Muir and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2009] AATA 644

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 644

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/1595

GENERAL ADMINISTRATIVE DIVISION		)
Re		JACK MUIR

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Dr M Denovan, Member

Date28 August 2009

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

................[Sgd]...............................

Member

CATCHWORDS

SOCIAL SECURITY – Pension Bonus Scheme – Management of family financial investment does not constitute gainful work – Work test not satisfied – Lack of understanding of the law does not constitute special circumstances – Decision affirmed.

Social Security Act 1991 (Cth), ss 9, 92C, 92U, 92X, 93

Social Security (Administration) Act 1999 (Cth), ss 21(2), 22(1)

Social Security and Veterans’ Affairs Legislation Amendment (Pension Bonus Scheme) Act 1998 (Cth)

Re Drake and Minister for Immigration and Ethnic Affairs (No.2) (1979) 2 ALD 634

REASONS FOR DECISION

28 August 2009   Dr M Denovan, Member    

1.      Jack Muir, the applicant, reached 65 years of age on 13 July 1995.  Although he had reached the age which made him eligible to claim age pension, he chose not to do so.  Over the next few years, he worked in a variety of positions—project managing and selling real estate and management rights.  He bought the management rights for the Aquarius Resort at Alexandra Headlands and managed that complex until 2003, when he sold those rights and invested in shares.  Mr Muir then worked full-time managing his share portfolio.  Mr Muir never intended to claim the age pension, however due to losses in the stock market he was forced to do so in November 2008.

2.      Age pension was granted but, on 18 March 2009, the Social Security Appeals Tribunal (“SSAT”) affirmed a decision of Centrelink which had determined that Mr Muir was not eligible for pension bonus.  The pension bonus scheme requires that a person satisfy a work test.  The main reason for the rejection of Mr Muir’s claim for pension bonus was that the time he had spent managing his share portfolio was not regarded as satisfying the work test.  Also, the scheme imposes strict time limits for making a claim.  For work performed by Mr Muir from 1998 until 2003 to be considered, a discretion to extend the time limit would need to be exercised.

3.      In order to resolve the dispute in this case, I must:

·     firstly, decide whether the applicant’s share trading satisfies the work test for the purposes of the pension bonus scheme; and

·     secondly, in relation to work performed by the applicant from 1998 until 2003, I must determine whether the discretion to allow a longer period in which to lodge the claim can and ought to be exercised.

4.      After having careful regard to the legislation and the evidence, I have decided the applicant does not meet the requirements of the pension bonus scheme.  I have therefore decided to affirm the decision under review.  I explain my reasons below.

5.       A person who defers claiming age pension that he or she is qualified for may be eligible for a single lump sum pension bonus, if certain requirements are met.

6. The legislation governing pension bonus is set out in Part 2.2A of the Social Security Act 1991 (“the Act”) and in the Social Security (Administration) Act 1999 (“the Administration Act”).

7. It is not in dispute that Mr Muir registered for the pension bonus scheme as required by s 92C of the Act, on 17 September 1998. The respondent accepted this registration with effect from the date of commencement of the scheme on 1 July 1998.

8. Section 92C of the Act also requires accrual of at least one full-year bonus period while registered as a member of the pension bonus scheme. This requires satisfaction of the work test, which is met where a person gainfully worked in that year for at least 960 hours.[1] Gainful work is described in s 92X of the Act as follows:

[1] Section 92U of the Act.

92X  Gainful work—basic rule

(1) For the purposes of this Part, gainful work is work for financial gain or reward, whether as an employee, a self-employed person or otherwise, where:

(a) the work involves a substantial degree of personal exertion on the part of the person concerned; and

(b) the work is carried on within or outside Australia.

9.      Mr Muir believes that he was gainfully employed whilst maintaining his share portfolio.  Mr Muir explained that he spent approximately ten hours a day, five days a week managing his shares.  He would check world markets and read daily releases prior to the market opening, monitor the computer during trading hours and finalise the day’s trading after 4 pm.  He also spends hours on the weekend researching.  Mr Muir borrowed approximately $1 million and at one point, his portfolio was worth approximately $2.4 million.  I found Mr Muir to be a very credible witness and I accept his evidence as truthful.

10. Mr Hamilton, for the respondent, did not take issue with any of the evidence given by the applicant. However, he submitted that the work Mr Muir performed on his share portfolio from June 2003 to November 2008 does not satisfy the work test for the pension bonus scheme, because of s 93 of the Act. That provision confirms that management of family financial investment does not constitute gainful work. Mr Hamilton further submitted that the legislation requires a person to claim the pension bonus within 13 weeks of finishing work, or of failing to meet the work test.[2]  As Mr Muir did not claim a pension bonus until November 2008, work he performed prior to June 2003 would not assist his claim.

[2] Section 22(1) of the Administration Act.

11. Section 93 of the Act reads as follows:

(1)       Unless the Secretary otherwise determines, work undertaken by a person is taken not to be gainful work for the purposes of this Part to the extent to which the work consists of the management or administration of one or more financial investments in which any of the following has a legal or equitable interest:

(a)       a member of the person's family group (see subsection (2));

(b)a company that is a family company in relation to the person (see subsection (2));

(c)the trustee or trustees of a trust that is a family trust in relation to the person (see subsection (2)).

…

(2)       In this section:

family company, in relation to a person, means a company where:

(a)the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of any or all of the members of the person's family group; or

(b)any or all of the members of the person's family group are in a position to cast, or control the casting of, more than 50% of the maximum number of votes that may be cast at a general meeting of the company; or

(c)       both:

(i)        the company has one or more shareholders; and

(ii)       each shareholder is a member of the person's family group.

family group, in relation to a person, means the group consisting of the person and the family members of the person.

12. The term “financial investment” is defined in s 9 of the Act and includes investments of the type that Mr Muir was dealing in and that he had legal interest in, namely listed securities and loans that have not been repaid. Mr Muir did not have a family trust or a family company. Even though no other family member had an equitable interest in Mr Muir’s investments, s 93(2) of the Act makes it clear that a person in his circumstances is a “family group” in their own right.

13.     Mr Muir does not dispute the fact that he had a legal interest in his share portfolio.  His position is that he was not told his work on it would not satisfy the requirements of the pension bonus scheme.  He also argues it was reasonable for him to assume that it would satisfy those requirements, as he was required to pay tax on the earnings from his work.  Mr Muir asserted that the legislation was amended some time after the scheme was introduced to exclude persons who worked solely on managing their investments.  He argued that he should therefore have a right to rely on the pension bonus scheme as it was when first introduced.

14. Mr Muir compared the work he performed on his share portfolio to other forms of employment and presented a logical and well reasoned argument as to why his work should be regarded as gainful. I accept that the work he performed managing his share portfolio would be regarded as gainful in many other circumstances but, unfortunately for him, the legislation specifically excludes management of personal investments. Contrary to Mr Muir’s misapprehension, at the time the pension bonus scheme was introduced, it was the intention of Parliament to specifically exclude work of the nature performed by Mr Muir: managing personal financial investments. Section 93 of the Act has not changed since it was introduced in 1998. The Social Security and Veterans’ Affairs Legislation Amendment (Pension Bonus Scheme) Act 1998 (“the amending Act”) amended the Act to introduce the pension bonus scheme. The explanatory memorandum for the Bill of the amending Act reads as follows:

Under the scheme, a person who qualifies for an age pension (or corresponding payment from the Department of Veterans’ Affairs ) but defers claiming that payment may be entitled to receive a tax free lump-sum bonus payment, provided that the person passes the work test (ie the person or their partner works at least an average of 20 hours per week over 48 weeks of the year – equivalent to 960 hours per year – or the pro rata equivalent for a part-year) during relevant bonus periods …

New subsection 93(1) provides in general that, unless the Secretary otherwise determines, work which consists of the management or administration of one or more financial investments (see definition of “financial investment” in subsection) is taken not to be gainful work.  The rationale for this rule is that the pension bonus scheme is designed to encourage people to participate in the workforce, past their normal retirement age, in employment which goes beyond mere decision-making processes relating to the investment of their assets.[3]

[3] Explanatory Memorandum to the Social Security and Veterans’ Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998, see Outline and  p 15.

15.     As Mr Muir was not engaged in any other work from June 2003 except controlling his own financial investment, he does not satisfy the work test after that date.

16.     As stated earlier, Mr Muir worked in real estate for a number of years—until June 2003.  The respondent has made no finding as to whether part or all of this work would meet the work test, presumably because the legislation requires a person to claim the pension bonus within 13 weeks of finishing work or failing to meet the work test.[4]

[4] Section 22(1) of the Administration Act.

17.      In certain special circumstances, the period of 13 weeks can be extended.[5]  It was Mr Hamilton’s submission, however, that I had no jurisdiction to consider the possibility of extending the time limit.  He submitted that, whilst the SSAT had considered the issue, they in fact also had no jurisdiction to do so because the original decision under review had not addressed that issue.

[5] Section 21(2) of the Administration Act.

18.     The original decision maker concluded that Mr Muir’s claim for pension bonus could not be granted.  However, unlike in a judicial review, the Tribunal’s jurisdiction is not limited to the reasoning in the original decision.  This is because Administrative review is a full merits review to determine what is the correct or preferable decision.  Such review is never limited by what the previous decision maker canvassed in their reasoning.

19. Section 21(2) of the Administration Act provides that in special circumstances a longer period for making a claim can be granted. Special circumstances are not defined in that Act. The Guide to Social Security Law (“the Guide”), published by the respondent, sets out policy guidelines and provides as follows:

The intention of the late claims provisions is to allow acceptance of late claims from members who have not been able to lodge a claim within the time limits due to special circumstances, and not for members who deliberately claim late in order to get a higher bonus. The member should be asked for their reasons for making a late claim for pension bonus and evidence should be provided, where applicable/appropriate.

The reasons for acceptance of a late claim are different to those that apply to late PBS registrations.

Examples may include cases where a member:

·     has poor numeracy or literacy skills,

·     was ill,

·     was located in a remote area,

·     performed irregular work that made it difficult for the member to determine the lodgment period,

·     was helping a close family member suffering from a serious illness,

·     has experienced the death of a close family member,

·     had experienced a major disruption to their living arrangements (such as their home being fully or partially destroyed or the member or member's partner moved into a nursing home).

The list above is not a full list of acceptable reasons to accept a late claim. Each case should be judged on its merits.

Before accepting a late claim, the delegate of the Secretary should consider how late the claim is, and whether this is reasonable when considering the event/s that caused the member to claim late. For example, if a person was ill for 4 months after ceasing work, it would not be reasonable for the claim to be 12 months late (unless there were other special circumstances that contributed to the delay).[6]

[6] The Guide at 3.4.7.80.

20.     A consistent line of authority is important, and the Tribunal will usually apply the Guide unless there are cogent reasons for not doing so.[7]  Mr Muir’s reasons for not lodging an application within 13 weeks of June 2003 are both understandable and commendable.  He did not lodge his application for pension bonus then because he intended to remain financially independent through his own endeavours, and at that time he had no intention of claiming any type of social security benefit.  As Mr Muir was still earning money sufficient to support himself, he did not turn his mind to applying for either the pension or pension bonus at that time.  Whilst I consider Mr Muir's circumstances most unfortunate, I do not consider that a lack of understanding of the law is a sufficient reason to warrant the exercise of the discretion.

[7] Re Drake and Minister for Immigration and Ethnic Affairs (No.2) (1979) 2 ALD 634 at 639-645.

conclusion 

21.     In summary, Mr Muir did not apply for pension bonus within 13 weeks of ceasing gainful work, and his circumstances are not such that would justify exercising the discretion to extend the time limit for claiming from 13 weeks to more than five years.

22.     The Tribunal affirms the decision under review.

I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member.

Signed:....................[Sgd]..........................................................
              Mátyás Kochárdy, Research Associate

Date of Hearing  28 July 2009 
Date of Decision  28 August 2009
Applicant was self-represented  
Solicitor for the Respondent     Mr Bob Hamilton, Departmental Advocate