Griffin-Beale and Secretary to the Department of Family and Commu Nity Services
[2003] AATA 1002
•6 October 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1002
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2003/503
GENERAL ADMINISTRATIVE DIVISION
Re: BERNARD CHARLES GRIFFIN-BEALE
Applicant
And: SECRETARY TO THE
DEPARTMENT OF FAMILY AND
COMMUNITY SERVICES
Respondent
DECISION
Tribunal: Mr B.H. Pascoe, Senior Member
Date: 6 October 2003
Place: Melbourne
Decision:The Tribunal affirms the decision under review.
(sgd) B.H. Pascoe
Senior Member
SOCIAL SECURITY – disability support pension - value of assets - whether assets of trust attributable to applicant - whether attributable stakeholder - sole trustee of discretionary trust - value of assets
Social Security Act 1991 Part 3.18
REASONS FOR DECISION
6 October 2003 Mr B.H. Pascoe, Senior Member
This is an application to review a decision of the Social Security Appeals Tribunal (SSAT) of 17 April 2003, which affirmed a decision of the respondent made on 15 August 2002 to cancel the applicant’s disability support pension on the grounds that his personal and attributed assets were higher than the allowable assets limit.
At the hearing, Mr Griffin‑Beale was unrepresented and the respondent was represented by Ms K. Navarro, a Centrelink advocate.
The issues in this matter were whether Mr Griffin‑Beale was an attributable stakeholder of the Griffin‑Beale Family Trust after January 2002 and whether 100 per cent of the assets of the trust should be taken into account in calculating the value of his assets for the purposes of eligibility for disability support pension.
Part 3.18 of the Social Security Act 1991 (the Act) was inserted in the Act by the Social Security and Veterans' Entitlement Legislation Amendment (Private Trusts and Companies - Integrity of Means Testing) Act 2000. Section 1207 of the Act sets out a simplified outline of Part 3.18 and provides (as far as is relevant to this application) that, for an asset or income to be attributed to an individual:
(a)the trust must be a designated private trust (s1207P);
(b)the trust must be a controlled private trust in relation to the individual (s1207V); and
(c)the individual must be an attributable stakeholder of the trust (S1207X).
The Griffin‑Beale Family Trust was established by deed dated 6 February 1976. Initially, Mr Griffin‑Beale and his late wife were trustees. After the death of Mrs Griffin‑Beale in 1984, she was replaced as trustee by one family friend until 1992 and another until 1996. Since that date Mr Griffin‑Beale has been sole trustee. The trust is a discretionary trust with the trustee having wide powers of investment and absolute and uncontrolled discretion to apply or appropriate income between beneficiaries and to pay out capital for the benefit of any residuary beneficiaries. Beneficiaries entitled to be considered in the trustee's discretion to distribute income are Mr Griffin‑Beale and his children and grandchildren. Residuary beneficiaries entitled to capital of the trust on the vesting day are the children of Mr Griffin‑Beale. The vesting day is 6 February 2026 or such earlier day as the trustee may appoint.
The Balance Sheet of the trust as at 30 June 2001 showed the following:
Land — Sassafras 385,316
Factory — Bayswater 97,223
Computer, Printer and Scanner 851
Investment — Sapfor 2,360
Furniture and Fittings 49,861Bank account 3,655
______
539,266
Less liabilities
Loans from Beneficiaries
B. Griffin‑Beale 10,246
V. Griffin‑Beale (3,289)
N. Griffin‑Beale 15,811
S. Griffin‑Beale 10
______ 22,778Net assets 516,488
_______
Corpus Account 100
Capital Reserves 553,171
Loss carried forward (36,783) 516,488_______
The income and expenditure statement for the year ended 30 June 2001 disclosed a loss of $423 with income of $9008, consisting of $9000 rent received and $8 interest. Expenditure totalled $9431, including $3080 depreciation of the factory building.
Mr Griffin‑Beale said that the property at Sassafras had been destroyed by fire in 1993. Rebuilding had commenced in late 1996 but no progress has been made since early 1997 as a result of a dispute with the contractor. The matter is awaiting a determination by the Victorian Building Commission and there is an unpaid progress claim of $77,908. The factory at Bayswater is occupied by Mr Griffin‑Beale as his current residence and place of work. He pays rent to the trust for this property. The initial mortgage on the Sassafras property was paid out in 1998 from the proceeds of sale of another property, which had been owned by the trust. For the purpose of assessing the trust assets to be attributed to Mr Griffin‑Beale, the respondent used the site value of the Sassafras property of $250,000 as valued by the Australian Valuation Office. The property at Bayswater was excluded as being the principal residence of Mr Griffin‑Beale. Loans from beneficiaries were excluded as liabilities as no written loan agreements existed.
Mr Griffin‑Beale said that he and his wife decided to establish the trust in 1976 for the purpose of providing future financial security for his children and to protect the assets held for such purpose from third parties. He has two daughters in their 30s and a much younger son from a subsequent relationship. He said that he has taken his role as trustee very seriously and had gone to considerable lengths to maintain an arms‑length relationship in that capacity to protect and increase the assets and has paid rent for the trust property used by him. He accepts that he has considerable discretion in the administration of the trust and dealing with the income. He believes that the discretionary power is vital to enable distributions on a need basis. Mr Griffin‑Beale acknowledged that, if the trust had been able to complete the building at Sassafras and receive a full rental and it had been able to retain the previous rented property, then he would have expected to have distributed sufficient income to himself to live without recourse to social security. He said that he would be happy to have his two daughters become trustees and, if necessary, transfer control to them and resign as a trustee.
It is clear that the trust is a designated private trust under s1207P of the Act. It is clear, also, that the trust is a controlled private trust in relation to Mr Griffin‑Beale pursuant to s1207V of the Act, which states:
…
1207V.(1) For the purposes of this Part, a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and:
(a)the individual passes the control test set out in subsection (2); or
(b)the individual passes the source test set out in subsection (3).
Control test
1207V.(2) For the purposes of this section, the individual passes the control test in relation to a trust if:
(a)the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)), is the trustee, or any of the trustees, of the trust; or
(b)a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or
(c)a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or
(i)the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and
(ii)the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);
is 50% or more; or
(e)a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or
(f)a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or
(g)a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or
(h)a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.
For the purposes of this provision, a group means an individual acting alone, an associate of the individual acting alone, the individual and one or more associates of the individual acting together or two or more associates of the individual acting together. Under s1207C(1), any relative of the individual is an associate.
In this case, Mr Griffin‑Beale is the sole trustee. There is no specific power of appointment of trustee contained in the trust deed so that he may appoint any new trustee or trustees. He has complete and unfettered control over the investment of the trust assets and the distribution of income between the beneficiaries, including himself. The total beneficial interests in the corpus and income of the trust are held by Mr Griffin‑Beale and his children and grandchildren. Consequently, the control test is passed under paragraphs (a), (b), (d), (e) and (f) of s1207(2) of the Act and the trust is a controlled private trust.
The next question is whether Mr Griffin‑Beale is an attributable stakeholder of the trust. Section 1207X(2) provides:
1207X.(2) For the purposes of this Part, if:
(a)a trust is a controlled private trust in relation to an individual; and
(b)the trust is not a concessional primary production trust in relation to the individual (see section 1208U);
then:
(c)the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and
(d)if the individual is an attributable stakeholder of the trust—the individual’s asset attribution percentage in relation to the trust is:
(i)100%; or
(ii)if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage; and
(e)if the individual is an attributable stakeholder of the trust—the individual’s income attribution percentage in relation to the trust is:
(i)100%; or
(ii)if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage.
1207X.(3) A determination under this section is to be in writing.
1207X.(4) A determination under this section has effect accordingly.
1207X.(5) In making a determination under this section, the Secretary must comply with any relevant decision-making principles.
It is clear from this provision that 100 per cent of assets of the trust are to be attributed to Mr Griffin‑Beale unless the respondent or this Tribunal, standing in the shoes of the respondent, believes the circumstances are such for it to be appropriate to determine a lower percentage.
It is clear from the Second Reading Speech, when the amendments to the Act were introduced and from the wording of the legislation, that there is a clear intention to attribute assets held in trust to the person who controls those assets, particularly when that degree of control allows access to those assets and the income generated from them. Mr Griffin‑Beale was concerned that the decision of the respondent somehow cast aspersions on his character and integrity as a trustee of a genuine trust and implied that the trust was being utilised for the purpose of obtaining a social security benefit improperly. This cannot be inferred from the decision. I am left in no doubt that the trust was established for the purpose of seeking to provide some financial assistance and security for the children. I accept that Mr Griffin‑Beale has acted honestly and genuinely as a trustee of the trust, including paying $9000 per year for the premises used by him and owned by the trust. Nevertheless, his unfettered power and discretions as trustee of the trust give him complete control of the assets and any income generated by those trust assets. Consequently, while that position remains, he is the attributable stakeholder of the trust within the legislation. There is no evidence that any other beneficiary has made a contribution to the trust and has any involvement other than as a passive discretionary beneficiary.
The respondent calculated the value of Mr Griffin‑Beale assets as follows:
Attributed assets
Land at Sassafras at site value 250,000
Computer, Printer and Scanner 851
Investment — Sapfor 2,360
Furniture and Fittings 49,861Bank account 3,655
Loan from V. Griffin‑Beale 3,289______
310,016
Less loan from Mr Griffin‑Beale 10,246
______299,770
Personal Assets
Loan to trust 10,246
Bank account 260
Furniture 40,000
Motor vehicle 2,500 53,006
_____ _______Total $352,776
Mr Griffin‑Beale submitted that the value of some of these assets was overstated. These assets and Mr Griffin‑Beale's estimates were:
(a)Computer, printer and scanner
said to be outdated and with a market value of $150;
(b)Land - Sassafras
sought to deduct selling costs of $19,500 and the liability of $77,908 to the contractor;
(c)Investment Sapfor
said to be not a good investment and should be valued at an offer of $814.50 from Country Estate Agency Co Pty Ltd;
(d)Furniture and Fittings
said to be worth an estimated auction value less selling costs of $19,980;
(e)Motor vehicle
said to be a 1972 Ford Fairlane, unroadworthy and worth only $50;
(f)Loans to and from beneficiaries
Although not clear from Mr Griffin‑Beale's submission, it would appear that he believes the loans from his daughter and son to the trust should be accepted as liabilities, but the loan from the trust to another daughter be excluded as an asset, having regard to money otherwise spent by that daughter for his benefit; and
(g)Personal Furniture, etc
sought to deduct selling costs of $13,600.
In relation to these submissions, I am prepared to accept Mr Griffin‑Beale's evidence of value in relation to the computer, printer and scanner and the motor vehicle. The land at Sassafras has been included at site value only and, consequently, it is inappropriate to further deduct unpaid contractors claims for improvements on the land or selling costs. In relation to the furniture owned both by the trust and personally, there is no evidence of market value and, again, it is not appropriate to reduce the amounts by estimated selling costs. It is well known that unsolicited offers for investments are made by Country Estate Agency Co Pty Ltd at amounts well below real market value. Consequently, I cannot accept an offer from that company as market value and there is no other evidence that the value of the investment in Sapfor is less than book value. In relation to the amounts recorded in the trust records as loans to and from beneficiaries, I am unable to see how the loan to the daughter Vanessa can be disregarded. Something more is needed than simply saying that Vanessa has spent an equivalent sum for his benefit. The amounts shown as loans from the other daughter and son are not necessarily "loans" as such. Although no evidence was provided on this point, it is more likely than not that the amounts totalling $15,821 are not strictly loans to the trust, but the unpaid balance of income to which such beneficiaries were entitled in prior years. In such a case, both under the terms of the trust deed and in law, such amounts are held on separate trusts for the sole benefit of such beneficiaries and are not loans. However, while they may be amounts held on separate trust, Mr Griffin‑Beale remains the sole trustee with unfettered control of the investment of such trust funds and they continue to form part of his attributable assets.
A further question was raised as to whether the land at Sassafras could be regarded as an unreliable asset and excluded. While there are complexities surrounding this land with a part building construction, unpaid progress claim from the builder and dispute over the work done to date, I am unable to accept that the land is unrealisable as defined under s11(12), (13) and 14 of the Act.
The result of the foregoing is that the value of Mr Griffin‑Beale's assets are $349,625, being the amounts set out in paragraph 13 above less a reduction of $701 relating to the computer, scanner and printer and $2450 relating to the motor vehicle. As this amount exceeds the allowable asset limit of $288,000, the decision cancelling his disability support pension of 4 April 2002 must be affirmed.
Much of Mr Griffin‑Beale's submission related to the unfairness of the application of the legislation to him and the delays and absence of information provided in his dealings with Centrelink. It is with no lack of sympathy for his position or disrespect of his views that these issues have not been canvassed in the foregoing. Neither of these issues can have any effect on whether the terms of the legislation produce the outcome in his case.
I certify that the sixteen [16] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B.H. Pascoe, Senior Member
(sgd) Catherine Thomas
Clerk
Date of Hearing: 15 September 2003
Date of Decision: 6 October 2003
Solicitor for the applicant: Nil — IN PERSONAdvocate for the respondent: Ms K. Navarro, Centrelink
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