Lawrence Pye and Secretary, Department of Social Services
[2013] AATA 801
•13 November 2013
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2012/3522
General Administrative Division )
Re: Lawrence Pye
Applicant
And: Secretary, Department of Social Services
Respondent
DIRECTION
TRIBUNAL: Mr S. Webb, Member
DATE: 21 February 2014
PLACE: Canberra
The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:
- at paragraph [61], in column 2 of the table replace the total value of $301,725 with $311,725; and
- at paragraph [61], in column 5 of the table replace the total value of $377,604 with $373,604.
........................................[sgd]...........................
Mr S. Webb, Member
[2013] AATA 801
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2012/3522
Re
Lawrence Pye
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
Decision
Tribunal Mr S. Webb, Member
Date 13 November 2013 Place Canberra The decision under review is varied to the extent that the amount of Mr Pye’s overpayment debt is the amount calculated in accordance with these reasons.
The application is remitted to the Secretary to undertake that calculation.
......................[sgd]..................................................
Mr S. Webb, Member
SOCIAL SECURITY – disability support pension – assets test – divorce – inheritance - ownership of assets prior to formalisation of agreed transfer – undeclared assets – valuation – unrealised value - actual or agreed value – asset value limit exceeded – overpayment – debt – no administrative error – health and financial difficulties – no special circumstances – debt cannot be written off or waived – decision varied
Social Security Act 1991 (Cth) ss. 9, 11, 1064, 1237A, 1237AAD
Secretary, Department of Families and Community Services v Draper [2003] FCA 1409.
REASONS FOR DECISION
Mr S. Webb, Member
13 November 2013
Lawrence Pye has spent his life working on farms. He and members of his immediate and extended family live in a small rural community. Mr Pye experienced difficulties in his family and in his health. His marriage broke down. He claimed and was granted disability support pension. There was a protracted property settlement. Centrelink stopped payment of Mr Pye’s pension on the basis of undeclared income and a debt was raised against him. Mr Pye sought review by an Authorised Review Officer and the Social Security Appeals Tribunal. Mr Pye is unhappy with the result and applied for review.
The issues to be decided with respect to the period from 8 June 2002 to 29 June 2009 are:
(a)what is the value of Mr Pye’s assessable assets;
(b)does this amount exceed the applicable threshold under s 1064 of the Social Security Act 1991 (Cth) (the Act); and if so
(c)is he liable for an overpayment debt; and if so
(d)are there grounds to write off or waive the debt?
During the hearing, I gave Mr Pye opportunity to produce additional materials. He filed documents relating to the settlement of property with his ex-wife – Exhibit 9. The Secretary provided further written submissions.
Before addressing the issues, it is desirable to set out the facts. The matter has a long history that is complicated by poor evidence and protracted divorce proceedings.
The facts
On 6 November 2001, Mr Pye’s then wife filed an application for divorce in the Family Court of Australia, listing the couple’s properties and assets[1].
[1] Exhibit 9, filed 27 September 2013
On 6 May 2002, the divorce was issued[2], but disputation about the settlement of property persisted.
[2] T32 folio 249.
In May 2002, Mr Pye suffered from heart problems that caused him to be hospitalised. Thereafter, at all relevant times, he suffered from heart and other health problems that affected his ability to work. These are presently ongoing.
On 8 June 2002, he contacted Centrelink about claiming sickness allowance.
On 7 August 2002, he completed a claim form, reporting his assets[3] and including information about his farming partnership with his former wife[4] - a Partnership Tax return for 2000-2001[5] is attached.
[3] T7 folios 42-53 and T11 folios 89-100.
[4] T8.
[5] T9.
Mr Pye’s claim was treated as a claim for disability support pension, which was granted on 17 September 2002. On 18 September 2002, he was sent a letter, notifying him of his reporting obligations. The letter stated that his assets were $185,056 and his annual income was $6,993.04[6]. Subsequently, Mr Pye was sent numerous notices setting out his recorded income and assets, and his reporting obligations[7].
[6] T15 folio 173.
[7] See T17, T18, T19, T34, T36, T40, T41, T43, T44, T46, T48, T49, T50, T51, T54, T57 and T59 for example.
On 11 June 2003, the divorce proceedings were transferred to the Federal Magistrates Court and, on 23 September 2003, the parties were ordered to attend a conciliation conference[8]. This suggests that settlement between Mr Pye and his former wife had not been reached at this time. On 28 January 2005, Faulks DCJ issued orders in the Family Court[9], settling property between Mr Pye and his former wife.
[8] Exhibit 9.
[9] Exhibit 9.
On 13 December 2005, Mr Pye lodged his 2003-2004 Individual Tax Return[10] and his Partnership Tax return[11], both showing losses, with an Income and Assets Update form and Claim for consideration under hardship form[12].
[10] T24.
[11] T25.
[12] T23 and T26.
On 21 December 2005, Centrelink obtained valuations from the Australian Valuation Office (AVO) in respect of the properties ‘Mayfield’ - $270,000, ‘Gum Flat’ - $250,000 and ‘Butts’ - $270,000[13].
[13] T29.
On 22 December 2005, Centrelink wrote to Mr Pye, informing him that his disability support pension had been cut off because the value of his assets was above the allowable limit[14]. The letter recorded the value of his assets was $433,865 and that his annual income was $484.05.
[14] T30 folio 237.
On 4 January 2006, Mr Pye lodged a claim for a health care card[15].
[15] T31.
On 13 January 2006, Centrelink obtained further valuation reports from the AVO in respect of the properties ‘Mayfield’ - $180,000, ‘Butts’ - $150,000 and ‘Gum Flat’ - $160,000[16].
[16] T33 folios 261-263.
On 16 January 2006, Centrelink notified Mr Pye that his disability support pension would resume from 22 December 2005[17].
[17] T34 folio 264.
On 19 January 2006, the property ‘Mayfield’ was listed for sale at $198,000[18].
[18] T35, folio 266.
On 31 January 2006, Centrelink rejected Mr Pye’s claim for payment under the asset hardship provisions of the Act[19].
[19] T37.
On 3 May 2006, Centrelink obtained a detailed valuation report from the AVO in respect of the property ‘Gum Flat’. This reported a value of $150,000 as of 21 December 2005[20].
[20] T39 folio 276.
On 9 March 2009, a data matching exercise was conducted, in consequence of which Centrelink sought further information from MLC Limited about Mr Pye’s income and assets. MLC notified Centrelink that Mr Pye retained an Allocated Pension Policy from 1 July 2006, with the following balances: at 1 July 2006 - $74,387.59; at 1 July 2007 - $76,257.30; and at 1 July 2008 - $59,092.39[21].
[21] T60 folio 401.
On 18 May 2009, an overpayment debt was raised against Mr Pye in the amount of $11,514.33 as his MLC allocated pension income had not been taken into account when calculating the rate of his disability support pension, and on 20 May 2009 a letter notifying him of this was sent[22].
[22] T64 folio 411.
On 21 May 2009, title searches returned 12 titles in which Mr Pye had an ownership interest[23]. I note that these titles represent six properties – ‘Mayfield’, ‘Gum Flat’ and ‘Butts Paddock’ are parcels of rural farming land comprising multiple titles.
[23] T65 folios414–427.
On 21 May 2009, 13 August 2009 and 27 August 2009, Centrelink obtained AVO valuations for the properties[24].
[24] T70, T71, T109 and T118.
On 27 July 2009, an Authorised Review Officer increased the amount of Mr Pye’s overpayment debt to $65,606.92 on the basis of the value of his assets, finding that Mr Pye was not entitled to payment of disability support pension from 1 July 2002 and that the debt period ran from 24 September 2002 to 29 June 2009[25].
[25] T94 folio 649.
On 6 August 2009, Mr Pye provided Council rate notices setting out property values for rating purposes[26], and property values listed by Tony Cooke of Elders Real Estate in Yass: ‘Mayfield’ - $180,000, ‘Gum Flat’ - $120,000’ and ‘Butts Paddock’ - $120,000[27].
[26] T104.
[27] T103 folio 698.
On 31 August 2009, Mr Pye was granted disability support pension from 30 June 2009 under the disregarded asset hardship provisions[28].
[28] T47 folios 333-334.
On 15 December 2009, a decision was made to reduce the amount of Mr Pye’s debt to $42,713.97 on the basis that the earlier calculation included his home, which is exempt from the asset test[29].
[29] T47, folios 328-329
On 9 February 2010, Centrelink determined that Mr Pye was not entitled to further payment of disability support pension under the hardship provisions, because his properties were not on the market for an amount within 10 percent of the AVO valuations. ‘Mayfield’ was on the market for $295,000, whereas the AVO valuation was $180,000; ‘Gum Flat’ was on the market for $144,000, whereas the AVO valuation was $130,000; and ‘Butts Paddock’ was on the market for $154,000, whereas the AVO valuation was $130,000[30].
[30] T47 folio 327.
On 12 December 2011, the Social Security Appeals Tribunal set aside the earlier decision and directed that Mr Pye’s debt be recalculated on the basis of the values it determined[31]. This was done and the revised debt amount was determined to be $25,785.27[32]
[31] T2 folio 14.
[32] T127 and T128.
On 12 January 2012, Mr Pye applied for review of this decision.
On 30 April 2012, ‘Mayfield’ was sold for $195,000, returning $182,366.77 after costs and deductions[33]. Distribution of the sale proceeds was subsequently made[34]. Presently, ‘Gum Flat’ and ‘Butts Paddock’ are on the market, but have not been sold.
[33] Exhibit 1, document (f).
[34] Exhibit 5.
What is the value of Mr Pye’s assets?
The value of Mr Pye’s assets, excluding his home but including assets in which he has a partial interest or equity, must be considered over time. This task is rendered difficult by the nature and quality of the present evidence. On the one hand, there are estimates of property values prepared by the AVO from time to time. On the other hand, Mr Pye has made various estimates based on local knowledge, Council rating values and the advice of real estate agents. There are serious questions about the reliability of many of these valuations. Valuations that are not based on a thorough assessment process, including inspection of the subject property and consideration of the particular characteristics, are unlikely to be accurate or reliable.
In addition, there are other elements that compound the difficulty. Firstly, ‘Mayfield’, ‘Gum Flat’ and ‘Butts Paddock’, each comprise multiple portions or lots. As can be seen from the AVO valuations, if each lot is valued separately, a different (greater) result is obtained than valuing each parcel. To my mind, valuing each separate lot produces an artificial result, in excess of the true value of each parcel of land. It is common for rural farming properties to comprise multiple allotments and for these to be marketed and sold as one. I am satisfied that it is appropriate to adopt this approach when valuing ‘Mayfield’, ‘Gum Flat’ and ‘Butts Paddock’ – each is to be valued as one, even though it is comprised of multiple lots.
Secondly, the marketability and value of rural property, including farming lands and property in rural towns or villages, may be significantly affected by climatic and economic factors. In this regard, Mr Pye pointed to the prolonged drought that affected Dalton (and extensive areas of New South Wales) over several years. I accept that, in all likelihood, this adversely affected the marketability and value of properties in the Dalton area, including those presently under consideration.
Nonetheless, the determination of value must proceed on the basis of evidence.
I am satisfied that during the period from 8 June 2002 to 29 June 2009 Mr Pye’s interests in real property holdings are –
(a)‘Mayfield’, comprising lot 2 in DP873526 and lots 28, 29, 106 and 107 in DP 754142 – 50 percent;
(b)‘Gumflat’, comprising lots 92 and 255 in DP754106 – 50 percent;
(c)‘Butts Paddock’, comprising lots 175, 238, 275 and 301 in DP754111 – 50 percent;
(d)79 Gunning Street Dalton, comprising lot B in DP327933 – 100 percent, being his home;
(e)80 Gunning Street Dalton, comprising lot 355 in DP754111 – 33.3 percent until 28 January 2005 and 66.6 percent thereafter;
(f)47 Chapel Street Dalton, comprising lot C in DP343613 – 100 percent to 28 January 2005 and 0 percent thereafter.
Weighing the evidence, I am satisfied that the AVO valuations for ‘Mayfield’, ‘Gum Flat’ and ‘Butts Paddock’ that are set out in T118, can be accepted for present purposes. These were based on roadside inspections and they are to be preferred over valuations where no inspection was undertaken and over the estimates included in Exhibit 5 as part of the settlement of property between Mr Pye and his former wife – the basis of which is not clear.
Mr Pye cavilled with the AVO valuations on the basis that they are excessive as there was a severe drought for most of the years in issue and this dramatically affected and reduced the value of each of the properties. Mr Pye’s submission that the reduction of value in drought-affected properties was a matter of local wisdom and common knowledge is not supported by evidence. As a matter of common-sense it may be accepted that rural property values are adversely affected by drought, but, presently, I must weigh this against the valuation evidence as documented by real estate agents and the AVO.
In its valuation of these properties on 21 May 2009, the AVO reported values of $150,000 for 80 Gunning Street and $100,000 for 47 Chapel Street. The AVO valuer appears to have valued each of these properties as farms[35]. But they are not farms. Each is a town block in the village of Dalton. 80 Gunning Street comprises a block of 1032m2 with a single residential dwelling[36], whereas 47 Chapel Street comprises a block of 11,126m2 with no dwelling. I am satisfied that the AVO valuations of 80 Gunning Street and 47 Chapel Street are not reliable, and I do not accept them.
[35] T118 folio 792
[36] T70 folio 465.
Mr Pye gave evidence that 80 Gunning Street was purchased in 1997 for $25,000. On 6 November 2001, his former wife claimed in respect of divorce proceedings that the value of this property was $55,000 and that the value of 47 Chapel Street was $20,000. The basis for these values is not clear. On 28 January 2005, for the purposes of settling property between Mr Pye and his former wife, Faulks DCJ accepted a value of $90,000 for 80 Gunning Street and $60,000 for 47 Chapel Street[37]. To my mind, these are reasonable estimates of the value of each of these properties at that time, and I adopt them.
[37] T111 folio 751-752.
In its 21 May 2009 valuation of these properties, the AVO set out historical values from 2002, indicating a pattern of increasing value, year on year - $5,000 for each year, but for 2009 in which a $10,000 increase is reported for 80 Gunning Street. The basis for these levels of increasing value is not clear. Even though there are doubts about the reliability of the reported pattern of increasing values from 2002 to 2009, I accept that property values are likely to have increased to some extent, year on year, despite the effects of drought. Doing the best with the present evidence, I accept that the pattern of increasing value reported by the AVO on 21 May 2009 is reasonable to apply for present purposes.
Thus, adopting the resulting values, and applying the Family Court orders in respect of the property settlement between Mr Pye and his former wife, I am satisfied that the following values can be attributed to Mr Pye’s real property interests on 1 July in each year 2002 to 2009.
| Property | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
| ‘Mayfield’ | $57,500 | $67,500 | $90,000 | $90,000 | $90,000 | $90,000 | $90,000 | $90,000 |
| ‘Gum Flat’ | $35,000 | $30,000 | $35,000 | $40,000 | $25,000 | $40,000 | $40,000 | $40,000 |
| ‘Butts Paddock’ | $50,000 | $60,000 | $72,500 | $80,000 | $75,000 | $70,000 | $65,000 | $65,000 |
| 80 Gunning Street Dalton | $25,000 | $26,667 | $28,333 | $60,000 | $63,333 | $66,667 | $70,000 | $76,667 |
| 47 Chapel Street Dalton | $45,000 | $50,000 | $55,000 | |||||
| Value of Mr Pye’s total real property interests | $212,500 | $234,167 | $280,833 | $270,000 | $253,333 | $266,667 | $265,000 | $271,667 |
Mr Pye’s assets are not confined to real property, alone, but also include ‘financial assets’, as defined in s 9(1), in the form of available monies on deposit in several accounts, some jointly held with his former wife, and a small number of shares in publicly listed companies. Financial assets are a sub-set of ‘assets’ under s 11(1) for the purposes of the assets test[38].
[38] Secretary, Department of Families and Community Services v Draper [2003] FCA 1409.
As of 7 August 2002, Mr Pye’s financial assets included –
(a)an AXA Life Insurance policy with a (then) present market value of $10,000 and a surrender value of $3,000[39];
(b)600 Powertel shares, 400 Metcash shares and 600 IAG shares (I note that Mr Pye declared 1245 NRMA shares[40]) with a value of $3,260 estimated as of 9 October 2001 in the divorce proceedings[41];
(c)and the following bank accounts and balances[42] –
“[NAB] CHEQUE LJ & … PYE …1072 $5,444.21
[NAB] CHEQUE LJ & … PYE …8896 $8,648.53
[ANZ] TERM DEPOSIT LJ PYE …8666 $25,000”
[39] T7 folios 51 and 52.
[40] T7 folios 45 and 46, T111 folio 761.
[41] Exhibit 9
[42] T7 folio 44.
It is not clear when Mr Pye surrendered the AXA Life Insurance Policy he declared in his 2002 claim. On 3 January 2006, Centrelink recorded that the policy had no value and that Mr Pye had spent the money on living expenses[43]. For present purposes I will apply the surrender value of the policy and I will assume that Mr Pye liquidated the policy by 13 December 2005, as the Centrelink records suggest[44].
[43] T14 folio 167.
[44] T127 folios 876-877.
The value of the shares owned by Mr Pye is difficult to estimate with accuracy – this would have been affected by market variables. The value attributed for the purposes of settling property between Mr Pye and his former wife, as of 28 January 2005, is $6,208 – I will assume this estimate is correct as of 1 July 2004, with the value of Mr Pye’s interest as of 28 January 2005 being $3,104. I will assume this estimate of value as of 1 July 2005. On 13 December 2005, Mr Pye declared 1245 IAG shares in the Income and Assets Update form he lodged with Centrelink on 13 December 2005[45]. Mr Pye informed Centrelink on 3 January 2006 that the shareholdings had been disposed of and that the funds he obtained were expended on living costs[46]. I will proceed on this basis even though the Centrelink records suggest that Mr Pye retained ownership of IAG shares until 20 March 2007[47].
[45] T23 folio 190.
[46] T14 folio 166.
[47] T127 folio 878.
I am satisfied that the $25,000 Mr Pye held on deposit in an ANZ Term Deposit account in 2002 was his alone. I will assume, and the present evidence suggests, that Mr Pye retained 100 percent interest in these monies until 28 January 2005, when he was required to pay the sum of $30,000 to his former wife. I note that the Family Court judgement in property settlement between Mr Pye and his former wife refers to an amount of $30,000 held in Mr Pye’s name in an NAB account[48]. This reference is not presently explained by evidence, but I will proceed on that basis that the evidence before the Family Court was correct. As to the joint NAB accounts identified in Mr Pye’s claim, what happened to the monies held on deposit is not presently established. The Family Court judgement refers to a sum of $5,000 in a second NAB account. I will assume this is correct.
[48] T111 folio 752.
It is established that Mr Pye and his former wife jointly held a St George Bank Term Deposit account with a balance of $46,388.50 as of 4 September 2001[49]. Mr Pye gave evidence that he was a beneficiary of his mother’s estate following her death on 31 January 2000. Her estate was divided between several family members – Mr Pye and his six siblings. He maintains that $50,000 of the money he derived from his mother’s estate was placed into a St George Bank Term Deposit account, which was rolled over and subsequently transferred to an IMB investment account on 4 September 2001.
[49] T32 folio 260.
On 4 September 2001, the entire balance of the St George Bank Term Deposit account was transferred to an IMB account in Mr Pye’s name, alone. Mr Pye contested this, suggesting that the IMB account was jointly owned with his former wife. He produced no evidence to support this proposition, contrary to the bank records in evidence, which are preferred.
Mr Pye maintains that this money was reserved for his children, but any such intentions are not determinative of his equitable interest at the time. The money in the IMB account was held in Mr Pye’s name, alone, and the monies held on deposit in that account formed part of his assets.
It is notable that Mr Pye made no reference to this IMB account in the documents he lodged with Centrelink from the date of his initial claim for disability support pension until 4 January 2006, when he provided an IMB Statement dated 30 June 2003 for an investment account in his name, alone, opened on 4 September 2001 with an initial deposit of $46,388.50[50]. Mr Pye’s former wife made no reference to this account in financial documents she lodged in the Family Court on 24 April 2003[51].
[50] T32 folios 258-259.
[51] Exhibit 9.
On 5 June 2002, the balance of Mr Pye’s IMB investment account was $47,918.40 (account X…8745). On 4 December 2002, the balance of the account, $48,537.27, was transferred to IMB account X…4861, also held in Mr Pye’s name, alone[52]. On 30 June 2003, the balance of this account, which was due to mature on 5 August 2003, was $49,267.32[53].
[52] T32 folio 259.
[53] T32 folio 258.
I am unable to determine precisely what occurred to the monies held on deposit in Mr Pye’s IMB account thereafter. It appears that the monies were retained by Mr Pye until 28 January 2005, on which date the Family Court issued property settlement orders, requiring, among other things, that on or before 25 February 2005 Mr Pye pay his former wife “the sum of $25,000 being one half of the money disclosed by the Husband in his Financial Statement as money he held in the IMB”[54]. The present evidence does not establish that this was done, although it may have been.
[54] T111 folio 761.
On 6 April 2006, Mr Pye purchased an MLC MasterKey Allocated Pension for $81,019.01[55]. These monies were invested in the MLC Horizon 5 – Growth Portfolio and are described as “Money you can generally access at any time (Unrestricted non-preserved)”. I am unable on the present evidence to determine the source of this money, although, on My Pye’s imprecise evidence, it was drawn from his share of the proceeds of his mother’s estate. Mr Pye told me that he obtained $80,000 from the estate once two real properties were sold. He said that his mother’s house was destroyed in a fire. An insurance claim was made and settled, and two portions of land were subsequently sold. Whether this is correct, or Mr Pye applied funds from his earlier accounts with IMB, ANZ and NAB, I cannot determine.
[55] T58 folio 397.
The Secretary’s case proceeds on the basis that the “MLC income stream” is an assessable asset of Mr Pye’s. Mr Pye did not expressly contest this. In the materials before me there is but scant documentation of the MLC Allocated Pension Mr Pye purchased in April 2006.
Having regard to the documents in T58 and Exhibit 3, documents (d) to (f) inclusive, it appears that the Allocated Pension may be within the meaning of ‘income stream’ at s 9(1). Whether or not the Allocated Pension is a long term or short term asset-tested income stream under s 9(1) or an ‘asset-test exempt income stream’ under s 9A, 9B, 9BA or 9C, or a ‘partially asset-test exempt income stream’ under s 1118(1A), was not addressed in any detail by either party. If it is asset-test exempt, the value of the asset is excluded, whereas if it is not asset-test exempt, the value of the asset would be determined under s 1119(2) and (3) - as Mr Pye obtains an annual payment under the Allocated Pension, the value would be the annual balance of the MLC account at the commencement of each 12 month period. If the Allocated Pension is not within the meaning of ‘partially asset-test exempt income stream’ for the purposes of s 1118, the annual balance is assessable as an asset, in full. On the present materials, it is likely that the Allocated Pension is not exempt from the asset test and I will proceed on that basis.
The balance of Mr Pye’s MLC account is: on 6 April 2006 - $81,019.01; on 1 July 2006 - $74,387.59; on 1 July 2007 - $76,257.30; on 1 July 2008 - $59,092.39[56]; on 26 March 2009 - $38,011.02[57]; on 1 July 2009 - $39,391.45[58]; and on 1 July 2010 - $35,768.99[59].
[56] T60 folio 401.
[57] T58 folio 397.
[58] Exhibit 3, document (d).
[59] Ibid, document (f).
As regards motor vehicles, Mr Pye owned an interest in three motor vehicles during the period I must consider, including a Suzuki motor vehicle and a 1982 Daihatsu motor vehicle he owned for many years in partnership with his former wife, that were depreciating assets of their farming business[60]. This notwithstanding, Mr Pye declared 100 percent ownership of the Daihatsu motor vehicle in the claim he lodged with Centrelink on 7 August 2002, with a value of $3,000[61]. Mr Pye declared his ownership of a 1995 Ford motor vehicle on 13 December 2005, with a value of $6,000[62], although it is recorded with a value of $4,500 on 3 January 2006[63].
[60] T25 folio 221 and T10 folio 88.
[61] T7 folio 52.
[62] T23 folio 195.
[63] T14 folio 167.
As the precise value of these vehicles is not clear on the present evidence, I will assume that the declared values are correct and I will apply the reducing values set out in the Centrelink records at T127. I note in passing that those records include a Triton motor vehicle, but I have not been taken to any supporting evidence to establish Mr Pye’s ownership of such a vehicle. I will not include any value for such a vehicle.
Applying these values, and adopting the values for household contents set out at T127 folios 873 to 879[64], the following values are obtained as of 1 July in each relevant year.
[64] See T7 folio 51.
| Asset | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
| Real property | $212,500 | $234,167 | $280,833 | $270,000 | $253,333 | $266,667 | $265,000 | $271,667 |
| AXA Life policy | $3,000 | $3,000 | $3,000 | $3,000 | ||||
| Shares | $3,260 | $3,260 | $6,208 | $3,104 | $0 | $0 | $0 | $0 |
| Monies on deposit – ANZ and NAB | $32,047 | $35,000 | $35,000 | $35,000 | $0 | $0 | $0 | $0 |
| Monies on deposit - IMB | $47,918 | $49,267 | $50,000 | $50,000 | $0 | $0 | $0 | $0 |
| MLC Allocated Pension balance | $0 | $0 | $0 | $0 | $74,388 | $76,257 | $59,092 | $39,391 |
| Household contents | $10,000 | $10,000 | $10,000 | $10,000 | $3,000 | $2,000 | $2,000 | $1,500 |
| Motor vehicles | $3,000 | $2,500 | $2,500 | $2,500 | $4,500 | $1,500 | $1,500 | $500 |
| Total Value | $301,725 | $337,194 | $387,541 | $377,604 | $335,221 | $346,424 | $327,592 | $313,058 |
Clearly, the value of Mr Pye’s assets should be calculated on the basis of variations in his ownership interest in particular assets, consistent with the findings I have made, and not just as of 1 July each year.
In respect of 80 Gunning Street and 47 Chapel Street in Dalton, Mr Pye says that these properties were not his – 80 Gunning Street was purchased for his daughter, and 47 Chapel Street was allocated to his former wife when the divorce was finalised. These submissions are not made out. I accept that 80 Gunning Street was purchased for Mr Pye’s daughter and that he intends to bequeath this to her[65]. I also accept that Mr Pye and his former wife may have reached agreement in proceedings for divorce in 2002 that he would transfer his interest in 47 Chapel Street to her. The difficulty for Mr Pye is that these arrangements were not formally settled and given effect in 2002 - they were not formally resolved until 28 January 2005, by order of the Family Court.
[65] Exhibit 6.
I do not accept Mr Pye’s submission that assets he intends to pass on to family members should not be considered as his when applying the assets test. So long as Mr Pye retained ownership of his interest in each asset, subject only to exclusions under s 1118, the asset must be included when applying the test. Thus, his intention to transfer money or real property interests to his daughter, or a purported understanding between he and his former wife in respect of the allocation of property in the context of protracted divorce proceedings, does not void his ownership of those assets or properties prior to settlement. The present evidence does not establish that Mr Pye’s assets were encumbered at any time, such that the values should be reduced.
It is not presently established that any of Mr Pye’s property assets are within the meaning of an ‘unrealisable asset’ as defined by s 11(1), (12) and (13). The protracted divorce proceedings did not prevent Mr Pye from realising his interest in any contested asset, or from using such an asset as a security for borrowing, albeit that doing so may have required consent or that the distribution of the proceeds may have been contested. Furthermore, the present evidence does not establish that Mr Pye could not reasonably be expected to realise any asset, or to use the asset as security for borrowing. Difficulty selling rural farm lands during a drought may affect the assessable value, but in Mr Pye’s circumstances, it does not mean that he could not reasonably be expected to sell or realise his rural property interests, or to use these as security for borrowing.
I note that the property “Mayfield” was disregarded by Centrelink when applying the hardship provisions of the assets test under Module G of the rate calculator on 31 January 2006[66] in response to Mr Pye’s claim for consideration under hardship on 13 December 2005. Mr Pye’s hardship claim was not successful.
[66] T38 folio 271.
Does the value of Mr Pye’s assets exceed the applicable threshold?
Two thresholds apply in respect of the assets test under s 1064: the ‘asset value limit’ – a threshold above which a partial pension may be payable on a reducing scale under s 1064-G4 to G7; and an ‘assets excess’ threshold, above which no pension is payable.
In July 2002, for a single person such as Mr Pye, the asset value limit was $141,000 and the assets excess threshold was $283,750, whereas in July 2009 the asset value limit was $178,000 and the assets excess threshold was $562,000.
As can be seen, the value of Mr Pye’s assets as of 1 July 2009 exceeds the asset value limit, but it does not exceed the assets excess threshold. This means that he may be entitled to payment of a part pension at that time. But the value of his assets as of 1 July 2002 exceeds the assets excess threshold, meaning that pension was not payable to him at that time.
Is Mr Pye liable for an overpayment debt?
It is quite clear that the rate of disability support pension Mr Pye was paid from 8 June 2002 to 29 June 2009 did not take into account the true value of each of his assets. As his assets exceed the asset value limit under Module G of the rate calculator set out in s 1064 and related sections, he was not entitled to the full rate of pension.
The present materials are not sufficient for me to determine the precise amount of disability support pension that may be payable to Mr Pye from time to time from 8 June 2002 to 29 June 2009 and, consequently, the precise amount he was paid over his entitlement. This will be remitted to the Secretary to assess.
Mr Pye says that he declared each of the assets that he owned, excluding assets that were intended for members of his family. He maintains that he informed Centrelink of the IMB account and the MLC accounts. This is not made out.
Mr Pye did not declare all of his interests in real property and other assets, including the balance of his IMB account, in the claim form he lodged with Centrelink on 7 August 2002 – he answered No to the questions ‘Do you have any other assets?’ and ‘Do you have any money invested in, or do you receive income from, any other investments not declared elsewhere in this form?’[67]. These answers were not correct.
[67] T7 folio 51.
Subsequently, Mr Pye was issued with numerous notices[68] under Division 6 of Part 3 of the Social Security (Administration) Act 1999 (the Administration Act), setting out the value of his reported assets and income, and informing him of his reporting obligations. I am satisfied that Mr Pye did not comply with his reporting obligations, fully disclosing all of his assets. Mr Pye acknowledged that he would have received most if not all of these notices, despite some of his correspondence being delivered to a relative with the same initials and the same street address.
[68] See, for example,T15 folios 173-4, T18 folios 178-9, T19 folios 180-1 and paragraph [10], above.
I am satisfied that Mr Pye did not disclose his IMB account to Centrelink until 4 January 2006 and he did not disclose his MLC account until this was identified in a data matching exercise in April 2009. Furthermore, Mr Pye did not fully disclose all of his interests in real properties until this information was obtained by Centrelink in 2009, on review.
In consequence of this, the true value of his assets was not properly taken into account when determining the rate of disability support pension that was payable to him from 8 June 2002. I am satisfied that Mr Pye was paid amounts of pension in excess of his true entitlement under s 1064.
The overpayment amount is a debt due to the Commonwealth for which Mr Pye is liable.
Are there grounds to write off or waive the debt?
Even though I am unable to determine the precise amount of Mr Pye’s overpayment debt, it is likely to be greater than that determined by the Secretary on remittal from the Social Security Appeals Tribunal - $25,785.27. This is because the asset values I have found are higher than those set out in paragraph 76 of the Secretary’s Statement of Facts Issues and Contentions. That being so, it is appropriate for me to proceed to determine whether recovery of any part of the debt can be written off or waived under Part 5.4 of the Act.
Mr Pye asserts that Centrelink made administrative errors, failing to record receipt of information he provided about his financial assets.
This assertion is not made out. Even if it was, it would not assist Mr Pye. I am satisfied that he failed to fully disclosed his real property assets, and he failed or omitted to comply with notices setting out his reporting obligations in respect of his assets and income. That being so, I find that Mr Pye’s debt is not solely attributable to Commonwealth error and, in all likelihood, Mr Pye did not receive the amounts he was paid in good faith – he knew that he had assets that he should disclose, but he did not disclose them, and he knew, or had good reason to know, that the information set out in notices he received was not correct, but he failed or omitted to correct this information.
It follows that the debt arising from overpayment of disability support pension from 8 June 2002 to 29 June 2009 cannot be waived under s 1237A.
I am satisfied that there are no grounds to write-off the debt under s 1236, as none of the preconditioning criteria are made out.
The Act makes provision in s 1237AAD for a debt to be waived, in whole or in part, if there are special circumstances that make it desirable to do so. The discretion to waive a debt under this section is only enlivened if the debtor did not knowingly make a false statement or fail or omit to comply with a provision of the Act or the Administration Act.
I am reasonably satisfied that Mr Pye knowingly did not fully disclose all of his assets, as required – he knew that the information he set out in the claim form he lodged on 7 August 2002 was not correct. And subsequently, despite being sent and, by his own admission, receiving numerous notices setting out the value of his assets and his reporting obligations, he failed or omitted to correct the record.
Furthermore, I am satisfied that Mr Pye’s circumstances are not ‘special circumstances’. Quite clearly, since 2002 Mr Pye has suffered from a number of ailments, including serious heart problems, which are established by medical evidence[69]. These ailments adversely affect his capacity to work and earn income. He told me that his heart problems and depression have affected his memory. That may be so, but Mr Pye’s poor health does not set his case apart from the usual run of cases - health complaints are common to claimants of disability support pension.
[69] See T7, T45 and Exhibit 1, for example.
Mr Pye has endured difficult familial circumstances, including the death of his mother in 2000, as well as separation and divorce from his former wife and the tragic death of his son in 2001. Those circumstances notwithstanding, he lives in close proximity to other members of his family and he is supported on a regular basis by his surviving children. While these are difficult circumstances, they are not special circumstances that make it desirable to waive his debt.
I accept that Mr Pye’s financial circumstances have been difficult and that he has struggled to make ends meet from time to time. I note that he lodged a claim under the hardship provisions of the assets test in December 2005, but the claim was not successful even though the property “Mayfield” was disregarded. It is unfortunately not unusual for people who rely on social security payments for their income to encounter financial difficulties from time to time. Unlike many others, however, Mr Pye owns several assets, including his own home and his MLC Allocated Pension. While some of Mr Pye’s assets have been and are subject to on-going Family Court orders, pending sale or realisation, and it may have proved difficult to find buyers at the price sought for these properties when listed for sale, Mr Pye’s ownership of such assets sets him apart from many other pension claimants.
In sum, therefore, I am satisfied that Mr Pye’s debt cannot be waived, in whole or in part, under s 1237AAD. Mr Pye did not fully disclose his assets and, in all likelihood, he did so knowingly. That aside, his circumstances, separately and together, are not ‘special circumstances’ that render it desirable to waive recovery of any part of his debt.
Conclusion and decision
Mr Pye failed or omitted to fully disclose his assets. Calculation of the rate of disability support pension that was payable to him from time to time did not properly take into account the value of his assets. In the result, Mr Pye has been paid an amount of pension in excess of his entitlement. This is a debt to the Commonwealth.
No part of the debt can be written off or waived.
The decision under review is varied to the extent that the amount of Mr Pye’s overpayment debt is the amount calculated in accordance with these reasons. The application is remitted to the Secretary to undertake that calculation.
I certify that the preceding 91 (ninety-one) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member ..........................................[sgd]..............................
Associate
Dated 13 November 2013
Dates of hearing 29 August and 13 September 2013 Date final submissions received 16 October 2013 Applicant In person Advocate for the Respondent Dr. Stephen Thompson Solicitors for the Respondent Sparke Helmore
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