JOHN GREGORY CASH and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 458

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 458

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          Nos  2007/4455 & 2008/3872

GENERAL ADMINISTRATIVE DIVISION		)
Re		JOHN GREGORY CASH

Applicant

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

Respondent

DECISION

Tribunal Senior Member R W Dunne

Date24 June 2009

PlaceAdelaide

Decision The Tribunal affirms the decisions under review.

..............................................

R W DUNNE
  (Senior Member)

SOCIAL SECURITY – pensions, benefits and allowances – qualification for Exceptional Circumstances Relief Payment – moneys borrowed by applicant from bank and loaned to another – whether amount loaned was a debt and an asset of the applicant – whether the debt was an “exempt asset” – decision affirmed

SOCIAL SECURITY – pensions, benefits and allowances – whether financial hardship provisions of the assets test apply to Exceptional Circumstances Relief Payment – whether Payment is a social security benefit or pension – decision affirmed

Farm Household Support Act 1992 ss 3(1) and (2), 8A(1), 9(2)(a), 10

Social Security Act 1991 ss 11(1), (12) and (13), 23(1), 1118(1)(a), 1121(1), 1122, 1129(1), 1130(1), 1131(1) and (2), 1132(1)

REASONS FOR DECISION

24 June 2009   Senior Member R W Dunne   

introduction

1.      The applicant (Mr John Gregory Cash) is a farmer at Streaky Bay, South Australia.  In 2005 he lent $400,000 or thereabouts to another farmer (Mr Rockemer) in New South Wales.  He borrowed the funds from the Commonwealth Bank, granting a mortgage over his farm as security for the borrowings.  The understanding between the two farmers was that the borrowings would be repaid when Mr Rockemer sold his farming property.  On 2 May 2007, Mr Cash lodged an application for Exceptional Circumstances Relief Payment (“ECRP”) under the Farm Household Support Act 1992 (“FHS Act”). Centrelink (“respondent”) rejected his application, which was affirmed by the original decision-maker and, on further review, by an Authorised Review Officer. Mr Cash applied to the Social Security Appeals Tribunal (“SSAT”), which affirmed Centrelink’s decision. He has applied to this Tribunal for a review of the decision of the SSAT.

2.      Following the decision of the SSAT, Mr Cash lodged a claim with Centrelink, seeking to have the financial hardship provisions of the assets test under the Social Security Act 1991 (“Act”) applied to his claim for ECRP.  Centrelink rejected the hardship claim, which was affirmed by the original decision-maker and an Authorised Review Officer.  Mr Cash sought a further review by the SSAT and, on 23 July 2008, the SSAT affirmed Centrelink’s decision.  He has applied to this Tribunal for a review of the decision of the SSAT.

3. Mr Cash represented himself (by telephone) and Ms Laura Giaretto (from Centrelink Legal Services and Procurement Branch) appeared for the respondent. Pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, the Tribunal received into evidence the T documents relating to the claim for ECRP (Exhibit R1) and the claim under the financial hardship provisions (Exhibit R2).

issues for the tribunal

4.      The following are the issues for the Tribunal in respect of the two matters under review:

(a)Whether Mr Cash is entitled to receive ECRP.

(b) Whether the moneys loaned by Mr Cash to Mr Rockemer constitute an asset and, if so, an “exempt asset” under the FHS Act.

(c)Whether the ECRP is a “social security benefit” or a “social security pension”.

(d)Whether the financial hardship provisions of the assets test under the Act can be applied to a claim for ECRP.

legislation

5. The relevant provisions of the FHS Act dealing with the applicant’s claim for ECRP follow:

“3         Interpretation

(1)In this Act, unless the contrary intention appears, the following definitions have the same meaning as in the Social Security Act 1991:

…

asset

…

(2)      In this Act, unless the contrary intention appears:

…

exempt assets 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;

…

8AQualification for exceptional circumstances relief payment

Qualification—farmers

(1)A person is qualified for exceptional circumstances relief payment in respect of a period if:

(a)the period begins on or after 1 October 1994; and

(b)throughout the period:

(i)the person:

(A)is a farmer; and

(B)contributes a significant part of his or her labour and capital to the farm enterprise; and

(C)derives a significant part of his or her income from the farm enterprise; and

(E)is an Australian resident; and

(ii)an exceptional circumstances certificate issued in respect of the person has effect.

…

9Overview of rules about non-payability

…

(2)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

…

10       Assets test

(1)Farm household support, exceptional circumstances relief payment or farm help income support 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.

(2)The Secretary must determine whether the value of a person’s assets exceeds the person’s assets value limit:

(a)if the person claims farm household support, exceptional circumstances relief payment or farm help income support—at the time when the claim is determined under section 18; and

(b)if the person is receiving farm household support, exceptional circumstances relief payment or farm help income support—within the period of 6 months from the day on which the last favourable determination took effect.

(3)      The value of a person’s assets at a particular time is worked out by:

(a)working out the person’s assets at that time that are not exempt assets for the purposes of this 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)in a case where a person qualifies for exceptional circumstances relief payment only under subsection 8A(5) or (7) and makes a claim for payment on the basis that the person qualifies under that subsection—because the person carries on a small business; and

(iii)in a case where a person qualifies for exceptional circumstances relief payment under subsection 8A(5) or (7) and, but for subsubparagraph 8A(1)(b)(i)(C), would also qualify under subsection 8A(1) for the payment—because the person carries on a small business and because the person is a farmer; and

(iv)      in any other case—because the person is a farmer; and

(b)working out the value of those assets in accordance with Parts 3.12 and 3.18 of the Social Security Act 1991.

(4)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 section 612 of the Social Security Act 1991).

…”

6. The relevant provisions of the Act dealing with the financial hardship (assets) test follow:

“11       Assets test definitions

(1)      In this Act, unless the contrary intention appears:

…

asset means property or money (including property or money outside                 Australia).

…

unrealisable asset has the meaning given by subsections (12), (13)                    and (14).

…

(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 (other than a pension PP (single)), 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.

…

23General definitions

(1)In this Act, unless the contrary intention appears:

…

social security benefit means:

(aa)widow allowance; or

(aab)youth allowance; or

(aac)austudy payment; or

(a)newstart allowance; or

(c)sickness allowance; or

(d)special benefit; or

(e)partner allowance; or

(ea)a mature age allowance under Part 2.12B; or

(f)benefit PP (partnered); or

(g)parenting allowance (other than non-benefit allowance).

…

social security pension means:

(a)an age pension; or

(b)a disability support pension; or

(c)a wife pension; or

(d)a carer payment; or

(e)a pension PP (single); or

(ea)a sole parent pension; or

(f)a bereavement allowance; or

(g)a widow B pension; or

(ga)disability wage supplement; or

(i)a mature age partner allowance; or

(k)a special needs pension.

…

1118 Certain assets to be disregarded in calculating the value of a person’s assets

(1)In calculating the value of a person’s assets for the purposes of this Act (other than sections 198F to 198MA (inclusive), Division 1B of Part 3.10, Division 2 and sections 1133 and 1135A), disregard the following:

(a)if the person is not a member of a couple—the value of any right or interest of the person in the person’s principal home that is a right or interest that gives the person reasonable security of tenure in the home;

…

1121    Effect of charge or encumbrance on value of assets

(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 (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.

…

1122Loans

If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.

…

1129Access to financial hardship rules—pensions

(1)      If:

(a)      either:

(i)a social security pension is not payable to a person because of the application of an assets test; or

(ii)a person’s social security pension rate is determined by the application of an assets test; and

(b)      either:

(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii)the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(c)the person, or the person’s partner, has an unrealisable asset; and

(d)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

…

1130    Application of financial hardship rules—pensions

Value of unrealisable asset to be disregarded

(1)      If section 1129 applies to a person, the value of:

(a)      any unrealisable asset of the person; and

(b)      any unrealisable asset of the person’s partner;

is to be disregarded in working out the person’s social security pension rate.

…

1131    Access to financial hardship rules—benefits

(1)      If:

(a)a social security benefit is not payable to a person because of the application of an assets test; and

(b)the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(c)the person’s partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(d)      either:

(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii)the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(e)the person, or the person’s partner, has an unrealisable asset; and

(f)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(g)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

…

(2)A reference in subsection (1) to acceptable alternative Commonwealth income support in relation to a person is a reference to payments (other than payments under the Farm Household Support Act 1992):

(a)that are made available by the Commonwealth by way of income support; and

(b)the rate of which is not less than the rate of newstart allowance, youth allowance or austudy payment that would be applicable to the person if that allowance were payable to the person.

…

1132Application of financial hardship rules—benefits

Value of unrealisable asset to be disregarded

(1)If section 1131 applies to a person, the value of:

(a)any unrealisable asset of the person; and

(b)any unrealisable asset of the person’s partner;

is to be disregarded in working out whether a social security benefit is payable to the person.

…”

background and evidence

7.      The factual background to this case is not in dispute and can be taken, in part, from the reasons for the decisions of the SSAT.  Having granted a mortgage over his farm to the Commonwealth Bank for $400,000, Mr Cash lent at least $330,000 of the borrowed funds to Mr Rockemer.  None of the remainder of the funds were spent on Mr Cash’s farm.  Mr Cash had a lien over about 700 head of cattle as security for the loan to Mr Rockemer and he had received some interest instalments on the loan. 

8.      Mr Cash’s assets (apart from his farm) at the time of his claim for ECRP comprised:

Asset	$ Value
Loan to Mr & Mrs Rockemer	390,000
ANZ Cash Management	10,633
Bendigo Bank	29,151
ABB Shares	37,177
AWB Shares	17,452
Incitec Pivot Shares	2,739
House Contents	5,000
Toyota Landcruiser	1,000
Mitsubishi Rocky	2,000
Nissan Navara	10,000
Holden Calais	6,000
Total	511,152

9. Mr Cash said that an agreement had been entered into with Mr Rockemer in respect of the loan, but he had lost his copy of the agreement. The lien over the cattle had also been documented. Mr Cash did not know when Mr Rockemer’s farming property would be sold, but he was in regular communication with him and believed he was doing his best to sell the property to enable the loan to be repaid. Some of his cattle had been sold to pay for interest accruing on the loan. Mr Rockemer’s property was listed for sale at $5.5 million and was subject to a mortgage of $2 million. The loan was made by Mr Cash to enable Mr Rockemer to avoid a fire sale of his farming property. The original agreement was that the loan would be repaid in six months, but as Mr Rockemer had been unable to sell his farming property, repayment of the loan debt had not been possible and interest payments had been made to compensate Mr Cash for the interest he was liable to pay the Commonwealth Bank on the borrowed moneys. Because of his severe financial circumstances, Mr Cash had applied to the respondent to have his claim for ECRP accepted under the financial hardship provisions of the Act.

consideration

Whether the applicant is entitled to receive ECRP

10. The qualification requirements for ECRP are set out in s 8A(1) of the FHS Act. It is clear (and the respondent accepted) that Mr Cash satisfied each of the requirements of s 8A(1) at the date of his claim, being 2 May 2007. Section 9 of the FHS Act provides an overview of situations in which ECRP is not payable. Section 9(2)(a) provides that ECRP is not payable to a person during a period where no determination by the Secretary has effect that the value of the person’s assets does not exceed the person’s assets value limit. Section 10 then provides that ECRP is not payable to a person during a period unless a favourable determination in writing by the Secretary has effect that the value of the person’s assets does not exceed the person’s asset value limit during that period. The term “asset” in the FHS Act has the same meaning as in the Act (see s 3(1) of the FHS Act). The Act, in s 11(1), defines “asset” as “… property or money (including property or money outside Australia)”. Where the person making a claim is a farmer, the value of the person’s assets at a particular time is determined by working out the person’s assets at that time that are not exempt assets for the purposes of the FHS Act. The value of a person’s assets at a particular time is worked out by identifying the person’s assets that are not exempt assets (for the purposes of the FHS Act) and working out the value of those assets in accordance with Part 3.12 of the Act, which contains the general provisions relating to the assets test.

11. In Part 3.12 of the Act, s 1118 contains a list of assets that are disregarded in calculating the value of a person’s assets. The main disregarded asset is the residence, that is, the principle home of the person. Section 1121 provides that, 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 the Act, is to be reduced by the value of that charge or encumbrance. The Tribunal notes that, in Mr Cash’s case, Centrelink has disregarded his principle home (farm) and farming assets in determining his assets level. As these assets have been disregarded, any charge or encumbrance over the assets will also be disregarded.

12. Under s 1122 of the Act, where a person lends money, the value of the assets of the person for the purposes of the Act includes so much of the amount lent as remains unpaid, but does not include any amount payable by way of interest under the loan. In the Tribunal’s view, on the evidence, the amount loaned by Mr Cash to Mr Rockemer is a form of debt (see Chitty on Contracts, 28^th Edition at paragraph 38-224). The loan and the debt arising from it is property and an “asset” for the purposes of the Act and the FHS Act.

13. In determining whether a person’s assets are or are not exempt assets (under s 10(3) of the FHS Act), s 3(2) defines exempt assets, in the case of a farmer, to mean farming land, farm plant and machinery, farm livestock or other essential farm assets and life insurance. In the Tribunal’s view, subject to what follows, the debt owed to Mr Cash by Mr Rockemer is not an exempt asset under s 3(2) of the FHS Act. Mr Cash’s total assets value at the date of his claim for ECRP was $511,152 (see paragraph 8 above). The Tribunal notes that, in reviewing Mr Cash’s claim for ECRP (Exhibit R1, T21 at page 77), the Authorised Review Officer recorded that Mr Cash had used $70,000 of his loan funds for his farm and only $330,000 had been loaned to Mr Rockemer. Even if this was the case, Mr Cash’s total assets value would have been reduced to $441,152, which was still in excess of the allowable assets limit of $161,500 for a single home owner’s assets value limit as fixed for a Newstart Allowance claimant under the Act. In these circumstances, Mr Cash would still not be eligible for ECRP.

Whether the financial hardship provisions of the assets test can be applied to a claim for ECRP

14. Division 3 of Part 3.12 of the Act deals with financial hardship and provides access to the financial hardship rules where a social security pension or benefit is not payable because of the application of the assets test. Sections 1129 and 1130 apply to pensions and allowances and ss 1131 and 1132 apply to benefits. In the case of pensions and allowances, the financial hardship rules apply where a person either is not being paid an amount because of the assets test or is paid at a reduced rate because of the test, the person or his or her partner has an “unrealisable asset” (which is an asset that cannot be, or cannot reasonably be expected to be, sold, realised or used as security for a loan) and the Secretary is satisfied that the person would suffer severe financial hardship if the hardship provisions were not applied. Similar hardship rules apply in the case of social security benefits. In addition, the person and the person’s partner must not be receiving and not be eligible to apply for acceptable alternative Commonwealth income support (s 1131(1)(b) and (c)).

15. Section 23(1) of the Act defines “social security benefit” and “social security pension”. The section contains an exhaustive list of the various pension and benefit types. ECRP is not included and is also not an “acceptable alternative Commonwealth income support” payment under s 1131(2) of the Act. ECRP is a payment under the FHS Act and is itself excluded under s 1131(2). Mr Cash has sought access to the financial hardship provisions because his claim for ECRP was not accepted. Because he has not claimed a social security pension or benefit which has been refused under the assets test, ss 1129-1132 cannot apply.

16.     For the above reasons, Mr Cash is not eligible for ECRP.  As ECRP is not a social security benefit or pension, the financial hardship provisions of the assets test cannot be applied to his claim for ECRP.

decision

17.     The Tribunal affirms the decisions under review.

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne

Signed:         .....................................................................................
  Associate

Date of Hearing  16 February 2009
Date of Decision  24 June 2009
Advocate for the Applicant       Self-represented

Advocate for the Respondent   Ms L Giaretto
  Centrelink Legal Services and Procurement Branch