Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2008] AATA 468
•5 June 2008
CATCHWORDS – SOCIAL SECURITY – exceptional circumstances relief payment – whether payable when disability pension being received – whether choice as to benefit matter for recipient or the Secretary – decision affirmed.
CATCHWORDS – SOCIAL SECURITY – newstart allowance and disability support pension – assets test – value of assets – principles of valuation - effect of Family Court order on value of interests in assets – treatment of sale of livestock – newstart allowance decision affirmed – disability support pension remitted for reassessment.
Mental Health Act 1986
Guardianship and Administration Act 1986 (Vic) ss 24, 28, 46(1), 46(3), 46(4), 48, 49(2), 52 and 53
Administrative Appeals Tribunal Act 1975 s 37
Valuation of Land Act 1960 (Vic) ss 13DA(1) and 13DC
Local Government Act 1989 (Vic) ss 154 and 157
Family Law Act 1975 s 79
Farm Household Support Act 1992 ss 3, 8, 8A, 9(2), 10, 12, 14, 15, 18, 19 and 24A
Social Security Act 1991 ss 8, 9, 11, 23(1), 94, 94A, 98(1), 117(a), 611, 643, 1064, 1064-A1, 1064-E10, 1064-G4, 1068-A1, 1068-B1, 1068-G1, 1068-G12, 1068-G13, 1068-G14, 1068-G15, 1068-G16, 1076, 1077, 1078, 1084, 1121, 1121A, 1129, 1130B and 1131
Payne v Esdaile (1888) 13 AC 613
Re Fawthrop and Repatriation Commission (1993) 36 ALD 140; 19 AAR 290
Re Kapust and Secretary, Department of Family and Community Services (2006) 90 ALD 462; [2006] AATA 110
Re Molinaro and Secretary, Department of Families and Community Services and Indigenous Affairs [2007] AATA 2068
Re Molinaro and Secretary, Department of Family and Community Services (2004) 87 ALD 184; [2004] AATA 1333
Re Price; Ex parte Tinning (1931) 26 Tas LR 158
Re Toohey and Tax Agents’ Board [2008] AATA 262
Shi v Migration Agents’ Registration Authority (2007) 158 FCR 525; 240 ALR 23; 95 ALD 260
DECISIONS AND REASONS FOR DECISIONS [2008] AATA 468
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2006/344
GENERAL ADMINISTRATIVE DIVISION ) V2006/540Re:THOMAS HENDERSON
Applicant
And:SECRETARY, DEPARTMENT OF FAMILIES, HOUSING COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 5 June 2008
Place: Melbourne
Decision:The Tribunal:
1.affirms the decision of a delegate of the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs dated 26 August 2005 and affirmed by the Social Security Appeals Tribunal on 17 April 2006 refusing to pay the applicant exceptional circumstances relief payment; and
2.sets aside the decision of a delegate of the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs dated 7 September 2005 and affirmed by the Social Security Appeals Tribunal on 25 May 2006 reducing his disability support pension; and
3.remits the decision to the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs to reassess the rate at which disability support pension should be paid to the applicant having regard to:
(a)the value of the farm property from the date of the applicant’s claim for disability support pension made on 27 June 2006 to 6 December 2005 being $400,000;
(b)the value of the farm property from 7 December 2005 to the date of the sale of that property being $480,000;
(c)the value of the applicant’s interest in the farm property until the date of sale on 12 February 2006 be calculated on the basis of an amount representing $95,000 less than an amount that is half of the value after the deduction of the amount secured by any mortgage over the farm property; and
(d)from the date of sale, the net proceeds of the sale that would be payable to the applicant from the date of settlement.
S A Forgie
Deputy President
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2007/30
GENERAL ADMINISTRATIVE DIVISION )Re:THOMAS HENDERSON
Applicant
And:SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 5 June 2008
Place: Melbourne
Decision:The Tribunal:
affirms the decision of a delegate of the Secretary of the Department of Employment Education and Workplace Relations dated 28 July 2006 and affirmed by the Social Security Appeals Tribunal on 20 December 2006 rejecting the applicant’s claim for newstart allowance.
S A Forgie
Deputy President
REASONS FOR DECISION
Mr Thomas Henderson has applied for review of three decisions initially made by delegates of the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA Secretary) and the Secretary of the Department of Education, Employment and Workplace Relations (DEEWR Secretary) and affirmed on review by an Authorised Review Officer (ARO) and by the Social Security Appeals Tribunal (SSAT). The first two were made under the Social Security Act 1991 (SS Act). One was a decision to reduce the rate of disability pension (DSP) that he was paid with effect from 7 September 2005 to the point where it was cancelled on 6 March 2006 on the basis that his assets exceeded the allowable limit. The second was to reject his application for newstart allowance (NSA) on 28 July 2006. The third decision was made on 26 August 2005 and was to refuse a claim to pay him exceptional circumstances relief payment (ECRP) under the Farm Household Support Act 1992 (FHS Act).
At the heart of the first two decisions is an assessment of Mr Henderson’s income and assets and decisions that they are such that he is not entitled to receive the NSA and that he is only entitled to a reduced rate of DSP for a period and then none at all. I have decided that the decision to reject Mr Henderson’s application for NSA is correct in that it is based on a correct assessment of his assets. That was a decision made after the sale of his farm and the proceeds were held on his behalf. In so far as the operative decisions relating to DSP were made before the sale of the farm, I have found that they did not necessarily take into account the effect of the Family Court on the value of Mr Henderson’s interest in the farm. Consequently, I have remitted the decisions to recalculate Mr Henderson’s entitlement to DSP, if any. I have decided that the decision in relation to ECRP is correct as Mr Henderson was receiving DSP at the relevant time and so was not entitled to a payment of ECRP.
BACKGROUND
In this section of my reasons, I will set out the historical record of events that have occurred in relation to each of the three payments together with the relevant legislative provisions. I have attempted to separate them under different headings as I normally do but there is some crossover of events as some have relevance in more than one matter.
Mr Henderson’s health and management of his affairs
In 1995 and 1997, Mr Henderson became an involuntary patient under the Mental Health Act 1986 (Vic). He was discharged in 2001.
On 4 March 2003, an application was made to Victorian Administrative Appeals Tribunal (VCAT) under the Guardianship and Administration Act 1986 (Vic) (GA Act) for an order appointing an administrator in respect of Mr Henderson’s estate. Such an order may be made if VCAT is satisfied that, in the case of a person living in Victoria, the person is a person with a disability, is unable to make reasonable judgments in respect of the matters relating to all or any part of her or his estate by reason of the disability and is in need of an administrator of her or his estate.[1] VCAT could not make an order of this sort unless it were satisfied that the order would be in the best interests of the person in respect of whom the application is made.[2] Any order it does make must be that which is the least restrictive of the person’s freedom of decision and action as is possible in the circumstances.[3] On 7 May 2003 VCAT ordered that the State Trustees be appointed as administrators.[4]
[1] GA Act, s 46(1)
[2] GA Act, s 46(3)
[3] GA Act, s 46(4)
[4] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 in proceedings No. V2005/540 (T540 documents), T540 documents at 110
Mr Henderson’s farm
Mr Henderson owned a farming enterprise jointly with his former wife. Their marriage came to an end and an order of the Family Court dated 17 May 2005 provided for the sale of the farm and the distribution of the proceeds between them. Among the lots of land that were on separate titles and that made up the farm was Lot 1A that Mr Henderson had initially leased from his father in 1975. Lot 1A was contiguous with Lot 22A, which was leased from the Crown in Mr Henderson’s name alone. In 1992, Mr and Mrs Henderson purchased Lot A. Lot 1A was also in Mr and Mrs Henderson’s joint names. Mr Henderson understood that his father had given him Lot 1A but his father then tried to sell part of Lot 22A. That led to civil proceedings between Mr Henderson and his father in the County Court of Victoria. When his father died, the matter was struck out by the County Court.
On 2 February 2001, the East Gippsland Shire Council recommended to the Valuer-General that “the property” have a capital improved value of $250,000 and a site value of $200,000. The land was described by location and by reference to its area of 134.003 hectares. The Valuer-General confirmed the value on 26 April 2001.[5]
[5] T344 documents at 66-67
In 2002, Mr Henderson had a valuation report prepared by PH Crane & Associates, certified practising valuers, regarding the value of the farm at 21 December 1995 and 21 December 1997.[6] That report described the farm:
“The subject property forms one contiguous farming operation and was run as a 150 cow milking operation, as far as we understand, as at the relevant dates. It is reasonably good carrying, well watered land, with the dairy located centrally within the 3 titles increasing efficiency of the dairying operation. It appears from our observations in 2002 that there has been a reasonable history of pasture improvement, however farming accommodation and structural improvements were assessed to be in only fair to reasonable condition as at the relevant dates.
More generally, the prevailing macroeconomic factors of the time were uncertainty in the dairying market in 1995 and 1997 due to the regulatory reforms which were being discussed as well as the beef cattle industry being in a depressed state which was affecting demand for property such as the subject and these issues have been considered in our valuation.
In summary, the subject properties are generally good clean, reasonably well watered flat and hill country lands which compliment one another but are probably lacking in overall area to warrant fully capitalised dairy or beef production enterprises.”[7]
[6] T540 documents at 159
[7] T540 documents at 167
The valuer valued each of the three lots making up the farm at each of the two dates. The areas of each were assessed by PH Crane & Associates: Lot A (79.62 hectares); Lot 1A (55.67 hectares); and Lot 22 (48.95 hectares).[8] There is a dwelling on each of Lots 1A and 22A. That on Lot 1A was given a value of $35,000 on 21 December 1995 and a nil value two years later. That accounted for the difference in the value attributed to the farm in the two dates: $470,000 in 1995 and $435,000 in 1997. The dwelling on Lot 22A was valued at $40,500 on each occasion. Lot A was valued at $183,000 as at 21 December 1995 and as at $148,000 as at 21 December 1997. Lot 1A was valued at $142,000 and Lot 22A at $145,000 on each of those days.
[8] T540 documents at 164
On 9 September 2005, State Trustees advised Centrelink[9] that CJA Lee & Associates had conducted a kerbside valuation in December 2004 and valued the farm at $400,000. The State Trustees’ letter dated 9 September 2005 did not divide the farm into its three components. It did, however, refer to its being jointly owned. From that, I take it that they could be referring to Lots A and 1A that were jointly owned by Mr and Mrs Henderson. The farm was subject to a mortgage that amounted in February 2005 to $21,947. Plant and equipment on the property were not included in the kerbside valuation.[10] The State Trustees’ letter confirmed that the land, plant and stock were to be sold, subject to a Family Court order.
[9] Centrelink, which is also known as the Commonwealth Services Delivery Agency, was established under the Commonwealth Services Delivery Agency Act 1997. Its Chief Executive Officer has entered arrangements with the respondents in this case to provide services for them in relation to pensions, benefits and allowances paid or payable under the legislation with which I am concerned in this case. Each of the respondents may delegate powers to the CEO or to an employee ofCentrelink.
[10] T540 documents at 110
Centrelink asked the Australian Valuation Office (AVO) for a valuation of the farm. The AVO responded on 27 February 2006 after inspecting the property on 2 February 2006 and evaluating it on 7 December 2005 and exploring previous sales in the area. It valued those parts of the property that came within Lot A and Lot 1 A and that comprised 134 hectares at $480,000. Included within that value was a value of $80,000 for the house and cartilage. The AVO valued the plant and equipment at $5,000 and $135,000 for stock. The basis of the valuation was that:
“Productive land of this quality and size is not readily offered on the market in this locality and in the wider area. Not only is it very productive, but it also aesthetically attractive and offers proximity both to the coastline and to the service/facilities/amenities of Orbost and Lake Entrance. The property also comprises two separately transferable titles with residence capability on both and with services nearby. As stated above the property has broad market appeal, particularly to the essentially primary producer and also to the ‘lifestyle/farmer’. The subject property has been valued in direct comparison to sales of similar properties in the subject locality. …”[11]
[11] T540 documents at 185
Family Court order
On 17 May 2005, Justice Mushin made an order in terms of the Minutes of Consent Orders dated 28 April 2005.[12] In so far as two lots making up the farm were concerned, Justice Mushin ordered that they be sold as soon as possible. They were lots A and 1A. The gross proceeds from the sale were to be used to pay the usual selling expenses and the mortgage. From the balance remaining, 50% was to be paid to Mrs Henderson’s solicitors for her benefit. From the balance then remaining was to be paid a further $90,000 to Mrs Henderson’s solicitors for her benefit and a further $5,000 for her costs. The balance was to be paid to Mr Henderson. Other orders provided for the situation in which only some of the parcels of land making up the farm were sold. That would mean that others provided for the situation in which none of the parcels had been sold. In outline, Mrs Henderson could elect to have one of the properties transferred to her as part of her entitlement under the Family Court’s order. She could then elect to sell the other and distribute it in accordance with the order.
[12] Attached to letter from Centrelink to Mr Henderson dated 22 January 2007
Under the order, Mr Henderson retained ownership of the Murray Goulburn and Pivot shares held in his name and his MLC Superannuation Benefits. He also retained any plant and equipment, stock and hay located upon the real property. Mr Henderson assumed sole responsibility for debts, including taxation liability arising from the operation of the farm enterprise from the date of separation.
The sale of the farm
The farm was sold on 12 February 2006 with settlement on 11 April 2006 with vacant possession. Settlement did not take place until 10 May 2006 while Mr Henderson was still occupying the farm. The SSAT contacted the State Trustees who advised it that Lot A and 1A had been sold for $600,000 and was settled on 21 April 2006. Mr Henderson’s share of the proceeds after they were distributed in accordance with the Family Court’s order was $184,013.77.[13]
[13] T540 documents at 101
The value of assets other than the farm
The State Trustees advised the SSAT that the livestock had been sold for $167,194.82. Plant and equipment were yet to be sold at that time but were expected to realise between $20,000 and $40,000.
Exceptional circumstances payment relief
Mr Henderson had a farm in an area that was, until 2003, just a little outside the area in relation to which an Exceptional Circumstances Declaration (Declaration) had been made. Therefore, he was not able to gain advantage of a payment of ECRP until 2003. At this time, Mr Henderson received DSP from Centrelink but at a rate less than the full rate otherwise payable. A Declaration over an area incorporating his farm was then made and it remained in effect until 25 August 2005. While it remained in effect, Mr Henderson was paid ECRP at the rate of $399.30 per fortnight.[14] That amount was regarded as part of his taxable income. The Declaration came to an end with effect from 25 August 2005 and, although it was expected that it would be extended, it had not been at that date. Mr Henderson was notified of its coming to an end in a letter dated 14 July 2005[15] but he did not receive it until approximately 22 August 2005 and so after the expiration of the Declaration and his entitlement to ECRP.
[14] T344 documents at 13
[15] T344 documents at 13-15
Mr Henderson found it difficult to complete the assets and income information required on the DSP claim due to his estate being managed by the State Trustees.[16]
[16] T344 documents at 22
Calculating rate of DSP after the expiration of the Declaration
Mr Henderson contacted Centrelink on 22 August 2005 regarding the payment of ECRP. He was told that, if a Declaration were to be made and backdated, he could apply once more for ECRP and it too would be backdated if his application were successful. He was advised to apply for DSP by an officer of Centrelink.[17]
[17] T344 documents at 16
Mr Henderson was granted DSP with effect from 26 August 2005 at a rate of $182.90 per fortnight together with a pharmaceutical allowance of $5.80 i.e. a total of $188.70. The payment was based on his having assets of $259,086 and an annual income of $261.33.[18]
[18] T344 documents at 26
At this time, the following assets were recorded by Centrelink as those of Mr Henderson:[19]
[19] This and the following tables are taken from the submissions Ms Bramley made on behalf of the respondents.
| household contents & personal effects | $5,000 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn | $1,129 $2,582 $5,000 | $8,711 |
| real estate | $245,375 | |
| total | $259,086 |
The rate was reduced with effect from 5 October 2005 to $186.65 plus pharmaceutical allowance totalling $192.45. This was based on an increase in Mr Henderson’s asset value to $257,957.[20] In a letter dated 15 September 2005, Centrelink asked Mr Henderson to confirm that his assets were accurately recorded.[21]
[20] T344 documents at 28
[21] T344 documents at 30
Further claim for ECRP
Mr Henderson contacted Centrelink on 19 September 2005 to advise that a further Declaration had been made. A claim for ECRP was sent to him.[22] On the following day, another claim was sent by facsimile to the State Trustees to complete in conjunction with Mr Henderson.
[22] T344 documents at 31
Mr Henderson lodged a claim for ECRP on 30 September 2005 stating that his farm income for the current financial year was $13,200 but that his estimate was dependent on livestock sales. He also sent a copy of an Exceptional Circumstances Certificate stating that his farm enterprise at Lot 1A was located in an area that had been affected by exceptional circumstances. The Certificate was valid from 26 August 2005 to 25 February 2006.[23]
[23] T344 documents at 37
On 10 October 2005, Mr Henderson advised Centrelink that he had sold 18 head of cattle and received payment of $9,041.02 on 23 September 2005. After paying bills, the balance in his bank account was $5,119. He also told Centrelink that he now had calves that he did not have previously.[24]
[24] T344 documents at 44
Adjustment of rate of payment of DSP
In a letter dated 10 October 2005, Centrelink advised Mr Henderson that his DSP was now payable at the rate of $176.70. That sum was made up of $170.90 as DSP and $5.80 as pharmaceutical allowance. The value of the assets that Centrelink attributed to Mr Henderson was $263,076 as was an annual income of $381.03.[25]
[25] T344 documents at 45
At that time, Centrelink had recorded the following assets as those of Mr Henderson:
| household contents & personal effects | $5,000 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn | $5,119 $2,582 $5,000 | $12,701 |
| real estate | $245,375 | |
| total | $263,076 |
Mr Henderson’s notification of variations in his assets and income in October 2005
On 14 October 2005, Mr Henderson gave Centrelink a Profit and Loss Statement covering the period 6 July 2004 to 28 June 2005.[26] He set out his income and operating expenses and showed a loss for the period. His income was $33,197 but that figure included $9,848 in ECRP payments and a further $4,192 from the Dairy Adjustment Scheme. He received a further $8,412.09 from the sale of livestock and $10,000 from MLC Superannuation Benefits as an early release of superannuation on the basis of his facing hardship. He incurred a fee of $1,650 as a result of the early release.[27] Mr Henderson also valued his remaining livestock at $132,492 and his vehicle and farm equipment at $6,149.[28]
[26] T344 documents at 48-54
[27] T344 documents at 52
[28] T344 documents at 50
On 17 October 2005, Mr Henderson also gave Centrelink an Income and Assets form that he had completed. He noted that he had been unable to obtain relevant information from the State Trustees. Despite that, he had completed the form in so far as he could gather the information whether by enquiry or otherwise. Mr Henderson wrote on the form that the orders by VCAT and the Family Court were relevant.[29] He estimated the current market value of Lots 1A, A and 22A to be $450,000[30] but also observed in a separate return on the same day that he had only a 22 year lease on Lot 22A.[31] Mr Henderson did not estimate the value of the lease but showed himself as owning 97% of it and another 3%.[32] He also stated that the total market value of the household contents and personal effects on the property were $116,000.[33]
[29] T540 documents at 119
[30] T540 documents at 125
[31] T540 documents at 129
[32] T540 documents at 128
[33] T540 documents at 129
In a separate return also lodged on 17 October 2005, Mr Henderson estimated the value of Lot 1A as $140,000 with a mortgage of $12,905. That mortgage also extended over Lot A. He owned 51%, his partner 36% and another 13%. Mr Henderson noted that the figure of 13% related to what he described as “adjustment of mortgage”.[34] The net market value of the household contents and effects on Lot 1A was $3,500.[35] Mr Henderson did not show any value for household contents and personal effects when he lodged a separate return regarding Lot A. He stated himself to be the owner of 51% and his partner to own 36% with another 13% being unattributed but presumably relating to the adjustment of mortgage.[36] Mr Henderson estimated the value of the 2 hectares surrounding the house on Lot 1A s $10,000.[37]
[34] T540 documents at 138
[35] T540 documents at 138-139
[36] T540 documents at 144
[37] T540 documents at 139
Mr Henderson was paid DSP from 26 August 2005 and his claim for ECRP was refused when he lodged it. He discussed the matter with officers of Centrelink on 22 August 2005.
Mr Henderson’s notification of variations in his assets and income in November 2005
On 4 November 2005, Mr Henderson advised Centrelink that the sale of 11 cattle had netted him $2,754.88.[38] As a result of his notification, Centrelink recorded his assets and income as:
[38] T344 documents at 56
| household contents & personal effects | $5,000 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn | $4,440 $2,582 $5,000 | $12,022 |
| real estate | $245,375 | |
| total | $262,397 |
On 11 November 2005, Centrelink advised Mr Henderson of the rate at which DSP would be paid to him on the basis of assets of $261,965 and his annual income of $347.70.[39]
[39] T344 documents at 60
On 28 November 2005, Mr Henderson advised Centrelink that his income for the period 1 July 2005 and 25 November 2005 was $31,409.20. That figure included $21,000 from the sale of livestock. His expenses in that period were $21,040.26.[40]
[40] T344 documents at 64
Payment of DSP to Mr Henderson in December 2005
Following the review of the valuation by the AVO in December 2005,[41] Centrelink advised Mr Henderson that his rate of DSP had been recalculated on the basis of a valuation of his assets at $212,515 and his income of $347.70. His rate was now $328.20.[42] The assets were made up in the following way:
[41] See [10] above
[42] T344 documents at 70-71
| household contents & personal effects | $5,000 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn | $4,008 $2,582 $5,000 | $11,590 |
| real estate | $195,925 | |
| total | $221,515 |
A second letter sent on 14 December 2005 advised Mr Henderson that his DSP was paid to him at a rate higher than that at which ECRP would be paid to him.[43] Mr Henderson responded that the ECRP payment gave him access to other benefits such as an interest subsidy and a reduction in his rates.[44]
[43] T344 documents at 72
[44] T344 documents at 74
Mr Henderson advises of changes in January and February 2006
On 30 January 2006, Mr Henderson advised of changes to his bank balance and the sale of livestock.[45] His rate of DSP was again adjusted on the basis that his assets were $210,644 and his annual income was $291.57. His DSP was payable at $334.20 per fortnight.[46]
[45] T540 documents at 218 and 217
[46] T344 documents at 85
On 2 February 2006, Mr Henderson advised Centrelink that he had sold livestock for the sum of $18,307.75[47] and, later on 15 February 2006, that this had resulted in an increase in his bank balance.[48]
[47] T540 documents at 217
[48] T540 documents at 216
Recalculation of DSP following AVO’s valuation of farm property
I have referred to the AVO’s valuation above.[49] On the basis of the valuation, Mr Henderson’s DSP was again recalculated and assessed to be $261.58 to 6 March 2006. Thereafter, it was cancelled on the basis of his assets exceeding the allowable limit.[50] The assets were assessed as:
[49] See [10] and [33] above
[50] T540 documents at 188
| household contents & personal effects | $5,000 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn | $19,566 $2,582 $5,000 | $27,148 |
| real estate | $330,833.33 | |
| total | $362,981.33 |
Mr Henderson’s application for NSA
Following the SSAT’s affirming the decision to cancel his DSP, Mr Henderson applied for a NSA and advised that he was no longer a homeowner.[51] On 28 July 2006, his claim was rejected on the basis that his assets exceeded the allowable limits.[52] At the time, Centrelink had recorded his assets as:
[51] T540 documents at 209
[52] T30 documents at 413
| household contents & personal effects | $0 | |
| financial assets | ||
| Bank of Melb – cash mgmt a/c Shares – Incitec Pivot Murray Goulburn State Trustees | $5,564 $2,606 $5,000 $283,547 | $296,717 |
| real estate | $0 | |
| total | $296,717 |
LEGISLATIVE BACKGROUND
Exceptional Circumstances Relief Payment: outline of legislative scheme
A person is qualified for an ECRP in respect of a period if, throughout the period, he or she is a farmer, contributes a significant part of his or her labour and capital to the farm, is an Australian resident and in Australia and an exceptional circumstances certificate (EC Certificate) issued in respect of the person has effect.[53] A “farmer” is defined in the FHS Act as a person who has a right or interest in the land used for the purposes of a farm enterprise.[54] A “farm enterprise” means “… an enterprise carried on within any of the agricultural, horticultural, pastoral, apicultural or aquacultural industries.”[55] An EC Certificate is a certificate by that name that has been issued for a specified period by the FaHCSIA Secretary and that relates to the farm enterprise, or any of the farm enterprises, in respect of which the person is a farmer.[56] It remains in force for the period specified in it.[57]
[53] FHS Act, s 8A(1)
[54] FHS Act, s 3(2)
[55] FHS Act, s 3(2)
[56] FHS Act, s 8A(2)
[57] FHS Act, s 8(3)
Section 9(2) FHS Act provides that an ECRP is not payable in some circumstances. In so far as those circumstances affect Mr Henderson, s 9(2) provides:
“Exceptional circumstances relief payment is not payable to a person for a period during which the person is qualified for exceptional circumstances relief payment if, during that period:
(a)no determination by the Secretary that the value of the person’s assets does not exceed the person’s assets value limit has effect (see section 10); or
(b)…
(c)…
(d)…”
Turning to s 10(1) of the FHS Act, it provides that:
“… exceptional circumstances relief payment … is not payable to a person during a period unless a determination (favourable determination) in writing by the Secretary that the value of the person’s assets does not exceed the person’s assets value limit has effect during that period.”
A favourable determination of the sort referred to in s 10(1) must specify the day on which it takes effect (operative day).[58] Unless revoked earlier, it continues to have effect until either another determination takes effect on a day before the expiration of six months after the operative day or, if there is no further determination, at the end of six months from the operative day.[59]
[58] FHS Act, s 10(5)(a)
[59] FHS Act, s 10(5)
Exceptional Circumstances Relief Payment: determination of value of assets
In deciding whether to make a favourable determination, the FaHCSIA Secretary must first determine whether the value of the person’s assets exceeds the person’s assets value limit. If the person is already receiving ECRP, the FaHCSIA Secretary must determine it at the time when the claim is determined under s 18.[60] Where the person is receiving ECRP, the FaHCSIA Secretary must determine it within a period of six months from the day on which the last favourable determination took effect.[61]
[60] FHS Act, s 10(2)(a)
[61] FHS Act, s 10(2)(b)
Section 10(3) of the FHS Act provides that:
“The value of the person’s assets at a particular time is worked out by:
(a)working out the person’s assets at the time that are not exempt assets for the purposes of the Act:
(i)in a case where a person qualifies for exceptional circumstances relief payment under subsection 8A(1) and makes a claim for payment on the basis that the person qualifies under that subsection – because the person is a farmer; and
(ii)…;
(iii)…
(iv)in any other case – because the person is a famer; and
(b)working out the value of those assets in accordance with Part 3.12 and 3.18 of the Social Security Act 1991.”[62]
[62] Part 3.18 is concerned with the means test treatment of private companies and private trusts and is not relevant in this case.
The first step then is to identify the person’s assets. That term is not defined but it is clear that they do not include “exempt assets”. That is a term that is defined in s 3(1) of the FHS Act. It means:
“(a) … if a person is a farmer …:
(i)any right or interest of the person in the land used for the purposes of the farm enterprise in relation to which the person is a farmer; and
(ii)any farm plant and machinery, farm livestock or other asset essential for the effective running of the farm enterprise; and
(iii)any rights of the person under an insurance policy in relation to the person’s life or under a superannuation scheme.
(b)…”
Having identified the assets, the next step is to work out their value according to Part 3.12 of the SS Act and I will set that out in a moment. Once the value of the person’s assets has been worked out, it must be compared with that person’s assets value limit during the same period to work out whether it is a greater or lesser amount. Section 10(4) of FHS Act tells us that:
“A person’s assets value limit at a particular time for the purposes of this Act is equal to the amount that would be the person’s assets value limit at that time for the purposes of Part 2.12 of the Social Security Act 1991 if at that time the person had made a claim for, or was in receipt of, newstart allowance under that Act (see subsection 611(2) and 612 of the Social Security Act 1991).”
Exceptional Circumstances Relief Payment: making a claim and paying ECRP
A person wanting to be granted ECRP must make a written claim for it.[63] The FaHCSIA Secretary must determine that the claim is granted if the person is qualified for the payment and no provision of the FHS Act makes it not payable to that person.[64] The fortnightly rate at which ECRP is paid to a successful claimant, who is a farmer, is the sum of the fortnightly rates at which three payments specified in
[63] FHS Act, ss 14 and 15
[64] FHS Act, s 19(1)
s 24A(1) of the FHS Act would be paid to him or her if entitled to them. As Mr Henderson is single, account can only be taken of the rate at which NSA would have been payable if he were entitled to it.[65] In working out that amount of NSA, exempt assets are again disregarded[66] as are exempt livestock proceeds. “Exempt livestock proceeds” are defined as:
“… proceeds of a forced disposal of farm livestock by a person at a time when an exceptional circumstances certificate referred to in section 8A applies to the person … to the extent to which the proceeds are invested in:
(a)a deposit under the Loan (Income Equalization Deposits) Act 1976;
(aa)a farm management deposit (within the meaning of Schedule 2G to the Income Tax Assessment Act 1936); or
(b)a deposit with a term of at least 3 months with a bank or other institution that receives money on deposit.”[67]
[65] FHS Act, s 24A(1)(a)(ii)
[66] FHS Act, s 24A(2)
[67] FHS Act, s 3(2)
For the purpose of calculating the rate, any off-farm salary and wages received by the person are disregarded in the amount worked out under ss 24A(5) and (6). Those sub-sections provide, in essence, that $10,000 in off-farm salary and wages are disregarded.
Calculating applicable rate of NSA
Section 24A(1)(a)(ii) of the FHS Act does not require any assessment of whether the person would be otherwise entitled to receive NSA. It focuses instead on whether it would be payable to a person entitled to receive it. That means that regard must be had to the rate at which NSA is payable to a person in Mr Henderson’s circumstances and, in particular, to any other income he receives. That means that regard must be had to the Benefit Rate Calculator B at the end of s 1068 in Part 3.16 of the SS Act (Benefit Rate Calculator B).[68] It also means that regard must be had to the claimant’s assets for s 611(1) of the SS Act provides that NSA is not payable to a person if the value of the person’s assets is more than the person’s assets value limit.
[68] SS Act, s 643
The assets value limit for NSA
Section 611(2) of the SS Act sets out the method of working out the assets value limit. The method requires reference to be made to a table included in the section. In August 2005, that table provided that the assets value limit of a person who was not a member of a couple but who was a homeowner was $110,750. If not a homeowner the assets value limit was $190,250.
Calculating the value of assets for NSA
An “asset” is defined to mean “… property or money (including property or money outside Australia)”.[69] A reference in the SS Act to:
“… the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset.”[70]
[69] SS Act, s 11(1)
[70] SS Act, s 11(1)
Part 3.12 of the SS Act provides for the way in which assets are to be taken into account and their value assessed for most purposes under the legislation. Its provisions apply in this case. Division 1 of Part 3.12 of the SS Act sets out those assets that are to be disregarded in the calculation of the value of a person’s assets and also the basis for calculating the value of some. Section 1121 prescribes the effect of a charge or encumbrance on an asset in circumstances of the sort in which Mr Henderson finds himself in this way:
“(1) If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act …, is to be reduced by the value of that charge or encumbrance.
…
(2) Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:
(a)the charge or encumbrance is collateral security; or
(b)the charge or encumbrance was given for the benefit of a person other than the person or the person’s partner.”[71]
[71] SS Act, s 1121
There is no definition of the words “charge” and “encumbrance” in the SS Act. The Guide to Social Security Law (Guide) referred to by Centrelink officers in making decisions states that:
“1.1.E.105
Usage
These definitions apply to all payments subject to assets testing provisions.
Usual types
The usual types of encumbrances are:
a registered mortgage,
a bank overdraft secured by lodgement of title deeds,
accumulated interest,
arrears of rates,
amounts outstanding to water, sewerage or electricity authorities if the charges are recoverable by statute against the property,
a solicitor’s lien for costs and fees,
a banker’s lien for money advanced, and
legally enforceable liens against stock and other farm assets.”
Section 1121A provides for the effect of liabilities that are, in the Secretary’s opinion, related to the carrying on of primary production. If there are any such liabilities, they are taken from the unencumbered value of the assets used for the purpose of carrying on primary production. The result is the value of the person’s primary production asset.
Newstart allowance: income test
Subject to certain qualifications in the SS Act to which I will refer below, the rate of NSA is determined under Benefit Rate Calculator B.[72] The rate of NSA is a daily rate and the method of calculating that rate is set out in s 1068-A1 of Part 3.6. It is:
[72] See [48] above
“Step 1 Work out the person’s maximum basic rate using MODULE B below.
Step 2Work out the amount per year (if any) of pharmaceutical allowance using MODULE D below.
Step 3Work out the applicable amount per fortnight (if any) for rent assistance in accordance with paragraph 1070A(a).
Step 4Add up the amounts obtained in Steps 1 to 4: the result is called the maximum payment rate.
Step 5Apply the income test using MODULE G below to work out the income reduction.
Step 6Take the income reduction away from the maximum payment rate: the result is called the provisional fortnightly payment rate.
Step 7The rate of benefit is the amount obtained by:
(a)subtracting from the provisional fortnightly payment rate any special employment advance deduction (see Part 3.16B); and
(b)if there is any amount remaining, subtracting from that amount any advance payment deduction (see Part 3.16A); and
(c)except where the person is a CEDP Scheme participant in respect of the whole or any part of the period for which the rate of benefit is being worked out, adding any amount payable by way of remote area allowance (see Module J).”
The maximum basic rate is determined in accordance with the table in s 1068-B1. In July 2005, it was $301.50 for a person who was not a member of a couple, did not have a dependent child and is not yet 60 years.[73] Added to it was the amount of any pharmaceutical allowance and any rent assistance that was payable.
[73] SS Act, s 1068-B1, item 4A
There are various adjustments to be made to the figure obtained from that table. One follows in Step 5 from the application of the income test found in Module G of Part 3.6. Section 1068-G1 sets out the method for working out the effect of a person’s ordinary income on the person’s maximum payment rate. It begins with the requirement to work out the person’s ordinary income. “Ordinary income” means “… income that is not maintenance income or an exempt lump sum”.[74] The word “income” is defined in s 8(1) of the SS Act in relation to a person to mean:
“(a) an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).”
[74] SS Act, s 8(1)
The term “income amount” used in the definition is itself defined to mean:
“(a) valuable consideration; or
(b)personal earnings; or
(c)moneys; or
(d) profits;
(whether capital or not).”[75]
The term “income from personal exertion” is defined to mean:
“… an income amount that is earned, derived or received by a person by way of payment for personal exertion by the person but does not include an income amount received as compensation for the person’s inability to earn, derive or receive income throughout personal exertion.”[76]
[75] SS Act, s 8(1)
[76] SS Act, s 8(1)
The amounts excluded under ss 8(4) and (5) of the SS Act relate to amounts paid under home equity conversion agreements. Section 8(8) sets out a number of amounts that are not income for the purposes of the SS Act. They relate to a number of specific payments including a payment under the SS Act.
Having worked out the person’s ordinary income on a fortnightly basis, the income test then requires regard to be had to whether the person’s ordinary income exceeds the person’s ordinary income free area under point 1068-G12. A person’s ordinary income free area is the maximum amount of ordinary income that the person may have without affecting the benefit rate.[77] A person’ ordinary income free area in July 2005 was $62.[78]
[77] SS Act, s 1068-G1 at step 7
[78] SS Act, s 1068-G12
If the person’s ordinary income exceeds the person’s ordinary income free area, the person has an ordinary income excess and the amount of that income excess is the amount by which one exceeds the other.[79] If it does not exceed the ordinary income free area, the amount is nil.
[79] SS Act, s 1068-G13
Having worked that out, regard must then be had to ss 1068-G14, 1068-G15 and 1068-G16 of the SS Act.[80] If the person has an ordinary income excess, the person’s ordinary income reduction amount is the sum of the person’s lower range reduction assessed under s 1068-G15 and the person’s upper range reduction, if any, assessed under s 1068-G16.[81] The lower range reduction is an amount equal to 50% of the part of that person’s ordinary income that exceeds $62 but does not exceed $142. The upper range reduction is an amount equal to 70% of that part that exceeds $142. [82] I accept Ms Bramley’s calculation that this meant that, for a single person without dependents, the rate of NSA reduced to nil under the income test if that person’s ordinary income as assessed under the relevant provisions of the SS Act exceeded $655.29 per fortnight.
[80] SS Act, s 1068-G1, Step 10
[81] SS Act, s 1068-G14
[82] SS Act, s 1068-G16
Disability support pension: qualification and determination of whether payable
Section 94 of the SS Act sets out the qualifications that a person must meet to be qualified for DSP. They are not in issue in this case. Whether DSP is payable is an issue separate from whether a person is qualified for it and separate from whether the person is receiving it. Qualification for a DSP is separate from qualification for the ECRP. That is the subject of ss 94 and 94A of the SS Act. In essence, s 94 is based on a person’s having a continuing inability to work. So too is
s 94A but it enables the FaHCSIA Secretary to have regard to a person’s entitlement to DSP when considering that person’s capacity to work in connection with a social security benefit or social security entitlement. An ECRP is a payment that does not meet the description of either a social security benefit or a social security entitlement.[83][83] SS Act, s 23(1)
In all relevant instances in this case, DSP is not payable if the rate at which it would be paid is nil.[84] Whether the rate is nil depends on the application of that person’s circumstances to the calculations set out in the Rate Calculator at the end of s 1064 (Rate Calculator).[85] That Rate Calculator contains both an assets test and an income test as part of the twelve step method it sets out in s 1064-A1 for calculating DSP. In outline only, the Rate Calculator requires an assessment of the person’s maximum basic rate to which are added amounts for pharmaceutical allowance and rent assistance. That gives an amount that is the maximum payment rate. The ordinary income test is then applied to the maximum payment rate leaving an income reduced rate. Regard is then had to the maximum payment rate again. The assets test is applied to it in order to work out the assets reduced rate. The income reduced rate and the assets reduced rate are compared and the lower of the two rates is the provisional annual payment rate. It is the provisional annual payment rate that is then adjusted to obtain the rate of DSP payable to the person.
[84] SS Act, s 98(1)
[85] SS Act, ss 117(a) and 1064(1)
Disability support pension: income test
The rate of a DSP is a daily rate but that rate is calculated by working out the annual rate according to the Rate Calculator and dividing it by 364.[86] The ordinary income test that the Rate Calculator applies is not the same test that is used under Rate Calculator B in relation to NSA. Instead, it is the test set out in Module E in Part 3.2 rather than in Module G in Part 3.6.
[86] SS Act, s 1064-A1
Again, I will not set out the steps in that income test for they are very similar to those in Module G in Part 3.6. Where the major difference lies is in the fact that the person’s reduction for ordinary income in excess of the ordinary income free area was 40% or 40 cents in the dollar for each dollar of income earned in excess of $142 per fortnight rather than by reference to the higher rates to which I have already referred.[87] Applying that reduction to the rate of pension then payable, I accept Ms Bramley’s figure that the rate of DSP payable to a person reduced to nil when that person’s fortnightly ordinary income as assessed under the relevant provisions of the SS Act exceeded $1,329.25 per fortnight.
[87] SS Act, s 1064-E10
Disability support pension: assets test
After the application of the income test to the maximum basic rate payable to a person, the assets test is applied to the maximum basic rate. The assets test is set out in Module G in Part 3.2 and the steps that must be taken are, in so far as they are relevant:
“Step 1 Work out the value of the person’s assets.
Note 1: …
Note 2: for the assets that are to be disregarded in valuing a person’s assets see section 1118.
Note 3: for the valuation of an asset that is subject to a charge or encumbrance see section 1121.
Step 2Work out the person’s assets value limit (see point 1064-G3 below).
Note: a person’s assets value limit is the maximum value of assets the person can have without affecting the person’s pension rate.
Step 3Work out whether the value of the person’s assets exceeds the person’s assets value limit.
Step 4If the value of the person’s assets does not exceed the person’s assets value limit, the person’s assets excess is nil.
Step 5If the value of the person’s assets exceeds the person’s assets value limit, the person’s assets excess is the value of the person’s assets less the person’s assets value limit.
Step 6Use the person’s assets excess to work out the person’s reduction for assets using points 1064-G4 to 1064-G7 below.”[88]
[88] SS Act, s 1064-G1
The assets value limit is worked out according to the table in s 1064-G3. Where a person was not a member of a couple and was a homeowner on 26 August 2005, the assets value limit was $157,000. A person’s reduction for assets is worked out on a yearly basis using Table G-2 set out in s 1064-G4. Where a person is not a member of a couple, the assets reduction is worked out according to the formula in item 1 of s 1064-G4:
| Assets excess x 19.50 |
| 250 |
The application of the formula led to an assets excess meant that, on 26 August 2005, a person’s entitlement to be paid DSP reduced to nil when the value of his or her assets exceeded $317,750. From 20 September 2005, a change in the assets value limit meant that it reduced to nil when a single person’s assets exceeded $322,000 and, from 20 March 2006, to nil when they exceeded $325,000.
The definition of a “social security pension” includes a DSP but not an NSA.[89] Section 1129(1) provides, in outline, that if a social security pension is not payable, or payable at a reduced rate, because of the application of an assets test, the person has an unrealisable asset and that person would suffer severe financial hardship if s 1129 did not apply, the FaHCSIA Secretary may determine that the section does apply.[90] There are two circumstances in which a person has an “unrealisable asset” and they are set out in ss 11(12) and (13):[91]
“(12) An asset of a person is an unrealisable asset if:
(a)the person cannot sell or realise the asset; and
(b)the person cannot use the asset as a security for borrowing.
(13) For the purposes of the application of this Act to a social security pension …, an asset of a person is also an unrealisable asset if:
(a)the person could not reasonably be expected to sell or realise the asset; and
(b)the person could not reasonably be expected to use the asset as a security for borrowing.”
[89] SS Act, s 23(1)
[90] SS Act, s 1129(1)
[91] SS Act, s 11(1)
CONSIDERATON
Mr Henderson has raised a number of concerns regarding the payment of ECRP, DSP and NSA. I will begin with his general concerns.
Release of funds by State Trustees
Mr Henderson expressed concern that the State Trustees had refused to release funds to him to enable him to continue to manage the farm or to enable him to continue to pay the mortgage on the farm. He felt that he was walking on eggshells regardless of what he did. When he asked the State Trustees to apply to the Rural Finance Corporation and to Centrelink for a Declaration, he was met with inaction. He thought that Centrelink would restart the DSP that he had originally received but he was told that he would have to reclaim it.
The relationship between Mr Henderson and the State Trustees is governed by the order that VCAT made and the GA Act. It is not a relationship in which the Tribunal can interfere but it is a relationship in which the administrator, in this case State Trustees, must act in the best interests of the represented person.[92] Without limiting the scope of that duty, it must act:
“as far as possible -
(a)in such a way as to encourage and assist the represented person to become capable of administering the estate; and
(b)in consultation with the represented person, taking into account as far as possible the wishes of the represented person.”[93]
[92] GA Act, s 28(1)
[93] GA Act, s 49(2)
The appointment of an administrator restricts the power of the represented person to manage his or her own affairs but it is clear from the GA Act that ownership of the person’s property, be it real property or money or otherwise, is not in any way affected by an administration order. It remains the person’s property even though he or she is not unrestricted in the manner in which he or she deals with it or disposes of it.[94] Therefore, the fact that Mr Henderson was subject to an administration order cannot of itself mean that his assets and income cannot be taken into account under the SS Act.
[94] See, for example, GA Act, ss 52 and 53
When looking at Mr Henderson’s entitlement to DSP, I have had regard to whether it could be argued that he has unrealisable assets within the meaning of ss 11(12) or (13) of the SS Act. It is not relevant to do that in relation to NSA for that payment does not come within the definition of “social security pension” to which those sections apply.[95] A finding that an asset is unrealisable depends on the person’s not being able to sell it or dispose of it or use it to raise money. Sections 11(12) and (13) are framed in terms of the “person’s” not being able to do so but there is no suggestion in those provisions that they are limited to the individual’s own personal action as opposed to the actions of those lawfully appointed to act on his or her behalf. That must be so when regard is had to the fact that a person in the position of an administrator is appointed to act on the person’s behalf and in the person’s best interests. As s 48(3) of the GA Act provides:
“Where a decision is made, action taken, consent given or thing done by an administrator under an order made by the Tribunal the decision, action, consent or thing has effect as if it had been made, taken, given or done by the represented person and the represented person had the legal capacity to do so.”
[95] See [69] above
In this case, the Lots A and 1A that were the freehold land comprising the farm were subject to a Family Court order that required them to be sold and the proceeds distributed in a certain way. That order did not mean that the property could not be sold. Indeed the contrary was the case. Therefore, it was not an unrealisable asset for the purpose of assessing the value of Mr Henderson’s assets in relation to whether DSP is payable to him.
Mr Henderson also stated that he was unable to gain access to his income. If that is so, it is a matter between him and State Trustees and a matter that needs to be determined under the GA Act. The decisions have been made on the basis of Mr Henderson’s assets but not on the basis of his income. Even if they had been made on the basis of his income, there is nothing in the SS Act that would enable me to disregard income which he earned, derived or received but to which he was denied access by an administrator such as State Trustees. I note that the financial hardship provisions in Division 3 of Part 3.12 of the SS Act apply to the application of various assets test and not to any income test. There would not seem to be any hardship provisions under the SS Act that apply to a situation such as that in which Mr Henderson believes himself to be. The explanation for that would be in the fact that, if the administrator is not complying with its duties towards him, his remedy lies with VCAT under the GA Act and not in the application of the SS Act.
An ECRP carries greater ancillary benefits than a DSP payment
Mr Henderson said that he could have gained concessions in the interest payable on loans and a reduction in his rates had he been granted an ECRP rather than a DSP. I accept that Mr Henderson may well be correct in his assessment of the benefits of one payment over the other in the wider world. Unfortunately, I am unable to have regard to them for I am only able to decide whether he is entitled to one or the other under the SS Act and the rate at which any should be paid under that legislation. Neither the Administrative Appeals Tribunal Act 1975, the FHS Act or the SS Act gives me any scope for looking at the wider advantages of each payment when I am undertaking that task. Instead, I am confined by the scope of the SS Act.
The relevance of the proceeds of the sale of livestock in assessing ECRP
As I have said, the fortnightly rate at which ECRP is payable is, for a person in Mr Henderson’s circumstances at the time, the rate at which NSA would have been payable to him. That is the effect of s 24A(1)(a)(ii) of the FHS Act but the effect of s 24A(3) is that exempt livestock proceeds are to be disregarded. In order for the proceeds of a sale to be regarded as exempt livestock proceeds for the purposes of that provision, they must meet two criteria. The first is that there must have been a forced disposal of that livestock at a time when an exceptional circumstances certificate is in force. The second is that the proceeds from the sale, or that part which is to be regarded as the proceeds of a forced livestock sale, have been deposited in a deposit of the sort referred to in the definition of “exempt livestock proceeds” in s 3(2) of the FHS Act.
Even if I were to find that Mr Henderson met the first criterion, I would have to find that the proceeds were not exempt livestock proceeds as understood by the FHS Act. That would follow from the fact that he did not deposit them in any one of the three ways set out in the definition of “exempt livestock proceeds”. He did not deposit them under the Loan (Income Equalization Deposits) Act 1976 or in a farm management deposit (within the meaning of Schedule 2G to the Income Tax Assessment Act 1936). Mr Henderson did deposit the proceeds in a bank but not for a term of at least 3 months with a bank or other institution that receives money on deposit. A deposit that is for a term of at least 3 months contemplates a term deposit that cannot be withdrawn or at least cannot be withdrawn without penalty. A deposit in a bank account that can be drawn upon at call does not meet the description in (b) of the definition of “exempt livestock proceeds”. That is so even if the proceeds happen to be left in the account and not drawn upon for a period greater than three months.
Cancellation of the ECRP
The delegate’s decision notified on 14 July 2005 was to cancel Mr Henderson’s ECRP with effect from 25 August 2005. I consider that this was the correct decision at the time that it was made and that it remains the correct decision in light of events that have come to pass. At that time, the Declaration had come to an end with effect from 25 August 2005 and it was some time later, on 20 September 2005, that a fresh Exceptional Circumstances Certificate was issued with effect from 26 August 2005.[96] That approach is consistent with my understanding of the principles established by the majority of the Federal Court in Shi v Migration Agents’ Registration Authority.[97]
[96] T344 documents at 42
[97] (2007) 158 FCR 525; 240 ALR 23; 95 ALD 260 and see my analysis of the principles in Re Toohey and Tax Agents’ Board [2008] AATA 262 at [91]-[102]
Fresh claim for ECRP
Mr Henderson made a fresh claim for ECRP on 30 September 2005 when a further Declaration had been made. By this time, Mr Henderson was receiving DSP and the question becomes whether a person can choose whether he is paid ECRP or DSP when he is entitled to both or whether the decision is made by the FaHCSIA Secretary.
It seems to me that a person receiving DSP could claim and, if successful, be paid ECRP only if he or she withdraws his or her claim for DSP in some way before being paid ECRP. Without a claim, DSP would no longer be payable for it is not open under s 94A for the FaHCSIA Secretary to decide that a person is entitled to DSP when considering a claim for ECRP.[98] Once DSP, which is a social security pension, is not payable and is in fact not paid, it cannot be said that the person “is receiving a social security pension”.[99] Whether there remains a claim is a choice that lies in the hands of the recipient. It is not one that the delegate may make for the person even though, as in this case, it is to be expected that the delegate has acted with the best interests of the person firmly in mind.
[98] See [62] above
[99] SS Act, s 23(1)
On the material that I have, it seems to me that Mr Henderson did not renounce his entitlement to DSP and that he was receiving it when the decision regarding his claim for ECRP was made. While it is patently clear that he wanted ECRP, he also sought review of the rate of DSP payable to him. I find that he did that on 20 December 2005 when he indicated that he wanted review of all of the decisions relating to ECRP and DSP and that was consistent with his previous actions in seeking review of the valuations of his property.[100] The choice was effectively put to Mr Henderson when an officer of Centrelink drew his attention to the higher rate of the DSP when writing to him on 14 December 2005.[101]
[100] T344 documents at 73
[101] T344 documents at 72
What difference does the appointment of an administrator make to the person’s choice? An administrator is appointed to manage the person’s estate. It is to be distinguished from a guardian appointed under a plenary order and having all of the powers and duties in respect of the represented person that he or she would have if he or she were the parent of the represented person.[102] It seems to me that the choice of whether he should be paid DSP or ECRP remained with Mr Henderson and was not a matter that required the administrator’s consideration.
[102] GA Act, s 24(1)
In view of the findings that I have made and the provision in s 12(1) of FHS Act that ECRP is not payable to a person if that person is receiving a social security pension, I have decided that the decision to refuse Mr Henderson’s claim for it was correct.
Payments under the Dairy Adjustment Scheme
Mr Henderson received payments under the Dairy Adjustment Scheme established under the Dairy Produce Act 1986. These were included as income in assessing his entitlement to NSA and DSP and I think that they were correctly included. I have set out the definition of “income” above and, as it is an amount received by Mr Henderson for his own use or benefit, I think that it comes within that term. It is not an amount that is excluded from the definition by ss 8(4) or (5) of the SS Act as it is not an amount paid under a home equity conversion agreement and it is not an amount specified in s 8(8) as an excluded amount. Therefore, I consider that the delegate properly treated the payments that Mr Henderson received under the Dairy Adjustment Scheme as income.[103]
[103] I note that this conclusion is consistent with that reached by Senior Member Handley in Re Molinaro and Secretary, Department of Family and Community Services (2004) 87 ALD 184; [2004] AATA 1333 at 186; [14] but note also the reservations of Senior Member Pascoe in Re Molinaro and Secretary, Department of Families and Community Servicesand Indigenous Affairs [2007] AATA 2068 regarding matters beyond that conclusion. In particular, I note Senior Member Pascoe’s views regarding the effect of Mrs Molinaro’s bankruptcy. That is not a matter that I need express a view on in this case.
The value of the farm
The records of Centrelink were adjusted to reflect the value of the farm on two occasions and the proceeds from the farm on one occasion. I note that the two valuations on which it relied were for Lots A and 1A. They represented the land comprising the farm to which Mr and Mrs Henderson held the freehold title. Mr Henderson submitted a value by the Valuer-General of $250,000 for a capital improved value. That value referred to the property as comprising 134.003 hectares but does not identify the property in any way that accords with the information that would normally appear on the certificate of title. The area, however, accords quite closely with that identified as the area of Lots A and 1A and I take it that the notice is referring to the freehold land owned by Mr and Mrs Henderson at the time.
Valuations can be prepared for different reasons. Taking that by the Valuer-General, it is clear that the valuation has been prepared under the Valuation of Land Act 1960 (Vic) (VL Act). Section 13DA(1) provides that a Council may appoint a person or persons to make valuations under that Act for the purposes of the Local Government Act 1989 (Vic) (LG Act). Part 8 of the LG Act is concerned with the rates and charges on rateable land. Subject to exceptions specified in s 154(2), all land is rateable.[104] Section 157 of the LG Act provides that the Council may use the site value, net annual value or capital improved value system of valuation and may change its system provided it publishes notice of its decision to do so. Section 13DC of the VL Act makes specific provision for the matters to which regard is had in valuing for the purposes of the LG Act. It follows that the valuation by the Valuer-General was not prepared for the purposes of the SS Act.
[104] LG Act, s 154(1)
More importantly, the basis on which the Valuer-General was required to value the land was not necessarily on the basis of market value that was the basis of the AVO’s valuation. The AVO had adopted as its basis the market value as determined in accordance with the International Valuation Standards 2001:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”[105]
[105] T540 documents at 186
Market value is the basis that accords with the principles underlying payments of NSA and DSP under the SS Act. Those payments are income maintenance payments. A purpose of the assets and income tests must be to determine the extent to which a person is regarded by the law at least as requiring income maintenance. That extent is determined by reference to the means that a person has at his or her disposal to support him or her self. Those means take the form not only of money but of assets that can be converted to money. In view of that, it seems logical that the value of a person’s assets must be assessed on the basis of the amount that they would bring if sold by a willing seller to a willing buyer in an arm’s length transaction after proper marketing.
On that basis, I prefer the value of the AVO to that of the Valuer-General once the AVO’s valuation was received by Centrelink. It was prepared on the basis of the only comparable sale at the time and according to market value. A wider basis of comparable sales would have been preferable but sales cannot be conjured up if they do not exist. Therefore, I consider that it was appropriate to adopt the AVO’s value of Lots A and 1A in determining the value of Mr Henderson’s assets after Centrelink received that valuation in February 2006. It remained valid until the property was actually sold. Once sold, the value of the property becomes that which a buyer actually paid for it. The proceeds received for it then become an asset of the person in place of the asset that was sold.
Before Centrelink received the valuation, it had CJA Lee & Associates’ kerbside valuation in December 2004 of $400,000. That is an acceptable method of valuation for some purposes but it is necessarily limited by the fact that any inspection of the property takes place from the kerbside rather than by walking over the property. Without a proper inspection of the property, it might be difficult to prefer to a kerbside valuation to a detailed valuation but I am not faced with that choice at this time. The delegate relied on the kerbside valuation when there was no other. I have not had any evidence regarding any changes in the market place between the two valuations and so no basis for concluding that the kerbside valuation was not somewhere near the mark. Indeed, in view of the AVO’s valuation of $480,000 a year or so later, it would seem to be somewhere near the mark. It was an appropriate basis on which to assess the value of the farm property until the AVO’s valuation was received by Centrelink on 27 February 2006. That was a value assessed on 7 December 2005 and, although significantly below the ultimate sale price of $600,000, I do not, on the evidence, any reason to find that it did not represent the market value at the time and up until the date of the sale. There is no evidence as to the state of the market subsequently and it may be that it was a volatile and ever changing market or that there were factors that made the farm a particularly attractive proposition for the purchaser so that he or she was prepared to pay a premium for it over and above its market value.
I note that the AVO’s valuation did not refer to Lot 22A. This was the Crown land over which Mr Henderson held a lease. That lease, I find, had only 22 years of its term remaining at all relevant times. Neither the valuation by CJA Lee & Associates nor that by the AVO attributed a value to Lot 22A. The earlier valuation provided by PH Crane & Associates related to a much earlier time than those with which I am concerned. It did attribute a value to Lot 22A on the basis of its being freehold estate. Neither approach can be correct regarding Lot 22A. A lease of a property has some value in that it gives the lessee a right to use and enjoy that property according to the terms of the lease.
In another case, it might well be the case that regard needs to be had to a Crown lease. In this case, I do not think that I need to as the identity of the person entitled to that lease is unclear. The delegate has not taken it into account for that reason and I think it appropriate to do the same. Ignoring the Crown lease can only be to Mr Henderson’s benefit as no value has been attributed to it.
The relevance of the Family Court order
Lots A and 1A were sold as a consequence of the Family Court’s order. What is the impact of that order before the property was sold on 12 February 2006 and finally settled on 10 May 2006? I have referred to ss 1121 and to 1121A. I do not consider that s 1121A applies as, on any view of the Family Court order, it cannot be regarded as a liability related to the carrying on of primary production. Initially, I considered whether the Family Court order can be regarded as a charge or an encumbrance over the farm property within the meaning of s 1121. Later, I considered whether the order should be regarded as altering the interests of Mr and Mrs Henderson in the farm as contemplated by s 79 of the Family Law Act 1975 (Family Law Act). It may be that the second view is the better view but, lest it not be correct, I have set out both lines of reasoning for they reach the same conclusion. That is that the value of the asset that is Mr Henderson’s interest in the farm property would be one half of the value less $95,000 in the period between the date of the Family Court’s order and the date of the sale of the property. As from the date of the sale, the actual proceeds paid on Mr Henderson’s behalf to State Trustees should be taken into account for the purposes of each of the assets tests.
Beginning with s 1121 and the word “charge”, its ordinary meanings include:
“… 12 a task, duty or burden. 13 a debt or financial liability. …”[106]
Those of “encumbrance” include “… an impediment, hindrance of burden.”[107] In Re Fawthrop and Repatriation Commission[108] I was a member of a Tribunal that considered the meaning of both words in a different context. Our summary of previous authorities remains relevant. We said:
“… Taking first the word ‘charge’, we note that the ordinary meaning of it is the liability to pay money but that it may also denote a particular liability to pay money when performance is secured by the creditor's right to receive payment from a specific fund or out of the proceeds of the realisation of specific property: see, for example, the consideration in Davison v Bathurst City Council [1966] 1 NSWR 61 at 64, Re Price, Ex parte Tinning (1931) 26 Tas L R 158 at 160 per Nicholls CJ and Davies v Littlejohn (1923) 34 CLR 174 per Knox CJ at pp 180-2 and 184.
24. The word ‘encumbrance’ may also have a wider and a narrower meaning in general language as is apparent from the case of Wallace v Love ((1922) 31 CLR 156 at 164) when it was said:
‘The word ‘encumbrances’, in its ordinary connotation, means that a person or estate is burdened with debts, obligations or responsibilities. True, the word is in law especially used to indicate a burden on property, a claim, lien or liability attached to property. …’”[109]
[106] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[107] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[108] (1993) 36 ALD 140; 19 AAR 290
[109] (1993) 36 ALD 140; 19 AAR 290 at 144; 295
I would add to that the observation by Lord Herschell LC when he said:
“ The word ‘charge’ may well be used to describe a burden imposed upon land, and if a payment has to be made in respect of land, and it can only be enjoyed subject to the liability for that payment, I cannot think that there would be any great straining of language if it were spoken of as charged upon the land.”[110]
In Re Price; Ex parte Tinning,[111] Nicholls CJ said that:
“ The words ‘charge’ and ‘lien’ are often interchangeable. The quality of each … is that, so far as is necessary, it appropriates or sets aside some particular property, real or personal, by making a deduction from the absolute ownership of it, in favour of someone who is given by law, or by agreement, will, or otherwise, the right to resort to the property to satisfy or discharge some obligation. The add to the right in personam a limited right in rem.”[112]
[110] Payne v Esdaile (1888) 13 AC 613 at 623-624
[111] (1931) 26 Tas LR 158
[112] (1931) 26 Tas LR 158 at 160
There is nothing in the SS Act that suggests that a different conclusion should be reached from that reached in these authorities. It is a conclusion that is consistent with the requirement in s 11(2) that the value of a jointly owned asset is a reference to the value of a person’s interest in that asset and in s 11(3) that the value of a charge or encumbrance on an asset is the value of that charge or encumbrance so far as it relates to that person’s interest in the asset. Having regard to the rationale of the assets test,[113] it is a view that the value of assets be assessed on the basis of what they would realise. They cannot realise more than would remain after a sale of the sort to which I have referred and the deduction of any amounts in relation to which a third party would have a right to resort to the land in order to be paid.
[113] See [67]-[70] above
The liabilities of the sort referred to in cl 1.1.E.105 of the Guide are examples of charges or encumbrances coming within s 1121(2) of the SS Act. Those examples should not be read as limiting those liabilities that may properly be regarded as charges or encumbrances. The Guide is a document that guides Centrelink officers in making decisions and ensuring consistency of decision-making. It is a very important document but it cannot be read as usurping the words used in the SS Act or as limiting the interpretation of the SS Act. Unlike Explanatory Memoranda accompanying a Bill presented to Parliament for its consideration, they are not extrinsic material of the sort to which regard may be had in interpreting a statute.[114]
[114] In Re Kapust and Secretary, Department of Family and Community Services (2006) 90 ALD 462; [2006] AATA 110 at 464; [23] it was said, without further reference to the meaning of the expression “charge or encumbrance” that “The Tribunal is satisfied that the Departmental policy appropriately amplifies the provisions of s 1121 of the Act.” If this statement means to convey that the Guide can be used to interpret the expression used by Parliament, I must respectfully disagree.
The effect of the Family Court order is to impose a charge or liability. It has force of law and alters the relative rights of Mr and Mrs Henderson to Lots A and 1A that make up the farm property. From the moment that it was made, they remained joint owners of those Lots but were no longer each entitled to 50% of the proceeds of their sale. Instead, Mrs Henderson was entitled to something more than 50% and Mr Henderson to something less than 50%. The precise change of percentage depended on the price for which the farm property was sold but, once that order was made, they were never again to be entitled to half each of the proceeds. It was an order that Mrs Henderson could enforce if the proceeds of the land were not divided in that way and, under the order, she could also take steps to sell the land. That seems to me to come within the description of a charge or encumbrance and there is no need to distinguish further which is which. It is an encumbrance that attaches to the Lots but does not change their interest in the asset as joint owners.
The practical result of that conclusion is that, from the date of the Family Court’s order on 17 May 2005, Mr Henderson’s interest in the farm was subject to a liability in the form of an encumbrance. It was not a liability he shared with Mrs Henderson within the meaning of s 11(3A) of the SS Act. The value of
Mr Henderson’s share of the property for all practical purposes would be calculated by reference to the formula:
(value of property) - $90,000 - $5,000[115]
[115] The sums of $90,000 and $5,000 are those sums that had to be paid to Mrs Henderson from Mr Henderson’s half share of the proceeds.
In relation to this line of reasoning, a question arises under s 1121(2). That is whether the charge or encumbrance over the asset was given for the benefit of Mrs Henderson and, if so, whether she was Mr Henderson’s partner at the time. Section 11(2)(b) provides that if a charge or encumbrance was given for the benefit of a person other than the person or the person’s partner, s 1121(1) does not apply. That would mean that the value of Mr Henderson’s asset would not be reduced by the value of the charge or encumbrance amounting to $95,000.
I do not think that there has been a charge or encumbrance given for the benefit of Mrs Henderson as such. Reading ss 1121(1) and (2) together, it seems to me that they mean to prevent a person from reducing the value of his or her assets for the purposes of the assets test where he or she gave the charge or encumbrance in circumstances that would lead to a benefit to a third party that was not his or her partner. If, for example, he or she had given a charge or encumbrance to secure repayment of a loan used by him or her or his or her partner to purchase property or to pay living expenses, the value of the asset subject to the charge or encumbrance would be reduced by its value. By the same token, the value of the asset purchased would be taken into account in the application of the assets test as would the proceeds of any funds remaining.
An order by the Family Court cannot be said to have been “given” for the benefit of one party to a marriage or the other. Rather, it represents the alteration of interests of the parties in the marriage.[116] It is imposed upon the parties even if, as in this case, it is imposed with their consent. That fact takes any charge or encumbrance that the Family Court order may represent beyond the scope of the exclusion in s 1121(2). That would leave s 1121(1) to operate so that the value of
Mr Henderson’s interest in the farm between the date of the order and the sale of the farm as 50% of its value less $95,000.[116] Family Law Act, s 79(1)(a)
The fact that the Family Court order alters the interests of the parties to the marriage gives rise to my second, and I think, stronger reason for concluding that Mr Henderson’s interest in the farm between the date of the order and the sale of the farm should be assessed as 50% of its value less $95,000. That is that, by altering the interests of the parties to the marriage in the farm, his interest becomes precisely that. There is no need to consider the matter from the point of view of a charge or encumbrance.
Are some of Mr Henderson’s assets unrealisable?
Mr Henderson has referred to s 1084 of the SS Act. It provides that certain financial investments are not to be regarded as financial assets for the purposes of ss 1076, 1077 or 1078. If a financial investment is an unrealisable asset for the purposes of ss 1129, 1130B or 1131, the financial investment is not to be regarded as a financial asset for the purposes of ss 1076, 1077 or 1078. Section 9(1) of the SS Act defines a “financial investment” to mean:
“(a) available money; or
(b)deposit money; or
(c)a managed investment; or
(d)a listed security; or
(e)a loan that has not been repaid in full; or
(f)an unlisted public security; or
(g)gold, silver or platinum bullion; or
(h)an asset-tested income stream (short term).”
Sections 1076, 1077 and 1078 come with Division 1B of Part 3.10 and deem a person to have received income from financial assets. They do not affect the value of a person’s assets. Therefore, any determination that the Minister might have made exempting financial investments from the deeming provisions of ss 1076, 1077 and 1078 can have no effect on the assessment of the value of Mr Henderson’s assets.
Application of the assets tests to the payment of NSA and DSP
Having regard to the principles that I have set out, it seems to me that the delegate’s assessments of the value of Mr Henderson’s assets for the purposes of assessing his entitlement to be paid DSP and NSA is correct in so far as they had regard to the proceeds of the sale of the livestock. The assessment of the value of his assets generally was also appropriate in relation to the consideration of whether or not NSA was payable to Mr Henderson. By the time that he made his claim in June 2006, the farm had been sold, settlement had taken place and the proceeds paid to State Trustees. The value of Mr Henderson’s assets was clear.
It is in relation to the value of the farm for the purposes of the DSP that I think that the assessment was not appropriate. It was not appropriate in so far as it does not appear to have had regard to the impact of the Family Court’s order between the date on which the order was made in May 2005 and the date of the sale of the farm on 12 February 2006. That impact must vary according to the varying values to be assigned to the farm in that period. Whether or not the recalculation makes a significant difference to the rate at which DSP was paid to Mr Henderson will become clear when the re-assessments are completed.
Decision
For the reasons I have given, I:
1.affirm the decision of a delegate of the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs dated 26 August 2005 and affirmed by the Social Security Appeals Tribunal on 17 April 2006 refusing to pay the applicant exceptional circumstances relief payment;
2.affirm the decision of a delegate of the Secretary of the Department of Employment Education and Workplace Relations dated 28 July 2006 and affirmed by the Social Security Appeals Tribunal on 20 December 2006 rejecting the applicant’s claim for newstart allowance; and
3.set aside:
(a)the decision of a delegate of the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs dated 7 September 2005 and affirmed by the Social Security Appeals Tribunal on 25 May 2006 reducing his disability support pension; and
(b)remit the decision to the Secretary of the Department of Family, Housing, Community Services and Indigenous Affairs to reassess the rate at which disability support pension should be paid to the applicant having regard to:
(i) the value of the farm property from the date of the applicant’s claim for disability support pension made on 27 June 2006 to 6 December 2005 being $400,000;
(ii) the value of the farm property from 7 December 2005 to the date of the sale of that property being $480,000;
(iii) the value of the applicant’s interest in the farm property until the date of sale on 12 February 2006 be calculated on the basis of an amount representing $95,000 less than an amount that is half of the value after the deduction of the amount secured by any mortgage over the farm property; and
(iv) from the date of sale, the net proceeds of the sale that would be payable to the applicant from the date of settlement.
I certify that the one hundred and eleven preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: .......................................................................
Jayne Haydon Associate
Date of Hearing 8 August 2007
Date of Decision 5 June 2008
Representative for the Applicant unrepresented
Representative for the Respondents Ms Alisa Bramley
Legal Services Branch
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