HALLIDAY and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2011] AATA 360
•30 May 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 360
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/5408
GENERAL ADMINISTRATIVE DIVISION ) Re JOHN HALLIDAY Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member S E Frost Date30 May 2011
PlaceSydney
Decision The decision under review is affirmed. .....................[sgd]......................
S E Frost
Senior Member
CATCHWORDS
SOCIAL SECURITY – rent assistance – ineligible homeowner – Applicant is director of corporation acting as trustee for unit trust that owns the property the Applicant is renting – reasonable security of tenure in home – symmetrical relationship between landlord and tenant – decision under review affirmed.
Social Security Act 1991 (Cth) ss 11(4)(b), 13(1), 1070B, 1070C
Secretary, Department of Employment and Workplace Relations v Vanderpluym (2007) 161 FCR 388
REASONS FOR DECISION
30 May 2011 Senior Member S E Frost Introduction
1. The applicant, John Halliday, is on a part pension. He and his wife live in a house that is owned through their self-managed superannuation fund. The rent they pay, according to Mr Halliday, is at market rates.
2. Mr Halliday has applied to Centrelink for rent assistance. Centrelink has refused the claim. Mr Halliday thinks that the decision not to pay rent assistance (which was upheld by the Social Security Appeals Tribunal) is wrong. He has asked this Tribunal to review it.
The issue for determination
3. The question for the Tribunal is whether Mr Halliday is an “ineligible homeowner” for the purposes of the Social Security Act 1991 (the Act). If he is, then he cannot receive rent assistance.
4. Mr Halliday’s application to the Tribunal also sought review of a Centrelink decision that the full value of his superannuation account should be treated as an income producing asset for the purpose of the age pension asset test. He indicated during the hearing on 27 April 2011 that he did not wish to pursue that issue.
The legislation
5. Sections 1070B and 1070C of the Act provide that a person who is an “ineligible homeowner” does not qualify for rent assistance.
6. The expression “ineligible homeowner” is defined in s 13(1) of the Act to mean a homeowner, other than a person of the kind described in one of the excluding paragraphs of the definition (none of which applies here).
7. Section 11(4)(b) of the Act explains the circumstances in which a person such as Mr Halliday is a “homeowner”, as follows:
(b)a person who is a member of a couple is a homeowner if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(A)the person’s principal home; or
(B)the partner’s principal home; or
(C)the principal home of both of them; and
(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home.
The ownership of the home in which Mr Halliday lives
8. ESKJ Investments Pty Ltd (the Company) is the trustee of the ESKJ Investments Pty Ltd Superannuation Fund (the Fund). The Company has three directors – Mr Halliday, his wife Eileen and one of their sons, Shane – and five shareholders, being the three directors plus Shane’s brother and sister. The Company is also the trustee of the ESKJ Investments Property Unit Trust (the Unit Trust), which was established sometime in the 1990s.
9. At some stage the Fund acquired fully paid units in the Unit Trust, and as Mr Halliday explained it in his email dated 27 April 2011 (Exhibit 2), this had the effect of:
… transferring funds to the trust for its acquisitions and under a formula set by taxation the trust could borrow certain funds from 3rd parties to assist in its acquisitions. It should be noted here that any borrowings had to be non-recourse borrowings and could not be guaranteed by Directors and any third parties but solely on the security of the asset. Land was acquired and a building was being erected.
10. The units in the Unit Trust are the major assets of the Fund. The land and the building, being the residential premises in which Mr and Mrs Halliday live, are the major assets of the Unit Trust.
Is Mr Halliday a “homeowner”?
11. Clearly Mr and Mrs Halliday do not own the property in which they live. The property is owned by the Unit Trust, or perhaps more accurately, by the Company as trustee for the Unit Trust.
12. But that fact does not mean that Mr Halliday is not a “homeowner” within the meaning of that word in the Act. As Greenwood J explained in Secretary, Department of Employment and Workplace Relations v Vanderpluym (2007) 161 FCR 388 at 402:
Section 11(4)(b) of the Social Security Act contemplates a point on a continuum of possible rights or interests. An applicant may be a registered proprietor; a beneficiary under a unit or discretionary trust; a party with the benefit of an agreement for lease for three years or more; a lessee under a registered lease pursuant to such an agreement; a lessee occupying premises pursuant to such arrangements where the lease has not been registered by the lessor; a lessee under an unregistered short term lease for a period of less than three years; a tenant under a written tenancy agreement for a fixed term; a weekly tenant under a written agreement or a weekly tenant under oral arrangements with no fixed term and no terms other than those implied by law. In the last case, the measure of the right or interest enjoyed by the applicant tenant might simply be a right to remedial relief in aid of occupation of the premises to restrain a breach of an obligation implied by law and in that sense the tenant might enjoy an equitable interest. Of course, vesting property (land and a residence) in a company or, for example, a corporate trustee of a discretionary trust coupled with a tenancy agreement conferring occupation in favour of a pension applicant related to the shareholders or directors of the entity has the apparent structural advantage of placing ownership of the home at arms-length yet retaining security of tenure in the home so as to enable a pension applicant to say that he or she is not, in orthodox terms, a homeowner and therefore entitled to a higher assets value limit for the calculation of the relevant pension entitlement. The social policy of the Social Security Act is to adopt a broad notion of ‘homeowner’ by s 11(4)(b) so as to ensure that those applicants (or their partners) who have a right or interest in a residence which gives reasonable security of tenure in the home are to be treated as homeowners for the purposes of calculating assets value limits and thus pension entitlements.
13. Mr Halliday submits, however, as follows (Exhibit 3):
The Vanderpluym case is not nor could ever be a case compared to the facts of the Superannuation fund and the Property unit trust as outlined above.
The property was not vested in the trust
the property is rented at arms length
there is no equitable charge (mortgage) by an associate or anyone else etc
The property unit trust does have a mortgage with the NAB over the property however as stated and evidenced in the documents the loan is a non-recourse loan solely secured by the property itself and does not have guarantees by directors or anyone else in accordance with ATO requirements.
14. The submission seems to be that if the rent paid were not an arm’s length market rent, then the Fund would be ruled a non-complying superannuation fund, with consequential (and possibly catastrophic) loss of taxation concessions. Mr Halliday says that the Fund has been audited by the Australian Taxation Office and has been found to comply with the prudential requirements of the Superannuation Industry (Supervision) Act 1993, so it must be complying with the law. If it is complying with the law, it must be dealing at arm’s length with him and his wife, and so it must follow that he is not a homeowner.
15. But the question here is not whether the Fund is, or should be accepted as, a complying superannuation fund. The question is whether the right which Mr Halliday has in the home gives him reasonable security of tenure in the home. That question is not answered by a consideration of whether or not he and his wife are paying market rent to the landlord, whether either of them may have guaranteed the borrowings of the Unit Trust, or whether the fund is a complying superannuation fund.
16. Mr and Mrs Halliday are, together with their son Shane, the directors of the Company which, as trustee for the Unit Trust, rents the property to them. This is another example of what Greenwood J referred to in Vanderpluym at 403 as a “symmetrical relationship between the landlord and tenant” in that Mr and Mrs Halliday control both the occupation of the premises and the conduct of the landlord in choosing to continue to rent the premises to them.
17. Mr Halliday’s right to exclusive possession of the home was created by the lease to him and his wife by the landlord, the Unit Trust, the trustee of which is a company that Mr and Mrs Halliday control with their son. In the circumstances of the overall arrangement, that right gives Mr Halliday a level of security of tenure that can be described, at the very least, as “reasonable”.
18. For that reason Mr Halliday must be regarded as a “homeowner” for the purposes of the Act.
Decision
19. The decision under review is affirmed.
I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member S E Frost
Signed: ..............[sgd]...............................................................
C. Taylor, AssociateDate/s of Hearing 27 April 2011
Date of Decision 30 May 2011
Applicant Self-representedAppearances for the Respondent Michael Najem and James Larcombe, Centrelink Advocacy Branch
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