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

The Administrative Appeals Tribunal considered a dispute between Mr Lym and the Secretary of the Department of Social Services concerning a decision to reduce Mr Lym's aged pension. The core of the dispute revolved around whether a purported loan agreement constituted a charge or encumbrance on Mr Lym's assets for the purposes of the assets test under social security legislation.

The Tribunal was required to determine whether the sum of $100,000, which Mr Lym claimed to have loaned to his son, should be treated as an asset of Mr Lym for the purposes of calculating his aged pension entitlement. Specifically, the Tribunal had to assess whether the transaction created a charge or encumbrance over Mr Lym's assets, thereby reducing their value for the assets test, or if it was a genuine loan that did not affect his assessable assets.

The Member, Mr A. Maryniak QC, reasoned that for a charge or encumbrance to exist, there must be a legal right or interest in property that secures a debt or obligation. In this instance, the Tribunal found that the documentation presented did not establish a legally enforceable charge or encumbrance over any specific asset. The purported loan was not secured against any property, and the terms did not create a legal impediment to Mr Lym accessing or dealing with his assets. Consequently, the Tribunal concluded that the $100,000 was an assessable asset of Mr Lym under the assets test. The decision under review, which reduced Mr Lym's aged pension based on this assessment, was affirmed.