Johnston and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2012] AATA 828
•22 November 2012
[2012] AATA 828
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/1256
Re
Elaine Johnston
APPLICANT
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Ms N Bell, Senior Member
Date 22 November 2012 Place Sydney The Tribunal affirms the decision under review.
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Ms N Bell, Senior Member
CATCHWORDS
SOCIAL SECURITY – age pension – asset test – calculation of value of applicant’s assets – whether sale of proceeds of property to be calculated – whether applicant’s assets exceeded assets limit – whether applicant disposed of asset – decision under review affirmed
LEGISLATION
Conveyancing Act 1919 (NSW) s 23C
Social Security Act 1991 (Cth) ss 1126AC, 1127
REASONS FOR DECISION
Ms N Bell, Senior Member
22 November 2012
Elaine Johnston claimed age pension in 2011. After her claim was rejected because Centrelink considered the value of her assets to be too high to allow payment of the pension, Ms Johnston appealed to the Social Security Appeals Tribunal who affirmed the decision to reject her claim. Ms Johnston now seeks review of that decision by this Tribunal.
The asset that gave rise to the decision to reject Ms Johnston’s claim was a house she had first owned with her first husband from whom she separated, and later divorced, in 1979. They remained joint owners of the property, although Ms Johnston no longer lived there. Ms Johnston’s first husband died in 2004 and the sole legal ownership of the property passed to her as the surviving joint tenant. The property was “given” to Ms Johnston’s two sons and she never returned to it. In 2008 the property was sold for $1.55 million, with Ms Johnston as the sole vendor. Ms Johnston says the proceeds of the sale went to her sons.
These sale proceeds were taken into account by Centrelink as assets of Ms Johnston, disposed of by her for no consideration.
Ms Johnston says she had not had the benefit of the property since she left the marriage and the property in 1979 and that it was always intended to be the property of her sons. She maintained she had no entitlement to or claim on the proceeds of sale.
The sole issue for my consideration is whether the proceeds of the sale of the property should have been included in the calculation of the value of Ms Johnston’s assets.
SHOULD THE PROCEEDS OF SALE BE INCLUDED IN THE VALUE OF MS JOHNSON’S ASSETS?
Ms Johnston said she signed the documents required for the sale of the property, but directed the proceeds of sale go to her two sons. She said she had always considered it to be her first husband’s home and that it would go to her sons when he died. She said she became aware that she was the legal owner of the property after her first husband died and that she investigated transferring ownership to her sons but decided not to do that because of the cost involved.
Ms Johnston said that after her first husband died and before the property was sold her sons treated the house as if it were their own, an arrangement she completely agreed with. She said they lived on it and used it for holidays and even rented it out at one point to one of their friends. She said her sons made some improvements, at their own expense, on the property in preparation for this rental; they kept the rental moneys; but they sent some small amount to her to “help her out” when her husband was ill and she had no access to funds.
Ms Johnston said that after her last husband locked her out of their house in 2010, she has had to depend on her sons for support. She mentioned their having found a house for her.
Section 1126AC of the Social Security Act provides that an asset that has been disposed of by a person for no consideration must be taken into account (except for $10,000) in calculating the assets of the person for five years after the date of the disposal. In particular, in the case of a person who, when she disposed of the asset, was a member of a couple and then ceases to be a member of a couple, the whole of the value of the asset (minus $10,000) is to be taken into account. I note that in 2008 Ms Johnston was a member of a couple, but advised Centrelink in 2009 that she was no longer a member of a couple.
Assets of this order render age pension not payable to Ms Johnston.
I note the suggestion, in a letter dated 24 May 2011 from Ms Johnston’s solicitor, that the property was held in trust by Ms Johnston for her sons. There was clearly no express trust because such a trust is precluded by section 23C(1)(b) of the Conveyancing Act1919 (NSW) which provides that a declaration of trust or a disposition of equitable interest in real property must be in writing signed by the person declaring the trust or disposing of the interest. There is no such document.
There was also a suggestion that there is a constructive trust in favour of Ms Johnston’s sons. There is evidence, from Ms Johnston and from an affidavit made by one of her sons, that there was a common intention between Ms Johnston and her sons that her sons would have the benefit of the property. There is also evidence of money having been spent by her elder son in maintenance and repairs on the property, getting the property ready for sale, and in payment of Land Tax and Capital Gains Tax. A note on the Centrelink file records this sum as a total of $121, 500. There is no information as to the total amount of the rental income received by Ms Johnston’s sons when they rented the property or how much of that rental income was provided to Ms Johnston for her assistance.
It could be argued that there is a constructive trust, generously in view of the unspecified amount of rental income from the property, in the amount of the moneys expended by Ms Johnston’s elder son, that is, $121,500. However, this would have no impact on the availability of the pension for Ms Johnston because at $1,278, 500 this gifted asset would still set her assets above the threshold for age pension – $799,500 at the relevant time.
A further argument for consideration is whether the provisions of section 1127 of the Act allow the disposition to be disregarded within the five years following the disposition. Section 1127 provides:
This Division does not apply to a disposition of an asset that took
place:
(a) more than 5 years before the time when:
(i) the person who disposed of the asset; or
(ii) if that person was, at the time when that
disposition took place, a member of a couple – the person's partner;
became qualified for a social security pension or
a family allowance supplement; or
(b) less than 5 years before the time referred to in paragraph (a) and
before the time when the Secretary is satisfied that the person who disposed
of the asset could reasonably have expected that the person or the person's
partner would become qualified for such a pension, benefit or allowance.
Ms Johnston became qualified for an age pension when she turned 60, well before she disposed of the asset. She maintained she had never applied for age pension because she “knew it was pointless”. It was difficult to ascertain why she considered it pointless. Her memory of events seemed not to be clear. When her attention was drawn to Centrelink records of claims made by Ms Johnston in 1998 and 2002, she said she was “confounded” by this because she had simply never claimed. She recalled dealings with Centrelink and reporting her earnings as a teacher in relation to drought relief payments, but she was adamant she had never claimed age pension. She ventured that her then husband may have claimed on her behalf. However, the records show a pension status history that indicates claims made in 1998 and 2002 were rejected because “assets over limit”. The claims made indicate an expectation of qualification for age pension. Section 1127 does not assist Ms Johnston.
It follows that, because of her disposed assets, age pension was not payable to Ms Johnston when she claimed the pension in 2011.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 17 (seventeen) paragraphs are a true copy of the reasons for the decision herein of ....[Sgd]....................................................................
Associate
Dated 22 November 2012
Date of hearing 4 October 2012 Applicant In person Solicitors for the Respondent Ms J Maclean, Centrelink Program Litigation Review Branch
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