be nil.
14. The rate of DSP is determined by reference to s 1064 of the Act; in particular, Module G to that section. However, the general principle under which the Act operates to apply assets and income tests when quantifying a person’s rate of pension payment is set out in s 1064 – A2. That general principle provides that members of a couple are treated as pooling their resources (that is, both income and assets) and sharing them on a 50/50 basis.
15. Module G is a rate calculator for determining the effect of a person’s assets on the overall entitlement to pension. The above referred to “general principle” rests behind the provisions set out at s 1064 – G2 (the Module used for the assets test). It is there set out that the value of the assets of a member of a couple is 50% of the sum of:
(1) the value of the person’s assets; and,
(2) the value of the person’s partners’ assets.
In other words, for pension assessment purposes, the assets of people who are married are combined and then apportioned equally to each partner. All assets must be taken into account when assessing a rate. It is thus made plain that regardless of which interests are owned directly by Mrs Glover; it is the combination of her and her husband’s assets that is relevant to the assets assessment process.
16. With those principles in mind, the Tribunal turns to the assessment of the assets in this case.
17. Clearly significant here is the $1.5 million loan from Mr Glover to Woodchopper. The applicant says that the loan is an asset of $1.5 million against which should be offset the loan of $1.5 million by Tradewise to Mr Glover, thereby producing a nil balance. Mrs Glover then says, logically, that this would reduce the asset balance to below the level required for her to qualify for DSP.
18. The respondent submits that the loan was revealed in the balance sheet of Woodchopper Trust at 30 June 2007 and 30 June 2008 as $1.5 million. It should be understood, according to the respondent’s submission that with respect to Tradewise, these were securities of bills of sale (of an original painting and a gold trophy, neither of which were declared to Centrelink).
19. The real question here centres on the application of ss 1118(1)(b), 1121 and 1122 of the Act. Section 1118 of the Act exempts certain assets – for instance a person’s principal place of residence. Section 1121 then deals with those assets over which there is a charge or encumbrance. The value of those assets will be reduced accordingly unless the Act does not allow such an offset - see s 1118 read with s 1121(1) of the Act. Section 1122 then provides that for any loan after 27 October 1986, the value of the assets related to those loans will be the amount of the loan which remains unpaid but not interest thereupon.
20. The interpretation by the Courts of these provisions has been highlighted by the Federal Court of Australia in Repatriation Commission and Harrison (1997) 46 ALD 193. The legislation enables offset of the loan against a specific asset, but does not permit a general offsetting of other indirectly related charges (Achkar and Department of Family and Community Services [2001] AATA 684). As Branson J emphasised in Unicomb v Secretary, Department of Social Security (1998) 50 ALD 405, one must look to the “whole transaction”.
21. In ReLing and Secretary Department of Family and Community Services, Senior Member Kiosoglous said that with respect to money loaned ss 9 and 11 of the Act must be applied:
Clearly the loan fits within the definition of ‘financial investment’ in s 9, and is therefore a ‘financial asset’ pursuant to that section. In the alternative, it looks at subsection 11(1) and the definition of property as including debts. That debt then needs to be valued. The debt in this case is a loan and the Tribunal therefore turns to s 1122 of the Act which has been interpreted by the Tribunal and the Federal Court such loans must be given their face value when being considered in relation to the Act …”
22. Here the respondent relevantly submitted that in the absence of any ‘charge or encumbrance’ held by Tradewise over the transaction between the husband and Woodchopper Trust, there is no reason for the Tribunal to depart from the clear intention of s 1122 – i.e. that the whole of the unpaid loan is an asset under the Act.
23. The Tribunal of course must comply strictly with the statutory provisions (see Collins and Repatriation Commission (1980) 32 ALR 581 per Fisher J).
24. In the result, Mrs Glover’s overall assets cannot be reduced where there is no charge or encumbrance to be taken into account with respect to the $1.5 million loan. In reaching that conclusion, I take into account Mrs Glover’s submission that Tradewise dollars cannot be exchanged for cash, being virtually a currency in itself. I would make the observation here that other assets such as land are also not easily convertible into cash but such inflexibility is the result of the commercial arrangements chosen by the parties. The statutory provisions here are not affected by those arrangements. The respondent submitted, s 11(12) lends no support to such a submission. I agree. The full amount of the loan of $1.5 million is therefore correctly included.
25. I agree with the ARO that the line of credit should be taken into account. While I had some initial concerns about that, Mrs Glover clarified at the Telephone Directions Hearing that the line of credit has been drawn upon. I therefore would include that amount in the assets assessment.
26. The assets taken into consideration by the ARO and detailed earlier for Mrs Glover and her husband amount to $1,778,054.00. 50% of those assets ($889,027.00) is attributed to each, but as I have explained, it is the whole which is called into account.
27. I note what the applicant refers to as the Australian Government’s “moral or possibly legal obligation” to approve her application due to her background of faulty immunization many decades ago (discussed above). Moral arguments can have merit however this Tribunal can act only within the law as prescribed by Parliament. Of course, Centrelink is similarly constrained – it is an agency of government but it is not the government. There must be a legal basis for its decisions. On the facts before me, I cannot find in favour of Mrs Glover. Her recent submission refers to her husband submitted a petition in bankruptcy. In that regard, Mrs Glover’s position in relation to DSP entitlement may change in the future, but that is not the basis upon which I am empowered to review the present decision.
28. Accordingly, the decision under review is affirmed.
I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Dr K S Levy RFD, Senior Member
Signed: .....................................................................................
Kate Slack, Research AssociateHearing on the papers 4 June 2010
Date of Decision 29 July 2010
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