Livingston and Repatriation Commission
[2003] AATA 946
•24 September 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 946
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V01/1126
VETERANS' APPEALS DIVISION ) Re GEORGE LIVINGSTON Applicant
And
REPATRIATION COMMISSION
Respondent
DECISION
Tribunal Mr J Handley, Senior Member Date24 September 2003
PlaceMelbourne
Decision The decision under review is set aside and in substitution IT IS DECIDED the applicant is entitled to pension at the special rate. (Sgd) J Handley
Senior Member
VETERANS’ ENTITLEMENTS; Self-employed farmer; 82 years at application date; whether s24 satisfied; discussion of “last paid work”; “loss”; “paid”; “successfully undertaken”; “substantial remunerative”; decision set aside; entitlement to special rate.
Veterans’ Entitlements Act 1986 s24(1), s24(2A), s24(2B)
Flentjar v Repatriation Commission (1997) FCA 1200
Repatriation Commission v Boyle (1998) 47 ALD 637
Sheehy v Repatriation Commission (1996) 41 ALD 205
Starcevich v Repatriation Commission (1987) 14 ALD 160
Repatriation Commission v Smith (1987) 74 ALD 537
Counsel v Repatriation Commission (2002) FCAFC 201
REASONS FOR DECISION
24 September 2003 Mr J Handley, Senior Member 1. The applicant applies to review a decision of the Veterans’ Review Board (“the VRB”) made on 31 July 2001. The VRB then decided to set aside a decision of the respondent made on 8 September 2000 by increasing the applicant’s entitlement to general rate pension from 80% to 90%.
2. The applicant has the accepted disabilities of a cataract of the right eye, osteoarthritis of both knees, hallux valgux deformity of left and right feet and sensori neural hearing loss.
3. Mr Moore of Counsel appeared on behalf of Mr Livingston and Mr Douglass appeared on behalf of the respondent. A number of documents were received into evidence and will be referred to in this decision.
4. This review concerns a claim by Mr Livingston for payment of special rate pension.
George Francis Livingston
5. Mr Livingston is presently 86 years of age having been born on 19 July 1917. He was a member of the Second Fourteenth Inventory who served in Syria, the Middle East and New Guinea. He enlisted on 2 August 1940 and was discharged on 11 October 1945. He achieved the rank of Sergeant.
6.
Following discharge in October 1945 Mr Livingston commenced
self-employment with some of his brothers in a retail butcher shop in Swan Hill. He experienced difficulty however with his feet and knees following an episode in Syria where a large box dropped onto his feet. Mr Livingston said that he had difficulty walking and standing on concrete floors in the butcher’s shop and in 1967 he resigned from the partnership and purchased a 300 acre farm property at Tooleybuc on the New South Wales side of the Murray River. Mr Livingston said that farming life appealed to him and he was familiar with stock management and stock handling. He also said he thought he would be more comfortable working on a farm rather than in a butcher shop. The property purchased was irrigated and he grew lucerne and raised beef cattle. He was assisted by his eldest son and his wife but he said that most of the work was undertaken by him.
7. Mr Livingston later found that he was having difficulty working the farm because he was frequently required to wear rubber boots which affected his leg and knee injuries. In fact he said that wearing rubber boots “aggravated” his injuries. There were occasions where he used a motorcycle but it did not eliminate a great deal of walking, particularly through flooded paddocks and across channels.
8. In 1972 the farm was sold to the applicant’s eldest son, Francis. Mr Livingston said that the farm was then unable to be managed by him because of its size and because of the condition of his feet and legs. He said that he regretted having to leave the farm because he found it very satisfying and economically it was much cheaper than living in an “urban situation”. He said that all domestic food was grown on the farm comprising vegetables, fruit, poultry, eggs and meat.
9. When the farm was sold Mr Livingston and his wife and other children moved to Swan Hill. Mr Livingston was unable to obtain employment for approximately two years however his wife found part-time employment at a local theatre. During the period of his unemployment he received income from investments but continued to assist Francis operating the farm at Tooleybuc.
10. In approximately 1978 the applicant obtained casual employment at the Oasis Hotel Motel in Swan Hill. Mr Livingston said that he knew the proprietor and work was made available to him purchasing and stocktaking. He worked at the Oasis Hotel from approximately 1978 until 1982 but in the interim he and his wife purchased a smaller farm of 56 acres, approximately 5 kilometres south of Swan Hill. It was also an irrigated property and was intended to be used only for fattening beef cattle. Mr Livingston said that he thereafter worked approximately 15 to 20 hours a week at the hotel and for 25 to 30 hours per week at the new farm at Swan Hill. He also built a house on the property and when the Oasis Hotel was sold in 1984 and Mr Livingston was retrenched, he and his wife and children moved to the farm and lived in the newly constructed house. Thereafter he said he worked full-time on the farm with some assistance from his sons and from his wife whom he described as his “right-hand man”.
11. Activity over the farm comprised purchasing young cattle in spring, keeping them through summer and selling them in autumn. Routine work over the farm comprised flood irrigation of paddocks on a fortnightly basis (which was described as a “major job”), yarding stock, fencing and watering trees. Mr Livingston said that he was always busy and had plenty of work to do.
12. Despite the size of the farm he said that he continued to have problems with his feet and knees. He said that his wife and children had mentioned to him that he appeared to be deteriorating and that his condition was becoming worse. At their insistence the farm was sold in 1997. Thereafter he has not worked.
13. Mr Livingston said that the principle reason why he has not worked is because of his feet and knees. He said that his accepted condition of cataracts did not interfere with his capacity to work. He said that he has had the cataracts removed and has had lens’ implants, which he described as a “simple process” and which had improved his eyesight. He said that his loss of hearing did not interfere with farming and whilst he had suffered back pain many years ago it did not interfere with farming.
14. Mr Livingston acknowledged that he had undergone two prior operations for inguinal hernia, the last being in 1982. He acknowledged that he had previously had inguinal pain but the surgery in 1982 was successful and thereafter he had not been in pain. He said the surgeon “did a good job” and he was thereafter able to return to work in the hotel and on the new farm.
15. Mr Livingston was adamant that if it were not for his feet and legs – and despite his age - he would have continued to be a farmer. He said that he continues to have the “desire” to do it and said that he is an “expert” in being a farmer. He said that farming gave him a sense of pride and enjoyment and a number of economic benefits.
16. In cross-examination Mr Livingston was taken to an application that he made in 1986 for a disability pension. The disabilities then claimed were “hernia in wall of stomach” and “arthritis in feet and knee”. In a letter attached to that application Mr Livingston reported the following with respect to the hernia:
Hernia area constantly tender and bothersome. Eventually sought medical advice and wore a surgical support for some years. Unable to lift sections of bodies of beef and being constantly on my feet on concrete floors aggravated the condition. In about 1957 had surgery for the condition. I continued butchering until early 1967, when I could no longer continue the heavy work of butchering and moved to a farm in Koraleigh NSW where my eldest son managed all the heavy work. When this son married I sold the farm to him and moved back to the Swan Hill area, where I obtained casual work in the Bottle Shop of the Oasis Hotel Motel. Meanwhile, my wife had gone back to work in May 1972 to supplement the family income, working for OHalloran Theatres. My hernia had broken away soon after the first operation and I constantly wore a support.
In August 1982 the hernia strangulated necessitating an emergency operation – I was forced to retire from active work. I am now living on a small 50 acre property where I run a few steers during the summer months.
My wife terminated her employment with OHalloran Theatres in February 1985 when the youngest of our seven children had completed his secondary education. We then applied for the Aged Pension and was granted a part pension of $50 pw. In March my wife obtained part-time employment with Wallace Family Law where she is still employed.
I believe this hernia was initially caused by five years active service, has seriously interfered with my working abilities and my sporting abilities and has cut short my capacity to earn a living.
The arthritic condition is a result of training, marching and fighting both in the sands of the Middle East and the wet and steamy jungles of New Guinea.
17. Mr Livingston said that the letter was completed by his wife and is in her handwriting. He said a number of comments made within it were “overstatements”. He disagreed with a reference to “all the heavy work” being undertaken by his eldest son. Mr Livingston said that heavy work was completed by him and his eldest son equally. He acknowledged that in August 1982 he probably then believed that he would have to retire because of the strangulated hernia and at that time he would have been unable to cope with “active work”, but after twelve months following the surgery, Mr Livingston did return to active work. When it was noted that the letter was written in 1986, being four years after the surgery Mr Livingston again said that his wife had made an “overstatement”. He said that in 1986 he was able to work and was indeed working.
18.
The applicant was then taken to a form completed by him 1987 (page 31) where in his claim for pension he recorded that he “retired due to ill health” in 1982 because of strangulated hernia. He then recorded that he “was not working”. Another part of the form where an applicant is asked to advise whether he is
“self-employed”was not completed.
19.
Mr Livingston was then taken to a report completed by Dr Briggs, the applicant’s general practitioner in March 1987 (pages 34 and 35). Under the
sub-heading of “Working Activities” Dr Briggs recorded “claims that he is careful not to do any heavy work that places strain on abdominal wall”. Under the sub-heading of “Home Activities” Dr Briggs recorded “claims reduced activities because of risk of hernia recurring”. Under the heading of “Leisure Activities” it is recorded “hernia not apparent now, plays golf and bowls”.
20. Mr Livingston said that he was surprised that these comments had been made by Dr Briggs. He said that he knew Dr Briggs very well and worked with him at the local branch of Legacy. He said he was unable to understand why these comments had been recorded.
21. The applicant was then taken to page two of the Departmental file where it is recorded that “arthritis” (of feet and knee) were first noticed in 1974. Mr Livingston was unable to understand this reference. When it was noted that 1974 was two years after the Tooleybuc farm was sold, he denied that the symptoms were first noticed at that time. He said that he had been aware of symptoms affecting his feet and knees for many years previously and it was because of those symptoms that he resigned his partnership in the family butcher shop.
22.
With respect to the applicant’s income from the farm at Swan Hill, Mr Livingston was aware that his accountant had forwarded a letter to the respondent in June 2000 (pages 13 and 14 of T-documents). The letter records the “Net Proceeds from Cattle Sales” and “Direct Costs of Production” costs but does not refer to other deductions or depreciation commonly expected in returns from primary producers. Whilst Mr Livingston said that he retired from the farm in 1997 because of his feet and knees, he was unable to explain why the accountant recorded that “at the end of 1995 Mr Livingston was forced to cease Primary Production and did not need to lodge further income tax returns”.. He was also unable to explain why in the claim made upon the respondent which has given rise to these proceedings, he recorded in a questionnaire of August 2000 that he ceased working in 1995
(page 26).
23. In re-examination Mr Livingston confirmed that he did return to work after the second hernia operation in 1982 by resuming at the bottle shop and on his Swan Hill farm. Thereafter he maintained between 45 and 50 head of cattle per annum.
24. As to the discrepancy of the year of retirement, and on reflection, Mr Livingston said that he thought he in fact did retire in 1995.
Mary Margaret Livingston
25. Mrs Livingston confirmed the contents of a statement completed by her and received into evidence. She said that she and her husband married on 2 September 1947 and there are seven children of the marriage. She described her husband as being “physically well” at marriage but his feet and knees were always “a problem”. She noticed that those conditions “got worse each year”.
26. Mrs Livingston said that her husband did have a “hernia problem” and she recalled that he had surgery in the early 1950’s which was not then successful. Thereafter he wore a “belt” for many years until he had emergency surgery 1982 when the hernia strangulated. Thereafter she “worried it would happen again”, however on reflection her husband had “no problem” and never complained of pain.
27. Mrs Livingston was adamant that her husband sold the butchers shop only because of his feet and knees and he moved to the farm at Tooleybuc because he thought that it would be easier on his feet. She said that it was always his and her ambition to own their own farm. However that farm was sold because her husband’s feet and knees did not improve and were no better than when he was working in the butchers shop. She said that he was unable to manage a 300 acre farm on his own and their eldest son Francis was about to become married. She and her husband thought that it would be preferable to move into Swan Hill because of educational opportunities for the younger children and also to relieve her husband from the pain and the discomfort he suffered in his feet and knees by working on the farm.
28. When they moved to Swan Hill, Mrs Livingston said that her husband looked for work but was unable to obtain it for some years because he had only ever been a “butcher, a soldier and a farmer”. She obtained part-time employment and other income was available from investments.
29. Mrs Livingston said that whilst her husband was looking for work he assisted Francis over the Tooleybuc farm but later he obtained casual employment at the Oasis Hotel. Nonetheless her husband’s first preference was always to return to farming and a small farm was located approximately 5 kilometres south of Swan Hill. She and her husband thought that he would be able to manage it because of its smaller acreage. Initially he continued to work for about 15 hours per week in the bottle shop and the remaining hours were spent managing the farm. Mrs Livingston said the cattle herd was always between 45 and 50 in number and she helped her husband manage the farm.
30. Mrs Livingston said that she was always worried after the 1982 hernia surgery that her husband would again break down. She said that the surgeon had told her that if the hernia needed further repair that it would be a difficult procedure. She thought that the concerns expressed by her in the letter that she wrote on behalf of her husband (refer earlier) and the comments made by her were a reflection of the worry that she felt concerning her husband’s health.
31. Mrs Livingston said that the farm at Swan Hill was eventually sold because she was concerned that her husband was deteriorating and it was obvious that it was becoming more difficult for him to manage it. She said that having to wear rubber boots was a “real bother” and because of the apparent pain he was suffering in his feet and knees and she could not bare to see him “like that”.. She said that she persuaded him to cease farming and the only reason why the farm was sold was because of his feet and knee injuries. Her husband had not complained of or suffered from back pain for many years and he had not experienced discomfort from the hernia since the surgery in 1982. In fact she said if it were not for his feet and knee injuries she and her husband would continue to be farmers.
32. When she was pressed on this issue and reminded that her husband was presently 85 years of age Mrs Livingston said “so what? - he is fit and never gives in”.
33. Mrs Livingston thought that she and her husband had moved away from the farm in 1997. She and her husband were then in receipt of a service pension.
34. In cross-examination Mrs Livingston was taken to the letter that she wrote on behalf of her husband when he first claimed disability pension (refer paragraph 16 earlier). She said that when she wrote that letter she was worried. She said “I am the one who worries – he just goes going on. I think the surgeon told my husband of the risk he was facing but he doesn’t hear what he doesn’t want to hear. The surgeon said if it broke away again it would be irrepairable”.
35. Mrs Livingston explained that her reference to her husband being “forced to retire from active work” was a reference to having him retire from work involving serving the public. She said that she did not intend that to mean that her husband was precluded from operating a farm. She acknowledged that the comment made by her in the letter that the hernia “seriously interfered with (his) abilities” was an overstatement because she thought at the time the letter was written that her husband would be unable to earn a living by reason of the hernia surgery and the risks as notified by the surgeon.
36. Mrs Livingston also acknowledged that she assisted her husband to complete the questionaries referred to earlier and said the absence of an entry against the question concerning “self-employment” was an oversight. She said that her husband did not have the skills to adequately complete the forms referred to by the respondent and said that his only skill is “butchery and farming”.
Conclusion and Reasons for Decision
37. The applicant claims special rate pension, the qualification for which is found at s24(1), (2A) and (2B). Those sections are reproduced as follows:
(1) This section applies to a veteran if:
(aa) the veteran has made a claim under section 14 for a pension, or an application under section 15 for an increase in the rate of the pension that he or she is receiving; and
(aab) the veteran had not yet turned 65 when the claim or application was made; and
(a)either:
(i) the degree of incapacity of the veteran from war-caused injury or war-caused disease, or both, is determined under section 21A to be at least 70% or has been so determined by a determination that is in force; or
(ii) the veteran is, because he or she has suffered or is suffering from pulmonary tuberculosis, receiving or entitled to receive a pension at the general rate; and
(b)the veteran is totally and permanently incapacitated, that is to say, the veteran's incapacity from war-caused injury or war-caused disease, or both, is of such a nature as, of itself alone, to render the veteran incapable of undertaking remunerative work for periods aggregating more than 8 hours per week; and
(c)the veteran is, by reason of incapacity from that war-caused injury or war-caused disease, or both, alone, prevented from continuing to undertake remunerative work that the veteran was undertaking and is, by reason thereof, suffering a loss of salary or wages, or of earnings on his or her own account, that the veteran would not be suffering if the veteran were free of that incapacity; and
(d)section 25 does not apply to the veteran.
(2A) This section applies to a veteran if:
(a)the veteran has made a claim under section 14 for a pension, or an application under section 15 for an increase in the rate of the pension that he or she is receiving; and
(b)the veteran had turned 65 before the claim or application was made; and
(c)paragraphs (1)(a) and (1)(b) apply to the veteran; and
(d)the veteran is, because of incapacity from war-caused injury or war-caused disease or both, alone, prevented from continuing to undertake the remunerative work (last paid work) that the veteran was last undertaking before he or she made the claim or application; and
(e)because the veteran is so prevented from undertaking his or her last paid work, the veteran is suffering a loss of salary or wages, or of earnings on his or her own account, that he or she would not be suffering if he or she were free from that incapacity; and
(f)the veteran was undertaking his or her last paid work after the veteran had turned 65; and
(g)when the veteran stopped undertaking his or her last paid work, the veteran:
(i) if he or she was then working as an employee of another person—had been working for that person, or for that person and any predecessor or predecessors of that person; or
(ii) if he or she was then working on his or her own account in any profession, trade, employment, vocation or calling—had been so working in that profession, trade, employment, vocation or calling;
for a continuous period of at least 10 years that began before the veteran turned 65; and
(h)section 25 does not apply to the veteran.
(2B)For the purposes of paragraph (2A)(e), a veteran who is incapacitated from war-caused injury or war-caused disease or both, is not taken to be suffering a loss of salary or wages, or of earnings on his or her own account, because of that incapacity if:
(a)the veteran has ceased to engage in remunerative work for reasons other than his or her incapacity from that war-caused injury or war-caused disease, or both; or
(b)the veteran is incapacitated, or prevented from engaging in remunerative work for some other reason.
38. Mr Livingston is presently 86 years of age having been born on 19 July 1917. The claim which has given rise to these proceedings was made on 10 July 2000 being nine days short of his 83rd birthday.
39. At the conclusion of the hearing in Mildura, Mr Douglass conceded that the applicant’s feet and knee injuries did reduce the applicant’s capacity to work for less than eight hours per week and that his hernia injuries did not impact on his capacity to work during the assessment period. These concessions in my view were properly made. However it was the respondent’s case that the hernia surgery in 1982 influenced the applicant’s decision to retire from work or reduce his involvement in work. It was contended that the applicant being engaged in a small farm with a consequent modest income was designed only to preserve maximum pension entitlements. It was submitted that the “alone” test was not satisfied and the applicant’s age was also a contributing factor in his incapacity.
40. In written submissions lodged subsequent to the hearing in Mildura, Mr Douglass conceded s24(2A), (a), (b), (c), (f), (g) and (h). The focus therefore from the respondent in its objection to qualification for special rate was upon s24(2A), (d) and (e). Additionally the respondent submitted that the applicant was unable to satisfy s24(2B).
41. The respondent relied on the Full Federal Court decision of Flentjar v Repatriation Commission (1997) FCA 1200 in its reliance upon s24(2A), (d) and (e). In that decision the Full Court in its description of the operation of s24(1), (c) decided the following namely:
(a)what was the relevant “remunerative work that the veteran was undertaking” within the meaning of s24(1)(c) of the Act?
(b)is the veteran by reason of war-caused injury or war-caused disease, or both, prevented from continuing to undertake that work?
(c)if the answer to question 2 is yes, is the war-caused injury or war-caused disease, or both, the only factor or factors preventing the veteran from continuing to undertake that work?
(d)if the answers to question 2 and 3, are, in each case, yes, is the veteran by reason of being prevented from continuing to undertake that work suffering a loss of salary, wages or earnings on his own account that he would not be suffering if he were free of that incapacity?
42. It was submitted that the concept of “remunerative work” as described in s24(1), (c) has been modified by the decisions in Flentjar and in another Federal Court decision of Repatriation Commission v Boyle (1998) 47 ALD 637 because s24(2A), (d) qualifies the concept of “remunerative work” by reference to the “last paid work” only. It was submitted in the present application that the veteran’s “last paid work” was difficult to ascertain until the concept of “paid” work was identified and then, whether that work was “successfully undertaken” within the meaning of Sheehy v Repatriation Commission (1996) 41 ALD 205.
43. In the present case it was submitted that the applicant ceased “remunerative work” and “paid work” when he sold his farm at Tooleybuc in 1972 and moved to Swan Hill. When the applicant purchased a smaller farm at Swan Hill in 1982 it was submitted that that operation was more “residential” in nature where the veteran “ran a few steers”. It was submitted that this work could not amount to “remunerative work”, that it could not amount to “paid” work, that it did not constitute work being “effectively undertaken” or “successfully undertaken” within the meaning of Sheehy nor was it “substantial” remunerative work within the meaning of Starcevich v Repatriation Commission (1987) 14 ALD 160. It was submitted that the veteran earned greater income from his employment at the Oasis Hotel, from investments, from rental income and from age pension. His “last paid work” was submitted as being the employment at the Oasis Hotel.
44. Additionally, it was submitted that Mr Livingston was 82 years of age at the commencement of the assessment period and at that stage – in year 2000 – he had been out of the workforce for 15 years (being the period between cessation of employment at the Oasis Hotel and the making of the claim upon the respondent).
45. Alternatively it was submitted that if the applicant’s “last paid work” was his employment on the smaller farm at Swan Hill, he had been out of the workforce for six years at the date of claim (1995 to 2000).
46. Additionally it was submitted that special rate pension was intended to apply only to “severely disabled veterans of a relatively young age” in reliance by the respondent upon a Second Reading Speech of Acting Minister for Veterans’ Affairs recorded in Repatriation Commission v Smith (1987) 74 ALR 537 at 541.
47. In conclusion the respondent submitted that if it was decided that its foregoing submissions did not have merit the applicant was unable to satisfy the “loss test” upon an examination of his income tax returns. It was submitted that the farming operation at Swan Hill “consumed more cash than it generated”.
48. Mr Liefman on behalf of the respondent took issue with the respondent’s written submissions. In reliance upon a submission completed by the applicant’s accountant who offered an interpretation of the income tax returns between 1982 and 1995 it was submitted that the income earned and generated by Mr Livingston was “substantial” when regard was had “particularly” to cattle sales. It was submitted that the applicant was clearly able to demonstrate farming activity over the Swan Hill farm.
49. With respect to the submission that special rate pension was not intended for veterans of the age of Mr Livingston, Mr Liefman submitted special rate pension is payable to persons who might qualify under s24. It was submitted that the application brought by Mr Livingston was “exceptional” and but for his accepted disabilities his age was “less of an issue when set against the veteran’s determined attitude he would have undoubtedly continued farming”.
50. In the present application I have the benefit of reading statements prepared by Mr Livingston and his wife prior to the hearing and observing them both giving evidence in Mildura. I was impressed by Mr Livingston being a hard-working and determined person who, despite a number of major illnesses and injuries (originating in service), worked until 1995 when he was then 78 years of age. This was despite having had major abdominal surgery in 1982 for the repair of a major hernia which at that time had strangulated. It was learnt that the applicant had previously worked wearing a supporting belt and had been advised by his surgeon in 1982 that he was at risk of major complications in the event that he suffered a tearing of his abdominal wall by subsequent strain or heavy work. Nonetheless the applicant did continue to work and I interpret this as a measure of his determination. The applicant was then 65 years of age, being an age where it is commonly expected that persons retire. At or about that time Mr Livingston was working part-time in a bottle shop in Swan Hill and part-time at a smaller farm purchased by he and his wife outside Swan Hill. Mr Livingston continued to work that farm until he ceased farming in 1995. In 1997 the farm was sold and he and his wife moved back to live in Swan Hill. The observations made by Mrs Livingston in her evidence of her husband namely “he just goes going on” and “he is fit and never gives in” is borne out by his evidence and by his work history.
51. I previously decided that the concessions made by the respondent with respect to the applicant’s hernia injuries were sound. For reasons which follow I am satisfied the applicant ceased employment by reason of his war-caused injuries.
52. I am not satisfied that the applicant’s age is a bar, in this application, to qualification for special rate. That is to say, there is no contravention in my view of the “alone test” by the applicant’s age at the date of his retirement. Additionally, despite there being a period of six years between cessation of farming in Swan Hill in 1995 and the making of this application in 2000, his period of time “out of the workforce” is, in my view, additionally not a bar. Mr Livingston impressed me as being a stoic, forthright individual who, in the absence of war-caused injuries would be continuing to work on the Swan Hill farm. I acknowledge that there would be few 82 year old veterans who would qualify for special rate pension. Nonetheless, and despite the policy behind the qualification for special rate pension, entitlement is not eliminated at the age of 65. It is eliminated when a person is unable to satisfy the provisions of s24. In summary therefore I am not satisfied that the applicant’s age or the period of six years where he did not work immediately prior to him making his claim in 2000, disqualifies him from special rate entitlement.
53. The principle focus in this application – properly in my view – is the employment history of Mr Livingston and whether he satisfies the concepts of “remunerative work”, “paid” work, “last paid work” and “loss” within the meaning of s24(2A), (d) and (e).
54. In addition to the evidence of Mr Livingston and his wife, the review was assisted by the lodging of income tax returns between 1982 and 1995 by the applicant’s accountant. Additionally, the accountant (Mr Beare) prepared a useful summary interpreting the tax returns and the methodology in completing the returns. That summary prepared on 11 June 2003, is reproduced as follows:
Re: Mr. George Livingston / Farming Activities
This is to confirm that I act as accountant and tax agent for Mr. George Livingston. I have lodged income tax returns to the tax office on his behalf from 1982 to 1995 inclusive. For the 1996 and later income years he was not required to lodge a tax return. As his accountant I can speak on matters pertinent to his income tax returns and the benefits he obtained from his occupation as a farmer.
For the income years 1982 to 1986, the income tax system was one of assessment, that is, a tax officer would assess an income tax return and if he/she was satisfied that the return was in order, then a tax assessment would issue to the taxpayer. If the tax assessor was not happy with the return, or the legitimacy of (say) a primary production business, then it was the tax officer's duty to challenge the taxpayer to satisfy the tax commissioner that a legitimate business was being conducted.
Mr. Livingston was never challenged by the tax office to show that his farming activities constituted a business, therefore in those years the tax commissioner accepted the farming activities as a legitimate business.
From 1987 onwards, our tax system moved to a system of self-assessment, whereby a taxpayer would declare what his income was, and claim the expenses relating thereto and the commissioner would automatically issue a tax assessment. However the tax commissioner has the power within a five year period of the issue of a tax assessment to challenge the taxpayer to satisfy the commissioner that the tax return was correct, including that a legitimate business was being conducted by the taxpayer.
In the years since 1987, the tax office challenged thousands of farmers whom the tax office regarded as hobby farmers to show that a legitimate farming business was being conducted. Mr. Livingston was never categorised by the tax office as a "hobby farmer".
As a former employee of the tax office assessing branch, I can vouch that there were many legitimate farmers like Mr. Livingston who were quite correctly accepted by the tax office as conducting a primary production business.
In cases, similar to Mr. Livingston's the tax office could have challenged the indirect costs of farming along the lines as to what extent were some of these expenditures incurred in gaining or producing assessable income. However they never, and Mr. Livingston was able to gain a tax benefit from the claiming of these more indirect expenditures, some of which could be argued had less connection to his livestock activities.
In reviewing his primary production farming activities I have created a schedule summarising the profitability of the farm in contrast to the overall tax position of the business. I have dissected expenses into direct farm costs and indirect farm costs.
After taking into account the direct farm costs, in 13 out of 14 income years the farm showed a notional farm profit. From my oId assessing days I remember there were many "hobby" farmers who could not even cover the direct costs of their activity let alone any other associated costs. These were the ones the tax office would target because they had no chance of ever breaking even, whether it was due to small size of farm or activity, low turnover, or just poor management. There was no reason to challenge Mr. Livingston and his farming activities as he (nearly) always made a notional profit return on his farm.
I have included in the schedule as indirect costs, such things as Electricity, Fuel, Home Office, Insurance, Motor Vehicle Expenses, Pest & Weed Control, Rates, Telephone, Tools etc. because these items could be described as "lifestyle" expenses. That is, if Mr. Livingston had chosen to live on 40 acres for tranquility reasons, etc. and had no livestock, or primary production business, then he would have still incurred these kinds of expenses.
Therefore by Mr. Livingston having cattle and being accepted by the tax office as a legitimate business, he was able to increase his cash flow each year (between $10,841 and $20,490) and also the resultant direct profit from this activity by up to $4006 per annum in those years. Obviously, with profits in 13 out of the 14 years, this was a significant boost to his livelihood which he no longer is able to obtain.
In addition it could be argued that there were definitely benefits of the tax savings derived from expensing through the business such things, as motor vehicles, electricity, telephones, etc. How many phone calls or litres of car fuel does it take to have your stock graze in the paddock all day? Fortunately for Mr. Livingston our system permits these kinds of claims in tax returns.
There was also the benefit of being able to have a home-grown beast slaughtered and put in the freezer a couple of times a year, along with a free supply of eggs from the chook house, and a free supply of vegetables and citrus and other fruits from the orchard. I don't think Mr. Livingston milked a cow in those years. These benefits are not necessarily quantifiable but do add a significant saving to people who could be described as self-sufficient. Mr. Livingston no longer has access to these fringe benefits.
55. In 1982 - when the accountant’s summary commenced – the applicant and his wife purchased the smaller farm at Swan Hill. From that year until 1995 when farming activity at Swan Hill ceased, a profit was declared in each year. When expenses were deducted directly referable to farming activity (described by the accountant as “direct expenses”) a “notional farm profit” was declared in each of the years between 1982 and 1995 except for the 1993 year, when there was a claim for “repairs” which appears to be unusually high having regard to the claim made for “repairs” in previous and subsequent years.
56. Upon the analysis made by the accountant when other “costs” are claimed (described as “farm indirect costs”) a loss was declared upon Returns lodged with the Australian Tax Office.
57. The expression “loss of earnings on his or her own account” as found within s24(2A), (b) and s24(2B) was the subject of extensive analysis by the Full Federal Court in Counsel v Repatriation Commission (2002) FCAFC 201.
58. At paragraph 79 of that decision, Goldberg JJ said:
The fact that at the end of the relevant accounting period the partnership might be showing a loss should not obscure the fact that during that year the appellant had access to the cashflow or earnings of the partnership which had been derived from his personal exertion. When the appellant was ultimately prevented by incapacity from continuing to undertake the work which he carried out in the course of the partnership, he thereby suffered a loss of earnings on his own account in the sense that he was no longer able to have access to, or take advantage of, the cashflow or earnings of the partnership business. It is not to the point that at the end of a relevant accounting period the partnership was shown in its accounts to have carried on business at a loss.
59. Gray J at paragraph 20, in his agreement with the analysis of Goldberg J has said:
I agree with what his Honour says about the application of “earnings on his or her own account” to the income of a partnership business. There may be various reasons why accounts compiled after the end of a financial period may show that a partnership business that was receiving income during that period made a loss in that period. This does not detract from the fact that, during the period, each of the partners as a member of the partnership was entitled to income according to the terms of the partnership agreement. In the case of a partner, such as the appellant, whose physical and mental labour produced or contributed to the generation of that income, it is appropriate to regard that income as “earnings on his or her own account” within the meaning of s 24 (2A) (e).
60. Carr J discussed the potential for ambiguity in interpreting the word “earnings” and concluded that any ambiguity should be resolved in favour of a veteran. It was noted that the Veterans’ Entitlements Act was beneficial in construction and the word “earnings should be construed as meaning gross earnings, even before deducting the cost of goods sold”.
61. For the purposes of the present application I am satisfied that the “last paid work” being undertaken by the veteran before he made his claim was the work on the smaller farm at Swan Hill. It is clear from the analysis produced by the accountant that that work was “remunerative”, the income was “substantial” (refer Starcevich) and the work was “successfully” undertaken (refer Sheehy). I agree with the assessment by the accountant of the nature of the farming activity undertaken by the applicant, his commitment and his capacity to earn income, both actual and potential.
62.
I had previously decided that the incapacity commenced by reason of the
war-caused injury alone, it follows therefore that the applicant was prevented from continuing to undertake the last paid remunerative work – being the work upon the farm at Swan Hill – before he made his claim. By reason of being prevented from undertaking his last paid work, Mr Livingston is suffering a loss of salary or wages or earnings on his own account that he would not be suffering if he were free from that incapacity. It follows therefore that I am satisfied that Mr Livingston meets the qualifications under s24(2A), (d) and (e).
63. For the purposes of s24(2B), I am not satisfied that Mr Livingston ceased to engage in remunerative work for reasons other than incapacity from his war-caused injuries or that he was incapacitated for other reasons.
64. It follows that, with respect to the questions posed by the Full Court in Flentjar that the answer to question (a) is, self-employment in partnership as a farmer at Swan Hill. The remaining three questions should be answered in the affirmative.
65. With respect to the submissions made by the respondent I am satisfied - if not already apparent- that the last paid work was the work upon the Swan Hill farm. Having regard to the income earned, I am satisfied that those farming operations were “effectively undertaken” and “successfully undertaken” within the meaning of Sheehy. The “last paid work” was not the income earned from salary as a wage earner at the Oasis Hotel.
66. Mr Livingston has not earned income from the Swan Hill farm since 1995. Prior to that year of income, income was earned in every year. It follows that he has suffered a “loss”.
67. In all of the circumstances the decision under review should be affirmed.
I certify that the 67 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Handley,
Senior Member.
Signed: Elsa Genovese
Personal AssistantDate of Hearing 22 May 2003 (Mildura)
Date of Decision 24 September 2003
Counsel for the Applicant Mr G Moore
Counsel for the Respondent Mr R Douglass
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