Lababidi and Secretary, Department of Employment and Workplace Relations

[2005] AATA 991

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 991

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2005/395

Nº V2005/396

GENERAL  ADMINISTRATIVE  DIVISION

Re: MOHAMMED MOLISEN LABABIDI AND LINA LABABIDI

Applicants

And: SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal:       Mr E. Fice, Member

Date:             7 October 2005

Place:            Melbourne

Decision:The Tribunal affirms the decisions under review.

(sgd) Egon Fice

Member

SOCIAL SECURITY – newstart allowance – parenting payment (partnered) – rent assistance – cancellation – member of a couple ‑ assets and income threshold – director and sole shareholder ‑ controlled private company – whether attributable stakeholder

Social Security Act s11(4), 212, 1070C, 1207N, 1207Q, 1207X

Social Security (Administration) Act 1999 s 179

Re Secretary, Department of Social Security and Williams and Another (1998) 52 ALD 418

REASONS FOR DECISION

7 October 2005  Mr E. Fice, Member

1.               There are two applications before the Tribunal, one brought by Dr Mohammed Lababidi and the other by his wife, Mrs Lina Lababidi.  Dr Lababidi received newstart allowance between 2002 and 2004, following which a Centrelink officer cancelled Dr Lababidi’s newstart allowance.  Mrs Lababidi received parenting payments (partnered) (“parenting payment”) between 2000 and 2004, but those payments were then cancelled.  She was also paid rent assistance as part of her family tax benefits up to 21 January 2002 when, following an assessment of the ownership of Dr Lababidi’s principal residence, an officer of Centrelink decided to stop payment of rent assistance.

2.               Mrs Lababidi sought an internal review of the decision to stop payment of rent assistance.  An authorised review officer affirmed the initial decision on 13 June 2002.  Dr Lababidi wrote to Centrelink in October 2004 requesting payment of rent assistance retrospectively commencing July 2001.  After reviewing the matter, the authorised review officer refused Dr Lababidi’s claim for payment of arrears of rent assistance.

3. Dr and Mrs Lababidi applied to the Social Security Appeals Tribunal (“SSAT”) for a review of all four decisions made by Centrelink officers. On 15 April 2005 the SSAT affirmed all of the decisions under review. Dr and Mrs Lababidi now seek review of the SSAT’s decisions pursuant to s 179 of the Social Security (Administration) Act 1999.

4.               Dr Lababidi appeared on his own behalf and on behalf of his wife.  Ms K. Paul, a Centrelink advocate, appeared on behalf of the Secretary to the Department of Employment and Workplace Relations (“the Secretary”). 

PARTIES’ CONTENTIONS

5.               The Secretary contends that Dr Lababidi, who is a director of a private company, Lababidi Pty Ltd (“the Company”), was the sole director and shareholder of the Company at the time when the reviewable decisions were made.  For that reason, the Secretary contends that Dr Lababidi is an attributable stakeholder of the Company under s 1207X(1) of the Social Security Act 1991 (“the Act”). Furthermore, because Dr Lababidi was at that time the sole shareholder of the Company, his asset attribution percentage in relation to the Company must be 100 per cent. The Secretary therefore contends that assets held by the Company must be regarded as Dr Lababidi’s assets when assessing his entitlement to Centrelink payments. The Secretary also contends that the assets owned by the Company must be included when calculating Mrs Lababidi’s entitlement to Centrelink payments, in accordance with the parenting payment rate calculator at s 1068B of the Act.

6.               As for as the decision not to pay rent assistance to either Dr or Mrs Lababidi, the Secretary contends that Dr and Mrs Lababidi satisfy s 11(4) of the Act and are therefore homeowners for the purposes of the Act.

7.               At the hearing of this matter Dr Lababidi handed up a document setting out some of his submissions.  In essence, they are as follows:

(a)the Company has had four shareholders  since it was incorporated;

(b)Dr Lababidi has only a 51 per cent interest in the Company;

(c)the Company owns the property situated at 39 Gaffney Street, Coburg (“the Gaffney Street Property”) but it is mortgaged to the extent of $349,450;

(d)the Company has an investment account with the ANZ bank which has a balance of $200,000;

(e)Dr Lababidi has an ANZ bank account in the sum of $5,034 and an Arab Bank account which holds a balance of $183;

(f)Dr Lababidi and his wife have five children and he has significant living expenses; and

(g)Dr Lababidi is presently unable to work because of chronic back pain.

CONSIDERATIONS

8.               Although Dr Lababidi claimed that the Company has four shareholders, that was certainly not the case when Dr Lababidi provided to Centrelink details about the company on 22 January 2002.  Under paragraph 12 of a questionnaire completed by Dr Lababidi, where the details of all shareholders and their shareholding are requested, the only shareholder listed is Dr Lababidi.  It is stated that he holds two shares in the Company.  No other shareholders are named.  Furthermore, among the liabilities of the Company, Dr Lababidi has listed an amount of $124,000 which is described as a “director’s loan.”

9.               Dr Lababidi disclosed that the company owned property the Gaffney Street Property with an estimated market value of $330,000.  It was mortgaged to secure an investment loan in the sum of $230,000.

10.              A company extract obtained from the Australian Securities and Investments Commission (“ASIC”) on 18 August 2004 indicates that Dr Lababidi is the sole director and Secretary of the Company.  A more recent company extract obtained on 30 September 2005 discloses that there has been no change to that position.

11.              Australian Taxation Office records dated 28 September 2004 reveal that the Company sold a property at 17 Norris Drive, Lilydale for $400,000, settlement taking place on 20 September 2004.  There was no mortgage on this property.  The Company had also sold a property at 861 Sydney Road, Brunswick and received $425,000.  The net proceeds of that sale amounted to $238,581.

12.              An extract obtained from ASIC on 30 September 2005 discloses that only two shares are currently issued by the Company and they are both held by Dr Lababidi.  It also appears that one share had previously been issued to each of Lina Zeino Lababidi, Emad Al Din Lababidi and Philip Zaiden.  Lina Lababidi and Philip Zaiden ceased to be shareholders in about 1990 and Emad Lababidi ceased to be a shareholder in 1997.

13.              At the hearing Dr Lababidi said that Dr Mustafa Kamal Lababidi, Dr Mahmaud Sabri Lababidi and Dr Faten Lababidi were to be listed as shareholders in respect of 49 per cent of the shares in the Company.  He also said that these persons had always been shareholders of the Company although they had not been listed as such with ASIC.  That cannot be correct.  ASIC records disclose that other persons were previously shareholders in the Company and that currently the only shareholder is Dr Lababidi.  Dr Lababidi admitted that he is the sole director of the Company. 

Rent Assistance Claim

14.              Mrs Lababidi was paid an amount additional to her parenting payment by way of rent assistance until it was cancelled on 13 June 2002.  Rent assistance is only payable if a person is not an ineligible homeowner and the person pays or is liable to pay rent in respect of a period for premises in Australia and that person’s fortnightly rent is more than the rent threshold amount (s 1070C of the Act). A homeowner for the purposes of the Act, is defined as:

11(4)…

(b)      a person who is a member of a couple is a homeowner if:

(i)the person, or the person's partner, has a right or interest in one residence that is:

(A)the person's principal home; or

(B)the partner's principal home; or

(C)the principal home of both of them; and

(ii)the person's right or interest, or the partner's right or interest, in the home gives the person, or the person's partner, reasonable security of tenure in the home…

15.              The meaning of ineligible homeowner is not relevant to this matter, although it is plain that neither Dr Lababidi nor Mrs Lababidi fall within that definition.  There also seems to be no dispute between the parties that the Gaffney Street Property is the principal home of both Dr and Mrs Lababidi.  The only question which arises is whether Dr and Mrs Lababidi have a right or interest in the principal home as a consequence of the Company being the owner of that property and Dr Lababidi being the sole director and shareholder in the Company at the relevant time. 

16.              In Re Secretary, Department of Social Security and Williams and Another (1998) 52 ALD 418, Senior Member Hallowes refused a claim for rent assistance in similar circumstances. The Tribunal held that it was unlikely that Mr and Mrs Williams, who were the majority shareholders in a company, would not take into account their own circumstances when making decisions in relation to the company. In other words, it was reasonable to expect that as the controllers and major interest holders in the company, Mr and Mrs Williams were unlikely to terminate the company’s leasing arrangements with themselves and therefore it could be said that they had reasonable security of tenure in their home. The Tribunal found that the respondents, as homeowners within the meaning of s 11(4)(b) of the Act, were not eligible for rent assistance.

17.              The same reasoning can be applied to Dr and Mrs Lababidi.  Mrs Lababidi leases the Gaffney Street Property from the Company and Dr Lababidi is its sole director and shareholder.  There is no question that Dr Lababidi’s right or interest in the home gives Mrs Lababidi reasonable security of tenure in the home.  I am therefore of the view that Mrs Lababidi, who is a member of a couple, is a homeowner for the purposes of the Act. She is therefore not entitled to rent assistance.

18.              As to the decision made on 12 June 2002 not to pay arrears of rent assistance to Dr Lababidi from July 2001, the same considerations apply as for Mrs Lababidi.  Therefore, he is also not entitled to rent assistance.

Newstart Allowance and Parenting Payment

19.              The newstart allowance, introduced in 1991, is provided to unemployed people aged over 21 years or people who are temporarily incapacitated.  A person is qualified for parenting payment if the person has at least one child which fits the definition of parenting payment child and the person satisfies certain residency requirements. Neither the newstart allowance nor the parenting payment are payable to a person if the value of his or her assets exceeds the applicable value asset limit. At the relevant time that limit was $108,750. Under s 212 of the Act, where a person is a member of a couple and the person’s partner is not in receipt of a service pension or income support supplement and is not in receipt of a social security benefit, the value of the person’s assets includes the value of the partner’s assets.

20. Part 3.18 of the Act was introduced in 2000 and commenced operation on 1 January 2002. Its purpose was to set up a system of attributing to individuals the assets and income of private companies and private trusts. Three criteria are required to be met in order for an asset or income to be attributed to an individual:

(a)the company must be a designated private company or the trust must be a designated private trust;

(b)the company must be a controlled private company in relation to the individual or the trust must be a controlled private trust in relation to the individual; and

(c)the individual must be an attributable stakeholder in the company or the trust.

21.              A company or a trust will be a controlled private company or a controlled private trust if the person concerned passes a control test or a source test. There is little doubt that the Company falls within the definition of a designated private company as is set out in s 1207N of the Act. The profit and loss statement for the financial year ended 30 June 2004 disclosed that its consolidated gross operating revenue was less than $10 million and the value of the consolidated gross assets at the end of the financial year was less than $5 million.

22.              A company is a controlled private company in respect of an individual if it is a designated private company and:

(a)the individual passes the control test set out in s 1207Q(2) of the Act; or

(b)the individual passes the source test set out in s 1207Q(3) of the Act.

An individual passes the control test if the aggregate of direct voting interest in the company of that individual and the direct voting interest in the company held by associates of the individual is 50 per cent or more.  As the sole shareholder in the Company, Dr Lababidi passes the control test.  This would be the case even if, as Dr Lababidi claimed, there were four other shareholders of the Company holding 49 per cent of its shares.  There is therefore no need to apply the source test.

23.              If a company is a controlled private company in relation to an individual, then the individual is regarded as an attributable stakeholder of the company unless the Secretary otherwise determines. That is not the case as far as Dr Lababidi is concerned and he must be considered to be an attributable stakeholder for the purposes of the Act. Therefore, Dr Lababidi’s individual income attribution percentage in relation to the Company will be 100 per cent unless the Secretary determines that a lower percentage is appropriate. The Secretary has not done so and therefore his asset attribution percentage must be 100 per cent. As I have already found above, Dr Lababidi falls within the definition of homeowner for the purposes of the Act. As at 22 September 2004, the Company had assets of at least $422,000 as disclosed in its financial records. Under the Act, 100 per cent of this asset is attributed to Dr Lababidi. As Mrs Lababidi’s assets include her husband’s assets for the purposes of the Act, and their assets exceed the assets limit for homeowners, which is $217,500 combined, they did not qualify for newstart allowance and parenting payment as at 22 September 2005.

CONCLUSION

24.              At the hearing of this matter, Dr Lababidi said that the financial statements which were prepared by his accountant were false.  He said that he would have his accountant prepare fresh financial statements which would disclose the true position of the Company.  This is despite the fact that those financial statements had been used in the preparation of company and personal tax returns.  Be that as it may, on the evidence that was before the Tribunal at the hearing of this matter, the financial position of the Company at the time of cancellation must be as is stated in the financial documents prepared by Dr Lababidi’s accountant.

25.              I have taken into account the hardship Dr Lababidi claims he will suffer if the decision of the SSAT were to stand.  However, even at the date of the hearing of this matter, Dr Lababidi had substantial assets which could be called on if necessary to support his family.  Of course should his asset situation change in the future so that he becomes eligible for social security payments, there is no reason why he could not immediately make a further application for such support.

26.              In the circumstances, all of the decisions made by the SSAT should be affirmed.

I certify that the twenty‑six [26] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr E. Fice, Member

(sgd)     Olympia Sarrinikolaou

Clerk

Date of Hearing:  23 September 2005

Date of Decision:  7 October 2005
Advocate for the applicants:      Self‑represented

Advocate for the respondent:     Ms K. Paul, Legal Services Branch, Centrelink