Goh v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2010] FCA 396
FEDERAL COURT OF AUSTRALIA
Goh v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 396
Citation: Goh v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2010] FCA 396Appeal from: Goh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Anor [2009] AATA 527 Parties: SOOT HIN & SIEW CHING GOH v SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS & SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS File number: VID 554 of 2009 Judge: MIDDLETON J Date of judgment: 30 April 2010 Catchwords: ADMINISTRATIVE LAW - SOCIAL SECURITY LAW – Appeal from a decision of Administrative Appeals Tribunal - Applicants being sole directors and shareholders of a company – whether the value of the combined assets of the applicants includes monies described in documents lodged with the Australian Taxation Office as ‘profit’ from share transactions and monies held in the shareholders’ account as a ‘loan’ - operation of s 8(1), s 9(1) , s 11 and s 1077 of the Social Security Act 1991 Legislation: Administrative Appeals Tribunal Act 1975
Social Security Act 1991Cases cited: Unicomb v Department of Social Security (1998) 86 FCR 96 Date of hearing: 12 March 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 21 Counsel for the Applicants: Appeared in person Counsel for the Respondents: Mr J Lenczner Solicitor for the Respondents: Australian Government Solicitor
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 554 of 2009
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: SOOT HIN & SIEW CHING GOH
ApplicantsAND: SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS & SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondents
JUDGE:
MIDDLETON J
DATE OF ORDER:
30 APRIL 2010
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.Save as to the order made in paragraph 2, the application be dismissed.
2.The decision of the Administrative Appeals Tribunal be varied by the deletion of the words “and the Australian Securities and Investment Commission (‘ASIC’)”.
3.The applicants pay the respondents’ costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 554 of 2009
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: SOOT HIN & SIEW CHING GOH
ApplicantsAND: SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS & SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondents
JUDGE:
MIDDLETON J
DATE:
30 APRIL 2010
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
This application to the Court was instituted pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 which requires that an appeal from a decision of the Administrative Appeals Tribunal (the ‘Tribunal’) to the Court be on a question of law, and in order to succeed an applicant must establish an error of law on the part of the Tribunal.
THE DECISION AND REASONS OF THE TRIBUNAL
The Tribunal decided that the value of the combined assets of the applicants shall include the sums described in documents lodged with the Australian Taxation Office and the Australian Securities and Investment Commission (‘ASIC’), on behalf of Jaytra Pty Ltd (‘Jaytra’) as follows:
·$14,425, being the profit from share transactions; and
·the sums of $127,666, $126,820 and $130,795 in the years respectively of 2006, 2007 and 2008 and described as monies held in the shareholders’ account as a loan;
and affirmed the decision of the Social Security Appeals Tribunal (the ‘SSAT’).
The issue before the Tribunal was whether the decision of the SSAT which affirmed the decision made by the Authorised Review Officer of Centrelink in respect of the applicants was correct.
The Tribunal decided that the sum of $14,425 recorded in the 2007 income tax return of Jaytra was income deemed to have been received by the applicants by reason of the operation of the income (s 8(1)), financial asset and financial investment (s 9(1)), and assets (s 11) definitions in the Social Security Act 1991 (‘the Act’). The Tribunal decided that s 1077 deemed receipt by the applicants of that sum in that financial year because of the applicants’ involvement with Jaytra.
The Tribunal decided that the amounts of $127,666, $126,820 and $130,795, described as loans in the income tax returns of Jaytra, in respect of the income tax years 2006, 2007 and 2008, were unpaid loans and that by reason of ss 11, 1122 and 9(1) of the Act, these amounts were assets of the applicants in each of the financial years. Section 1122 provided that the value of the loan was the amount that remains unpaid, and s 9(1) defined ‘financial investment’, as monies which were ‘a loan that has not been repaid in full’.
The effect of bringing into account these amounts of monies was to increase the total assets held by the applicants in the relevant years to above the relevant assets value limits, and thereby reduce the social security benefits which the applicants were otherwise entitled to receive.
The Tribunal made the following findings of fact and applied them to the legislation:
4. It was agreed at the commencement of the hearing that there was no dispute between the parties concerning the value of sundry assets being household contents, motor vehicles, amounts held in bank accounts and a superannuation investment. Equally it was not in dispute that the applicants had failed to disclose, when asked in a number of questionnaires, that they had an interest in a private company. Additionally it was not in dispute that the applicants had failed to respond to routine notification requirements of changes in combined assets. It was agreed that the applicants, at all relevant times, were the sole shareholders and directors of Jaytra Pty Ltd (Jaytra).
…8. I am satisfied that the monies achieved by the sale and purchase of shares constitutes income as defined at s 8(1) of the Act because they were monies earned, derived or received by the Company for its own use or benefit. Additionally I am satisfied that the monies constitute a financial asset as defined at s 9(1) of the Act being a financial investment (also defined at s 9(1)) because they constitute available money. I note in evidence that the applicant said that Jaytra did not trade but rather it invested. Monies were received upon the investment, being the nett [sic] returns from the acquisition of shares. An asset is defined at s 11 as either property or money. The applicants are members of a couple and the persons beneficially entitled to the return achieved by Jaytra. That return is a financial asset, being money within the definition of s 11. Section 1077 provides that the applicants shall be deemed, jointly, to have received those monies as ordinary income, from those assets, the amount of which is brought into account when calculating the amount of a pension or benefit. (Money is not defined. It has a meaning well understood. Ordninary [sic] income is defined at s 8 as being income that is not maintenance income or an exempt lump sum).
9. In concluding this part I note at supplementary T-document 5 that the sum of $14,425 is recorded in a profit and loss statement, completed by Mr Goh and lodged by him with the Australian Securities and Investment Commission (ASIC), as total income in the 2007 income year. Nothing from the profit and loss statement or elsewhere indicates that any representations were made to have that sum regarded as a capital asset or to have it offset against previous capital losses.
10. The other issue in contention is the characterisation of monies recorded in the income tax returns of Jaytra for the 2006, 2007 and 2008 income years as loans to shareholders and their associates being the sums of $127, 666, $126,820 and $130,795 in each of the respective years. In the balance sheets lodged with ASIC on behalf of Jaytra, those three sums are recorded as liabilities of Jaytra and described as shareholders' current account.
11. In those years Mr Goh said that those monies should be regarded as a notional loan. He said Jaytra had previously borrowed monies from Citi Bank, secured against their domestic premises to permit them to trade. Eventually their home was sold and the loan was discharged. A net profit was made upon the sale and in a submission dated 20 March 2009 the applicant recorded:
We paid no money to Jaytra per se. We paid Citi Bank to discharge our own dwelling house. In creating Jaytra's debt to us there was no money paid into Jaytra neither was there any transfer of assets to Jaytra. The loan was not created to increase Jaytra's assets. It was to salvage what was left of our dwelling house. As such there can be no money that may be recovered to speak of. Had the loan been the result of us paying money or transferring assets to Jaytra then it is arguable whether or not the loan is recoverable.
12. The explanations given at the hearing for the recording of the above sums in the income tax returns and in the balance sheets lodged with ASIC were in my view unsatisfactory.
13. On the one hand Mr Goh made representations to the Australian Taxation Office (ATO) and ASIC that Jaytra held monies, described as liabilities and recorded as shareholders' funds. That is to say, funds of the shareholders, being the applicants in these proceedings, were being held by Jaytra and were a liability of Jaytra. Put another way, by the ATO return and the documents lodged with ASIC, Jaytra was in debt to the applicants. In a questionnaire completed by Mr Goh on 1 June 2008 (supplementary T-document 4), he recorded (p255) in the 2007 income year that the sum of $126,820 was a loan owing to shareholder.
14. For the purposes of this application, however Mr Goh said that Jaytra during the relevant years did not have any monies, but in a letter to Centrelink of 8 July 2008 (supplementary T-document 6 at p272) he recorded that Jaytra was liquidated on 25 June 2008, that it then had a debt of $130,795 owing to the Director/Shareholder, Soot Goh was completely written off. I do not understand that submission. That sum is identical to the amount recorded in the returns to the ATO and ASIC as shareholder funds and an amount owing to the applicants. But in evidence Mr Goh said Jaytra did not have any monies and his written submission above recorded that monies were not paid into Jaytra. If Jaytra did not have monies, there could be nothing written off. If the monies, which I am satisfied were held for the applicants' benefit were written off it would constitute disposal of an asset for which no benefit would be achieved when calculating asset values. Additionally, it would have the character of an unpaid loan (refer paragraphs 17 and 18 later).
…16. Consistent with the representations to the statutory agencies ATO and ASIC, on balance I am satisfied and find as a fact that in the three years in issue, monies were held by Jaytra and were held for the benefit of the applicants.
17. Those monies are an asset within the meaning of s 11 of the Act (refer earlier). Whilst it was the evidence of Mr Goh that those monies had not ever been paid to him or his wife, the combined value of the assets of the applicants will include the monies held in the shareholders' current account because it constitutes an unpaid loan as described at s 1122 of the Act. That the sum has not been repaid is an irrelevance for the purposes of the section. As was decided in the Tribunal decision of Re Boyd and Secretary Department of Social Security [1994] AATA 580 the value of the loan is the amount that remains unpaid. In Re Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225 the Tribunal decided even if a loan cannot be repaid, the unpaid amount still is to be treated as an asset even if this produces unjust results . . .
18. In concluding this part, the monies held in the shareholders' current account, constitutes a financial investment as defined at s 9(1) of the Act and in the circumstances of this application those monies are a loan that has not been repaid in full (refer sub-section (e)).
19. In all of the circumstances the respondents are entitled to take account of the monies held in the shareholders' current account, as described in the taxation returns and the balance sheets lodged with ASIC and acknowledged in the questionnaire at supplementary T-document 4, in order to determine whether the applicants' combined assets have exceeded the applicable asset value limits.
(my emphasis)
CONSIDERATION
I should commence by saying something about the evidence referred to by the Tribunal of the representation to ASIC and lodgement by the applicants of documents with ASIC.
It would appear that no representations were made by the applicants to ASIC of the type described by the Tribunal nor were documents so lodged by the applicants with ASIC. However, I consider this to be immaterial. There is other evidence supporting the characterisation of the transactions as indicated by the Tribunal which supports its factual conclusions. Significantly, there existed unpaid loans owing from Jaytra to the applicants. In other words, the evidence supports the conclusion that there was an amount which was lent from the applicants (or one of them) to Jaytra, which amount remained unpaid during the relevant period.
In my view, no error of law has been demonstrated by the Applicants. Once the facts had been found by the Tribunal as indicated above, the Act applies in the way concluded by the Tribunal. It is not my role to review the fact finding properly undertaken by the Tribunal.
I am also not able, as pressed by the applicants, to apply ‘principles of equity’ to resolve this application.
This Court is bound to apply the law as expressed in the Act. In my view, the substantive provisions of the Act demonstrate that the conclusion reached by the Tribunal was correct.
The Sum of $14,425
The sum of $14,425 received by Jaytra in 2007 year was ‘income’ (s 8(1)), a ‘financial asset’ (s 9(1)), and was deemed to be income of the applicants by the application of s 1077 and Pt 3.18 of the Act (which includes ss 1207N, 1207Q and 1207X). As the SSAT observed:
The Tribunal is satisfied that the profit declared by the company in 2007 falls under the definition of income and is properly attributed to Mr and Mrs Goh pursuant to the provisions of the legislation which deal with company income and assets. In determining a person’s income for social security purposes, Part 3.18 of the Act applies. This legislation came into effect from 1 January 2002, and sets out a three stage system for the attribution of the assets and income of private companies and trusts to individuals. For income to be attributed to an individual:
a)the company must be a designated private company or the trust must be a designated private trust (sections 1207N and 1207P);
b)the company or trust must be a controlled private company or trust in relation to the individual (sections 1207Q and 1207V). A company will be a controlled private company if the individual passes a control or source test; and
c)the individual must be an attributable stakeholder (section 1207X).
Loan Monies in Respect of 2006-2008 Years
In respect of the loan monies the applicants raised questions of fact and not law. Once the Tribunal’s findings of fact are accepted, the applicants cannot avoid the application of s 1122 and the definition of ‘financial investment’ in s 9(1) of the Act. The liabilities of Jaytra are not relevant for the purposes of the identification of the loan monies. The Act sets out the rules for the determination of the social security benefits to be received. The Tribunal was entitled to make the findings of fact it did, including the finding that amounts in question were loan monies. The Act treats the loans as assets of the applicants at their face value, to the extent unpaid. The Tribunal was entitled to take into account the amounts identified as loans in the income tax returns, namely in respect of the 2006 year - $127,666; in respect of the 2007 year – $126,820; and in respect of the 2008 year - $130,795, as the applicants’ assets.
General Comments
It is desirable to make some general comments.
The applicants made reference to the fact that Jaytra should be viewed as a separate entity.
However, the Act operates in the way indicated by the Tribunal, and even treating Jaytra as a separate entity, the conclusion reached by the Tribunal is authorised by the Act. In giving the Court illustrations of the errors of the respondents, the applicants fail to apply the various definitions and deeming provisions of the Act. It may well be from an investment or accountant’s point of view, various liabilities arise, and certain losses occur, but these may be irrelevant to the operation of the Act in any given circumstance in determining the social security benefits to be received.
There may have been some confusion of expression used in certain documentation, and in the respondents’ submissions as to whether the relevant sections of the Act (in particular s 1122) related to loans to shareholders, as distinct to loans from shareholders to a private company. It is clear that s 1122 (in the context of this case) is concerned with loans from the applicants to Jaytra, which were to be re-paid by Jaytra but which remained unpaid in the relevant years.
The applicants also contended that the loans to Jaytra should be considered in the context of all the assets and liabilities of the company itself. Whilst there may be some sense in this approach, this is not the way the Act operates: see eg Unicomb v Department of Social Security (1998) 86 FCR 96 (Branson J). The Act operates, as I have said, in the manner indicated by the Tribunal and I can find no error of law in the Tribunal’s approach. The Tribunal having found certain facts (importantly that loans did exist) was bound as a matter of law to apply the Act as it did.
CONCLUSION
In view of the above, the application should be dismissed with costs.
As the decision of the Tribunal makes an incorrect (although immaterial) reference to documents lodged with ASIC, I will also order that the decision be varied by the deletion of the words “and the Australian Securities and Investment Commission (‘ASIC’)”.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate:
Dated: 30 April 2010
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