Lloyd and Secretary, Department of Social Services (Social services second review)

Lloyd and Secretary, Department of Social Services (Social services second review) [2022] AATA 50 (18 January 2022)
Division:GENERAL DIVISION
File Number(s): 2021/2131 & 2021/2134
Re:Lucy Lloyd
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Mr S Evans, Member
Date:18 January 2022
Place:Sydney

The decision under review is set aside and substituted with a decision that Ms Lloyd’s age pension was correctly cancelled from 1 November 2019. The overpayment of age pension arising between 1 November 2018 and 31 October 2019 is to be waived on account of sole administrative error. Overpayment of age pension after 1 November 2019 totalling $10,503.16 remains a debt to the Commonwealth to be recovered in full.
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Mr S Evans, Member
CATCHWORDS
SOCIAL SECURITY – age pension – whether proceeds of sale of principal home are exempted from the assets test – whether age pension was correctly cancelled – whether a debt is owed to the Commonwealth – whether a debt can be written or waived in whole or in part – relevant legislation and policy considered – relevant material considered – decision under review set aside and substituted.
LEGISLATION
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
SECONDARY MATERIALS
Social Security Guide
REASONS FOR DECISION
Mr S Evans, Member
18 January 2022
INTRODUCTION

Lucy Lloyd (‘Ms Lloyd’) was in receipt of age pension when she sold her principal residence in Chatswood (‘the Chatswood property’) to a property developer for $1,125,993.18 on 1 November 2018. The purchaser of the Chatswood property agreed to allow Ms Lloyd to continue living at the property until 30 April 2020 for a nominal fee of $1 per week. At the time of the hearing she remained at the Chatswood property, paying $450 per week in rent.
Ms Lloyd planned to buy another apartment in Chatswood and placed the funds from the sale of the Chatswood property in a bank account for this purpose.
On 7 May 2020 a delegate of the Secretary of the Department of Social Services (‘the Secretary’) determined that Ms Lloyd’s assets exceeded the threshold for age pension recipients. Consequently Ms Lloyd’s age pension was cancelled and a debt raised against her for overpayment.
Ms Lloyd’s daughter and nominee, Joy Cheng (‘Ms Cheng’), is appealing the decision to raise a debt against Ms Lloyd. She seeks to have the proceeds of the sale of the Chatswood property exempted from the assets test for the maximum allowable period and the remainder of the debt written off or waived.
As Ms Cheng was representing Ms Lloyd and appears to have been managing her affairs from at least the time at which the Chatswood property was sold, I will primarily refer to her, rather than the applicant, in these reasons. The period between the sale of the Chatswood property on 1 November 2018 and the cancellation of Ms Lloyd’s pension on 27 April 2020 will be referred to as the ‘debt period’.
Ms Lloyd intends to buy a two bedroom apartment in Chatswood for her and Ms Cheng to live in. She would prefer to stay in Chatswood as it is close to transport and Chinese grocery stores and restaurants. To date she has been unable to find a suitable property.
Ms Cheng attributes her inability to find a suitable property to the high prices of apartments in the area prior to the COVID-19 pandemic, government intervention reducing the supply of suitable properties and her being unable to afford an apartment at auction.
In correspondence dated 15 October 2020 Ms Cheng writes in part:
We are wasting our money paying rents and we should have a principal home in normal condition because of coronavirus pandemic that we could not find a suitable unit. Many property investors and home loan home owners are holding their properties in Chatswood CBD. …
I urgently need to buy a new principal home to look after my mother whose health conditions are deteriorated recently. She needs more time for caring than ever. Now we live in two separate places and I am working 3 days per week, thus I am unable to spend more time to look after her as she needs me much more help on her daily living than ever. She is losing her mind and unable feeding by herself. I asked her whether she likes to live in a nursing home. She replied to me that she wants to die at home and wants me to look after her. ·
I had experience finding a domestic assistance to look after my mother part-time while she was experiencing difficulty in walking. She could not walk to open the door for the domestic assistance. I had to go to my mother's unit to open the door for the domestic assistance. It did not save me time.
I have been planning to buy a two-bed room unit since we sold the [Chatswood property]. So it would be more convenient for me looking after my mother while she was experiencing difficulty in walking. I was visiting her daily buying food and doing her housework. I am exhausting turn between two places daily twice for feeding her.
[errors in original]
ISSUES
The issues to be determined by the Tribunal are:
(a)whether the proceeds from the sale of the Chatswood property are exempt from the assets test beyond 1 November 2019; and
(b)whether Ms Lloyd was eligible for age pension from 1 November 2019; and
(c)whether Ms Lloyd owes a debt to the Commonwealth; and if so
(d)whether there is any basis to write off or waive part or all of the debt resulting from the overpayment.
LEGISLATIVE FRAMEWORK
The legislation relevant to this application is contained in the Social Security Act 1991 (Cth) (‘the Act’) and the Social Security (Administration) Act 1999 (Cth) (‘the Administration Act’).
Subsection 44(1) of the Act provides that age pension is not payable if the person’s age pension rate would be nil. Subsection 55(a) of the Act provides that a person’s age pension rate is determined in accordance with Pension Rate Calculator A contained at section 1064 of the Act.
Section 1064-A1 provides for the overall rate calculation process for age pension. It is affected by a person’s income and assets. The rate calculation process at Step 11 provides that if an income and assets reduction is applicable, the greater of them is applied.
Paragraph 4.2.3 of the Guide explains how the ‘pensions assets test’ applies:
The pensions assets test applies to all pensions. The assets test is only applied where a person's assets exceed the assets free areas for full pension. If assets exceed the assets free areas, pension entitlement is assessed by:
·calculating the rate payable under the assets test, and
·comparing that with the rate payable under the income test.
The assets test only applies if it produces a lower rate of payment than the income test.
On 1 November 2019 age pension was not payable to a single person who does not own the home they live in and who has assessable assets above $785,000.
When calculating the value of a person’s assets, section 1118 sets out assets which are to be disregarded and provides:
(a) if the person is not a member of a couple—the value of any right or interest of the person in the person’s principal home that is a right or interest that gives the person reasonable security of tenure in the home;
Subsections 1118(1B), 1118(2) and 1118(2B) of the Act relevantly provide the following in dealing with the proceeds of sale of a person’s principal home:
Application of proceeds of sale of principal home
(1B)     Subsection (2) applies if:
(a)       a person sells the person’s principal home; and
(b)       either:
(i)        the person does not have a right or interest in a principal home; or
(ii)       the person has a right or interest in a principal home that the Secretary is satisfied does not give the person reasonable security of tenure in the home; and
(c)       before the end of 12 months, or any longer period determined under subsection (2B), after the sale, one or more of the following applies:
(i)        the person intends to apply the whole or a part of the proceeds of the sale to build, rebuild, repair or renovate another residence that is to be the person’s principal home;
(ii)       the person applies the whole or a part of the proceeds of the sale to build, rebuild, repair or renovate another residence that is to be the person’s principal home;
(iii)      the person intends to apply the whole or a part of the proceeds of the sale to purchase another residence that is to be the person’s principal home.
(2)       For the purposes of this Act (other than Division 1B of Part 3.10):
…
(c)       if subparagraph (1B)(c)(iii) applies—disregard the proceeds, to the extent that the person intends to apply those proceeds to purchase the other residence, until the earlier of the following times:
(i)        the period mentioned in paragraph (1B)(c) ends;
(ii)       the Secretary becomes satisfied that the person has ceased to have that intention.
…
(2B)     For the purposes of subsection (1B), the Secretary may determine, in writing, a period of up to 24 months if:
(a)       a person who has sold his or her principal home is making reasonable attempts to purchase, build, repair or renovate another residence; and
(b)       the person has been making those attempts within a reasonable period after selling the principal home; and
(c)       the person has experienced delays beyond his or her control in purchasing, building, repairing or renovating the other residence.
Subsection 1223(1) of the Act provides that where a person receives the benefit of a social security payment to which they are not entitled the amount of the payment is a debt due to the Commonwealth.
Section 1236 of the Act provides that a debt may be written off in certain circumstances. Section 1237A provides that a debt must be waived if the debt is solely attributable to an administrative error by the Commonwealth.
Section 1237AAD provides that debts may be waived where special circumstances make it desirable to waive the debt.
In addition to the Legislation, the Social Security Guide (‘the Guide’) contains departmental policy. The Tribunal will usually apply departmental policy unless there are cogent reasons not to.
CONSIDERATION
Should the asset test exemption be extended beyond 12 months?
For the period between 1 November 2018 and 31 October 2019 the Secretary has exempted the proceeds of the sale of the Chatswood property from the assets test. This is consistent with subparagraph 1118(1B)(c)(iii) and paragraph 1118(2)(c) of the Act which provide that the person’s principal home is to be disregarded for the purpose of the assets test for the initial 12 months from sale.
Ms Cheng contends that the exemption of the sale proceeds from the assets test should be extended as she has been unable to secure a suitable residential property.
Subsection 1118(2B) allows for the period in which the proceeds of the sale of a person’s principal home is disregarded for up to 24 months in circumstances where an applicant is making reasonable attempts to purchase another residence within a reasonable period. What constitutes a reasonable period or reasonable attempts is not defined in the Act. However, the Guide provides parameters and descriptions of both reasonable attempts and reasonable period.
In relation to making reasonable attempts to purchase another residence the Guide provides at 4.6.3.80:
An income support recipient would be considered to be making reasonable attempts to purchase, build, rebuild, repair, or renovate their new principal home IF they entered into some form of agreement including:
·signing a contract of sale to purchase a house, or
·purchasing or signing a contract to purchase a block of land to construct a house on, or
·signing a contract with a builder to construct or rebuild a house, or house and land package, or
·contracting or accepting a quotation from a tradesman to undertake repairs or renovations.
The income support recipient will be required to provide some documentary evidence (when the extended exemption period is being requested) to satisfy they have been making reasonable attempts.
Ms Cheng argues that she has made reasonable attempts to find a property to purchase but has been unable to find a suitable property. A suitable property would be in Chatswood, within budget, close to Chatswood Station and shopping centre, and not at risk of a collective sale to developers.
Ms Cheng has identified and considered a number of two-bedroom apartments in the Chatswood area which came to market after her own property was sold. She contends they were either unsuitable or unaffordable.
In correspondence to the Department of Social Services (‘the Agency’) dated 8 August 2020, Ms Cheng writes that she started to inspect two-bedroom properties soon after the sale of the Chatswood property on 1 November 2018. Though she did not keep the inspection sheets from these properties, she did so for properties inspected between August 2019 and July 2020. She writes that the sale of the Chatswood property was at the ‘highest point in the market’ and that almost every inspection she went to in the area was for an auction. She contends that she was not able to buy in a new development as the price guide for those properties was $1,650,000. Further, there were few older buildings on the market and she did not want to buy somewhere that may be at risk of collective sale to a developer. The prospect of a collective sale is very worrying to Ms Cheng and an important consideration when considering an older property.
In cross examination Ms Cheng confirmed that she had restricted her search to properties in Chatswood. She told the Tribunal that it was an important consideration as Ms Lloyd liked living there and it afforded proximity to ‘a lot of Chinese food’. Ms Cheng also has problems with her legs that prevent her from walking long distances. She indicated that Chinatown in the City may be a suitable location but she did not believe she could afford to live there.
Ms Cheng was asked about a number of the properties she had inspected for which she had maintained the inspection details. She confirmed that she had not made an offer on any of the properties owing to them being ‘too old’, having high strata fees, being at risk of redevelopment or too expensive.
The Guide suggests that making reasonable attempts in these circumstances might be the signing of a contract of sale to purchase a house. However, in special circumstances, as an exception, an individual may be considered to be making a reasonable attempt to purchase a new home where delays have been experienced, due to, for example, requiring council approval before being able to enter into an agreement with a building contractor.
In correspondence to the Agency submitted 4 November 2018 Ms Cheng indicates her understanding that she would be able to extend the proceeds of sale exemption beyond 12 months. She writes in part:
The fund my mother received from selling the property is not enough to buy a two-bed room unit close to Chatswood station. We are unable to drive a car, because my mother's legs are swollen and pain, and my legs are also swollen and pain because of arthritis.
I read [the] human services online pension requirements, if the pensioner exceeds certain amount of cash, the pension will be cancelled. I wish Centrelink could give my mother plenty of time for looking a two-bed room unit.
[Errors in original]
I take Ms Cheng’s correspondence, provided three days after settlement, as being an indication she did not expect to purchase a property within the 12 month exemption period provided by paragraph 1118(1B)(c).
In considering the evidence I find that Ms Cheng has limited the scope of her search for a new residence to a very specific location and set criteria including the age of the building, the internal layout, the desired location, the maintenance fees and the price. There is no evidence to suggest that Ms Cheng has attempted to build, repair or renovate a residence.
I also find that Ms Cheng did not make a reasonable attempt to purchase a property during the 12 months following the sale of the Chatswood property. I make this finding based on the 4 November 2018 correspondence indicating that she may need longer than the 12 month exemption period to find a suitable property, the 18 month agreement with the property developer to continue living at the Chatswood property for $1 per week and the paucity of evidence indicating that Ms Cheng sought to inspect properties for sale prior to August 2019.
Having found that Ms Cheng has not made reasonable attempts to purchase a new property, she does not meet the requirement in paragraph 1118(2B)(a) for the proceeds from the sale to be disregarded from the assets test beyond 12 months.
Should Ms Lloyd’s age pension have been cancelled?
As of 1 November 2019 age pension was not payable to a single person who does not own the home they live in and who has assessable assets above $785,000. Ms Lloyd’s assessable assets totalled $1,544,877 at that time. Having found that the asset exemption period should not be extended beyond the initial 12-month period, as of 1 November 2019 Ms Lloyd was not entitled to receive age pension and her age pension was correctly cancelled from this date.
Does Ms Lloyd owe a debt?
Between 1 November 2019 and 27 April 2020, Ms Lloyd was paid age pension which she was not entitled to. I am satisfied that the overpayment of age pension during this period was $10,503.16.
When Ms Cheng wrote to the Agency seeking an extension to the proceeds of sale exemption, she acknowledged the sale of the Chatswood property and the sale amount. The Agency did not amend its record of Ms Lloyd’s assets to include the sale amount at that time.
The Agency’s error came to light on 15 April 2020 when Ms Cheng sought rent assistance after the agreement with the buyer of the Chatswood property expired and she was required to pay rent of $450 per week.
Between the sale of the Chatswood property on 1 November 2018 and 31 October 2019, Ms Lloyd was deemed to have received income on her assets, including the proceeds of the sale of the Chatswood property. Though the reviewable decision affirms the debt as calculated by the Agency, the Secretary now concedes that the overpayment of age pension up until 31 October 2019 was due to administrative error on account of the Agency’s failure to update the value of Ms Lloyd’s assets. Consequently, the Secretary submits that the debt component relating to deemed income between 1 November 2018 through 31 October 2019 should be waived, reducing the debt from $28,375.20 to $10,503.16.
The evidence strongly supports a conclusion that Ms Cheng is a thorough administrator adept at managing her financial affairs and her correspondence of 4 November 2018 indicates a robust understanding of the assets test.
Nonetheless, an error was made by the Agency and the Secretary now considers it appropriate this component of the debt be waived. After much consideration, on balance I am satisfied it is appropriate to waive that portion of the debt which is attributable to deemed income.
Can the debt be written off?
In relation to the remaining debt, Section 1236 of the Act provides a debt may be written off in certain circumstances.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law; or
(b)the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
I am satisfied that Ms Lloyd’s remaining debts cannot be written off under section 1236 as none of the preconditioning criteria set out in subsection 1236(1A) are satisfied. The debts are recoverable at law. Her whereabouts are known, and it is cost effective for the Commonwealth to recover the debt.
Was the debt due to sole administrative error?

Section 1237A provides that a debt must be waived if the debt is solely attributable to administrative error:
(1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
Having determined that the debt relating to deemed income during the 12 month exemption period should be waived, the remainder of the debt is for age pension Ms Lloyd received, but was not entitled to, between 1 November 2019 and when her pension was cancelled on 27 April 2020.
Ms Cheng’s correspondence to the Agency of 4 November 2018 makes clear she was aware the exemption from the asset test was for 12 months. As such, any debt arising from 1 November 2019 was not received in good faith or due to error on the part of the Commonwealth and is ineligible to be waived under section 1237A.
Can the debt be waived due to special circumstances?
Section 1237AAD provides the right to recover all or part of a debt may be waived in certain circumstances:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)       the debt did not result wholly or partly from the debtor or another person knowingly:
(i)        making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b)       there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c)       it is more appropriate to waive than to write off the debt or part of the debt.
Each of the three limbs must be satisfied in order for the debt to be waived under section 1237AAD.
Ms Lloyd is of advanced age and requires daily assistance from Ms Cheng. However, in circumstances where she has access to over $1.5 million in liquid funds and has had the benefit of receiving age pension to which she was not entitled, I am not satisfied that the sum of her circumstances are such that it is desirable to waive all or part of her debt.
DECISION
For the reasons stated above, the decision under review is set aside and substituted with a decision that Ms Lloyd’s age pension was correctly cancelled from 1 November 2019. The overpayment of age pension arising between 1 November 2018 and 31 October 2019 is to be waived on account of sole administrative error. Overpayment of age pension after 1 November 2019 totalling $10,503.16 remains a debt to the Commonwealth to be recovered in full.

I certify that the preceding 51 (fifty-one) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member

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Associate
Dated: 18 January 2022

Date(s) of hearing: 18 October 2021

Date final submissions received: 8 December 2021

Advocate for the Applicant: Ms J Cheng

Solicitor for the Respondent: Ms C Hammerton, Services Australia

[2022] AATA 50

18 January 2022

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Statutory Construction

Remedies

Procedural Fairness

Appeal

Date(s) of hearing:	18 October 2021
Date final submissions received:	8 December 2021
Advocate for the Applicant:	Ms J Cheng
Solicitor for the Respondent:	Ms C Hammerton, Services Australia