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

[2008] AATA 746

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 746

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/1916 &

GENERAL ADMINISTRATIVE  DIVISION		)        2008/1918
Re		KEVIN GRAY AND JANET GRAY

Applicant

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

Respondent

DECISION

Tribunal Dr P McDermott, RFD, Senior Member

Date26 August 2008

PlaceBrisbane

Decision The Tribunal affirms the decision under review.  

................[Sgd]..............................

Senior Member

CATCHWORDS

SOCIAL SECURITY – Pensions, Benefits and Allowances – age pension – meaning of ordinary income – income from private trusts – meaning of favourable determination – determination of date of effect of increase in age pension – decision under review affirmed.

Social Security Act 1991 ss 1064, 1072, 1073

Social Security (Administration) Act 1999 ss 78, 108

REASONS FOR DECISION

26 August 2008 Dr P McDermott, RFD, Senior Member  

INTRODUCTION

1.      On 15 October 2007, Centrelink made a decision to increase the rate of age pension payable to Mr Kevin Gray and Mrs Janet Gray as and from that date.  I have to decide whether under social security law Mr and Mrs Gray are entitled to payment of that increase of age pension from an earlier date than 15 October 2007.

HISTORY OF THE MATTER

2.      On 1 December 2006, Centrelink wrote to Mr Gray to advise him of the income and assets details that were being taken into account in the assessing income support payments of Mr and Mrs Gray. Mr Gray was asked to advise Centrelink within 14 days whether any of the details in the letter were incorrect[1].  A similar letter was sent to Mr Gray on 15 December 2006[2]. Mr Gray did not reply to either of those letters.

[1] T4A fol 17A.

[2] T12 fol 84.

3.      On 4 July 2007, Centrelink wrote to Mr Gray to advise that Centrelink customers who are involved in a private trust have their entitlements reviewed annually.  In that letter Mr Gary was asked to provide details of the income and assets of the trust, being the Commercial Traders Trust[3].

[3] T4 fol 18.

4.      On 13 July 2007, Mr Gray wrote to Centrelink and advised: “I have spoken to our accountant and he has advised that the tax returns should be available around the same time as last year being mid-October”[4].

[4] T5 fol 19. 

5.      On 3 October 2007, Centrelink wrote to Mr Gray seeking relevant details of the income and assets of the Commercial Traders Trust.  In particular, Mr Gray was asked to provide details of the income tax return of the trust for the financial year ending 30 June 2007 as well as the income tax returns of beneficiaries of the trust[5].

[5] T12 fol 85.

6.      On 12 October 2007, Mr Gray returned to Centrelink the Centrelink letter of 4 July 2007.  Enclosed with that letter was the income tax return for the 2006/2007 financial year of The Commercial Traders Trust as well as the individual tax returns for the 2006/2007 financial year of both Mr and Mrs Gray.  It is relevant to mention that these documents were received by Centrelink on 15 October 2007[6].

[6] T4  fol 18.

7.      On 15 October 2007, Centrelink made a decision to increase the age pension payable to Mr and Mrs Gray from 15 October 2007[7].  The decision was made because the income of the Commercial Traders Trust for the 2006/2007 financial year was less than the income of the trust for the 2005/2006 financial year.

[7] T6 fols 20 and 21.

8.      On 25 October 2007, Mr Gray wrote to Centrelink to seek a review of the decision of 15 October 2007.  Mr Gray essentially sought arrears of payment from July 2006.

9.      On 11 January 2008, the authorised review officer of Centrelink affirmed the decision of Centrelink of 15 October 2007.  Mr Gray and Mrs Gray were then advised that the decision of 15 October 2007 was considered to be correct and that no arrears of pension were payable to them[8].

[8] T7 fols 22 to 32.

10.     On 15 February 2008, Mr and Mrs Gray appealed to the Social Security Appeals Tribunal.  On 3 April 2008, that Tribunal affirmed the decision of the authorised review officer of Centrelink[9].

[9] T2 fols 9 to 13.

11.     On 5 May 2008, Mr and Mrs Gray lodged an application to this Tribunal to review the decision of the Social Security Appeals Tribunal[10].

[10] T1 fols 1 to 8.

FINDINGS

12.     It is necessary for me to make certain findings of fact before I determine these applications.  After having reviewed the material before me, I make the following findings of fact.

13.     I find that in view of their current annual income, Mr and Mrs Gray are now entitled to receive age pension at the maximum rate.

14.     The Beneficiaries Profit Trust Distribution Summary of The Commercial Traders Trust for the financial year ended 30 June 2007 indicates that in the 2005/2006 financial year there was a profit distribution from The Commercial Traders Trust to Mr and Mrs Gray in the total amount of $12,815.08[11].  I accordingly find that for the 2005/2006 financial year there were profit distributions from The Commercial Traders Trust to Mr Gray and Mrs Gray of $12,815.

[11] T10 fol  65.

15.     The Beneficiaries Profit Trust Distribution Summary of The Commercial Traders Trust for the financial year ended 30 June 2007 indicates that there was a profit distribution in that year from The Commercial Traders Trust to Mr Gray in the amount of $5,496.25[12].  This profit distribution of $5,496 is also disclosed in Mr Gray’s individual income tax return for the financial year ended 30 June 2007[13]. On the basis of this documentary evidence, I find that in the 2006/2007 financial year a distribution from The Commercial Traders Trust was made to Mr Gray in the amount of $5,496.  I also find that no distribution from the Commercial Traders Trust was made in the financial year ended 30 June 2007 to Mrs Gray.

[12] T10 fol  65.

[13] T9 fol 46. 

16.     I also find that on 15 October 2007, Centrelink received from Mr Gray the following income tax returns for the 2006/2007 financial year:

• The Commercial Traders Trust (of which Australia Commercial Trader Pty Ltd is the trustee);
• Individual Tax Return for Mrs Gray;
• Individual Tax Return for Mr Gray.

17.     I am satisfied that these documents were received by Centrelink on 15 October 2007.  This is because there is a date stamp which indicates that these documents were on that date received at the Mt Gravatt office of Centrelink[14].

[14] T4  fol 18.

RELEVANT LEGISLATION

18.     The relevant legislation concerning these applications is the Social Security Act 1991 and the Social Security (Administration) Act 1999.

Social Security Act 1991

19.     The Social Security Act 1991 (“the Act”) provides that the “ordinary income” of a person and their spouse has to be taken into account in determining their entitlement to age pension: for this purpose a rate calculator is used[15].

[15] See s 1064 Social Security Act 1991

20. Section 1072 of the Act provides that a reference in the Act to the ordinary income of a person is a reference to that person’s gross income from all sources for the period calculated without any reduction (other than a reduction under Division 2 or 3 which is not material for the purpose of these applications).

21. The Secretary has contended that income distributions made by private trusts is governed by section 1073 of the Act. I accept that submission that a distribution from a private trust is subject to s 1073 of the Act for the purpose of determining the ordinary income of a person.

Social Security (Administration) Act 1999

22. Section 78 of the Social Security (Administration) Act 1999 (“the Administration Act”) provides that, where the Secretary is satisfied that the rate at which a social security payment is being paid is less than the rate provided for by the social security law, the Secretary is to determine that the rate is to be increased to the correct rate.

23. The Secretary has contended that the determination which was made under section 78 is a ‘favourable determination’ for the purposes of s 108 of the Administration Act. That latter provision provides that a ‘favourable determination’ takes effect on the day when the person so informed the Department or on the day on which the event or change so happened, whichever is the later.

CONSIDERATION

24.     At the outset of my consideration of these applications, I mention that Mr and Mrs Gray have elected not to give any evidence in the form of testimony.  Mr and Mrs Gray did, however, tender a copy of the reverse of the letter of 4 July 2007 which was sent by Centrelink to Mr Gray concerning The Commercial Traders Trust[16].  The reverse of the letter of 4 July 2007 was admitted in evidence without objection[17] and contains the following notation:-

“Please return this information…within 28 days of the date on this letter. If you are unable to do this please contact us when you will be able to provide the information”.

[16] T4 fol 18.

[17] Exhibit B.

25.     It was because of this notation that Mr Gray had written to Centrelink on 13 July 2007 to advise that the tax returns concerning The Commercial Traders Trust should be available by mid-October of 2007[18].

[18] T5 fol 19.

26.     The tenor of the submission of Mr and Mrs Gary was that the letter of 4 July 2007 did not indicate that they would be prejudiced if they delayed in providing the information to Centrelink.  Mr and Mrs Gray have certainly complied with the request of Centrelink within the time limits allowed by Centrelink. Indeed, when Centrelink wrote to Mr Gray on 3 October 2007 to again seek details of The Commercial Traders Trust, it is evident that Centrelink did not object to Mr Gray not providing the information any earlier than in October 2007.

27.     I should mention that the fact that Centrelink allowed Mr Gary some three months to submit the information is consistent with the administrative practice of the Commissioner of Taxation in allowing the trustee of a discretionary trust an extra two months after the end of the income year in which to make a distribution.[19] 

[19] See Australian Master Tax Guide, 42^nd ed., 2008, p. 602, 6-105.

28.     There was no issue between the parties that the trust income of Mr and Mrs Gray for the financial year ended 30 June 2007 was less than the trust income that Mr and Mrs Gray received for the financial year ended 30 June 2006. 

29. There was also no issue between the parties that the rate of age pension of Mr and Mrs Gray had to be increased to the maximum rate in accordance with s 78 of the Administration Act. Section 78 provides that, where the Secretary is satisfied that the rate at which a social security payment is being paid is less than the rate provided for by the social security law, the Secretary is to determine that the rate is to be increased to the correct rate.

30. The only real issue between the parties is to determine the date when the determination to increase age pension should take effect. The Secretary has submitted that for the purposes of s 108 of the Administration Act, the determination to increase the age pension payable to Mr and Mrs Gray is a ‘favourable determination’. The Secretary further submits that the date of effect of that determination is subject to the operation of s110 of the Administration Act.

31. I accept the submission of the Secretary that, as Centrelink was first notified of the change in income for Mr and Mrs Gray on 15 October 2007, s 110(1) of the Administration Act applies so that the determination under section 78 takes effect on 15 October 2007.

32.     In these circumstances, the Secretary has no authority under social security law to pay the increase of age pension from a date prior to 15 October 2007.

33. For the sake of completeness, I have reviewed the material before me to ascertain whether there is any basis for the application of s 109 of the Administration Act. On 6 November 2006, Centrelink wrote to Mr Gray to advise him of the information that was used to calculate the regular payment of age pension[20]. In my view, this letter would constitute a notice of an “original decision” under s 109(1) of the Administration Act. That letter required Mr Gray to advise Centrelink if there was a change of income. However, Mr Gray did not respond to that letter to advise Centrelink of the fact that the trust had a decrease in income. Mr Gray, to his credit, was frank in advising the authorised review officer that he “really did not read” some letters that had been sent by Centrelink[21]. Had Centrelink been advised of the lack of trading activity of the trust then Centrelink could have investigated such a response. If Centrelink was satisfied with the accuracy of the information provided in the response then the payment of any increase in age pension could have been backdated to when a review was sought pursuant to s 109 of the Administration Act. It is important to appreciate that under the scheme of social security law, a change of circumstances has to be promptly reported to Centrelink. I would also add that Mr Gray also did not respond to the letters that were sent by Centrelink on 1 December 2006[22] and 15 December 2006[23].

[20] T12, fol 80.

[21] T7, fol 32.

[22] T4A fol 17A.

[23] T12 fol 84.

DECISION

34.     I affirm the decision under review.

I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member

Signed:................[Sgd]..............................................................
              Elizabeth Young, Research Associate

Date/s of Hearing  21 July 2008
Date of Decision  26 August 2008
Applicants were self-represented
Solicitor for the Respondent     Mr Matt Amundsen, Departmental Advocate