MWPL and Secretary, Department of Social Services (Social security second review)

[2025] ARTA 1499

MWPL and Secretary, Department of Social Services (Social security second review) [2025] ARTA 1499 (19 August 2025)

Applicant/s:  Ms MWPL

Respondent:  Secretary, Department of Social Services

Tribunal Number:                2024/4147

Tribunal:Senior Member M Kennedy (second review)  

Place:Adelaide 

Date:19 August 2025  

Decision:The Tribunal sets aside the decision under review and substitutes a decision that there was no loan in existence and Ms MWPL’s rate of Disability Support Pension at material times is to be calculated on the basis that there was no such asset.

This decision is to take effect only from 20 September 2023, noting that the limitation on the date of effect will mean that Ms MWPL receives no practical benefit from the decision.

Statement made on 19 August 2025 at 11:32am

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 201(1A) - 201(1B) of the Social Security (Administration) Act 1999

Catchwords

SOCIAL SECURITY – Disability Support Pension – rate – assets test – loan as an asset – where moneys given to third party –  loan subsequently found to be irrecoverable due to expiry of statute of limitations – circumstances of transaction found to be crime of deception – victim of crime of deception does not have a failed investment or underperforming loan – loan retrospectively found not to exist – new evidence of circumstances on review is not a change to the nature of transaction – delay in seeking AAT review – limitation on date of effect – decision set aside – no practical benefit where rate was already increased by date of review application.

Legislation

Social Security Act 1991
Social Security (Administration) Act 1999

Limitations of Actions Act 1958 (Vic)

Cases

Secretary, Department of Social Security v Brian McLaughlin & Anor. [1997] FCA 1456

Secondary Materials

Guides to Social Policy Law Social Security Guide Version 1.331

Statement of Reasons

1. On or about 7 February 2018, Centrelink decided that Ms MWPL rate of disability support pension (DSP) was to be calculated on the basis that she had an asset in the form of an unpaid loan to a Mr “S” in the amount of $440,000.  The existence of this asset had a very substantial impact of Ms MWPL’s rate of DSP under the asset test.

2. As has now become apparent Ms MWPL was the victim of a scam and probably the victim of a crime in the relation to the money she provided to Mr S.  None of the funds have ever been repaid.  According to Mr B, who is representing his sister in these proceedings, Mr S has recently been arrested by Victoria Police in relation to the circumstances and charges are pending. 

3. On review, on 20 October 2018, an authorised review officer reviewed the decision about Ms MWPL’s rate and the identification of a loan as an asset.  The authorised review officer found the loan existed and could not be disregarded because fraud had not been proved in court nor had Ms MWPL taken action through the courts to have the loan repaid.  The authorised review officer further noted that such considerations could in any event only apply when a person made an application to be paid under the hardship provisions.

4. That decision was not the subject of an application to the Administrative Appeals Tribunal (AAT) until nearly 5 years later, on 20 September 2023. 

5. The AAT affirmed Centrelink’s decision on 6 May 2024, observing that in 2018 Ms MWPL had taken insufficient action to have the loan disregarded.  However, the AAT observed that from August 2021 a real question arose as to whether the Limitations of Actions Act 1958 (Vic) might mean that no action to enforce repayment of the loan could now be brought.  The AAT further observed that the statutory scheme pertaining to accessing financial hardship rules (that permit disregarding unrealisable assets in certain circumstances) expressly required that a person lodge an application in an approved form for the provisions to apply, and this did not appear to have been done in Ms MWPL’s case.

6. Ms MWPL applied to the AAT for second review on 18 June 2024. On 14 October 2024, the AAT was abolished and the Administrative Review Tribunal commenced operations. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review that were not finalised by the Administrative Appeals Tribunal before 14 October 2024 were taken to be applications for review to the Administrative Review Tribunal (hereafter the Tribunal). The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed.

7. Following the observations of the AAT in relation to the statute of limitations potentially rendering any debt unrecoverable from August 2021, Centrelink examined Ms MWPL’s records and identified a contact of 8 June 2022 which it then treated as a request for review.  Through that review, Centrelink adopted the observations of the AAT, and decided that a rate could be struck from 8 June 2022 that did not take into account the loan as an asset from that date.  Substantial arrears were paid to Ms MWPL as a result of Centrelink’s actions in that regard.  That decision however is not before me.  I note that Mr B argues that perhaps earlier dates of contact might justify further arrears, but any arguments in that regard are outside the scope of these proceedings and should be the subject of a request for review of Centrelink’s subsequent decision.

   Legislative framework

8. DSP is paid subject to an income test and an assets test. The rate of DSP payable is the lowest rate produced by either test: sections 117 and 1064-A1 of the Social Security Act 1991 (the Act).  The assets test is provided for in section 1064-G1 of the Act and requires the value of a person’s assessable assets to be identified.  By way of example, in February of 2018…

9. Section 11 of the Act defines an asset as property or money (including property or money outside Australia). Section 1122 of the Act expressly provides that if a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of the Act includes so much of that amount as remains unpaid, but does not include any amount payable by way of interest.

10. Furthermore, under section 9 of the Act, a loan that has not been repaid in full is also a ‘financial investment’.  A ‘financial investment’ is a ‘financial asset’.  Financial assets are ‘deemed’ to earn income (section 1077 of the Act). 

11. Departmental policy[1] sets out a number of circumstances where the Department will accept a loan no longer exists. Generally speaking, these examples reflect general legal principles and/or the provisions of the Act. Relevantly, a loan no longer exists if it is repaid, the borrower is bankrupt, the lender forgives the loan, the lender takes a loan contract to court to have it enforced and obtains a court order to allow collection of the money, the lender takes a  loan contract to court to have it enforced and is unsuccessful, or the period specified in the relevant state Statute of Limitations has elapsed since the date of the first breach of the loan contract.

    [1] Guides to Social Policy Law Social Security Guide Version 1.331 - Released 11 August 2025, 4.6.5.65 Loans that no longer exist

12. I note that recognition that a transaction believed by the payer to be a loan but has in fact  been induced by fraud is not listed in the Department’s policy as a circumstance in which a loan can be taken not to exist, but it is mentioned as a basis in which a loan can be disregarded under other provisions. 

13. The question in that regard is whether a transaction believed to be a loan by one party but that has in fact been induced by fraud in the perpetration of a crime of deception by the other party, ever a loan at all?

14. Where a loan is considered to exist, the social security law makes provisions for circumstances where the application of the assets test causes financial hardship. Relevantly, the case of pensions such as DSP, sections 1129 and 1130 set out the scheme.  As observed by the AAT in the equivalent section 1131 (pertaining to social security benefits), it is an essential requirement as to form before assets can be disregarded under this scheme that the person lodge with the Department, in a form approved by the Secretary, a request that the section apply to the person.

15. In circumstances where that requirement as to form is complied with, an asset may be considered to be an unrealisable asset in accordance with subsections 11(12) and (13) of the Act.  In that regard, an asset is unrealisable if the person cannot sell or realise the asset, and the person cannot use the asset as a security for borrowing, or in the case of a pension the person could not reasonably be expected to sell, realise or use the asset for borrowing.

16. In this way, the scheme referred to as ‘the hardship rules’ may be used to disregard the value of an unrealisable asset such as a failed loan.  Departmental policy[2] suggests that for an investment to be considered unrealisable in this regard, the investor must have started to take all reasonable action to get their capital back.  The Department’s policy also addresses circumstances in which fraud is involved, recognising that a person may have considered they had made an investment (such as a loan) but the arrangement may be a sham.  The policy suggests that once it has been established that money has been misappropriated and no investment exists, no asset value is ‘maintained’.  The policy suggests that evidence establishing fraud may include the judgment of a court, statements by a receiver and statements by the Australian Securities and Investment Commission.

    [2] [2] Guides to Social Policy Law Social Security Guide Version 1.331 - Released 11 August 2025 4.6.5.110 Failed financial investments

17. Finally, as to the legislative framework relevant to this review, section 147 of the Social Security (Administration) Act 1999 modifies the Administrative Review Tribunal Act 2024 to mirror equivalent provisions that limit the favourable date of effect of a successful review outcome in circumstances where a person has not exercised their review rights within 13 weeks of being notified of a decision.

18. Specifically, item 8 provides of section 147 of the Administration Act essentially and relevantly provides that:

    ·      If a reviewable decision is made in relation to a social security payment; and

    ·      A notice is given to the person informing the person of the original decision; and

    ·      More than 13 weeks after the notice is given, the person applies for first review of the original decision; and

    ·      The review is successful; then

    ·      The favourable determination takes effect only from the day on which the application for ART review was made.

19. Essentially, this means that no effect could be given to any favourable outcome prior to 20 September 2023, by which time Centrelink had already disregarded the loan and increased Ms MWPL’s rate.

    Consideration

20. Mr B has helpfully summarised the contentions he advances on behalf of his sister, posing the following issues for determination:

    ·Whether the funds transferred to Mr S should be classified as a loan for social security purposes;

    ·Whether Ms MWPL’s lack of understanding and the fraudulent nature of the transaction invalidate the existence of a loan contract.

    ·Whether Centrelink failed in its duty of care by not informing Ms MWPL of the hardship provisions, ignoring evidence of fraud and delaying the application of the Tribunal’s decision.

    ·Whether Ms MWPL is entitled to back pay from the date her pension was reduced given Centrelink accepts the loan was fraudulent to begin with and ultimately irrecoverable.

    ·Whether Ms MWPL is entitled to back pay from 20 October 2018 as the ARO did not assess the situation correctly.

    ·Whether Ms MWPL is entitled to back pay from August 2021 per the AAT’s findings; and

    ·Whether compensation under the CDDA scheme (the scheme for Compensation for Detriment caused by Defective Administration) is warranted.

21. As discussed during the hearing, the Tribunal does not have jurisdiction or authority to address all of the matters Mr B has posed for resolution. It is important to bear in mind that these proceedings are a review of the decision of the AAT of 6 May 2024, being a second review of an eligible social services decision within the meaning of Part 5A of the Administrative Review Tribunal Act 2024 and through the operation of the Transitional Act. It is not a continuation of a general process whereby Ms MWPL’s legitimate grievances may be addressed at large.

22. The decision under review is a decision about Ms MWPL’s rate of DSP that was made on or about 7 February 2018, although the basis of that decision insofar as it pertained to the existence of the loan as an asset continued to impact every rate decision thereafter.  Ultimately, I must decide whether the decision of the AAT was the correct or preferable decision in that regard.

23. Another aspect of this matter that must also be understood is that the delay between the decision of the ARO (20 October 2018) and the application for review in the AAT (20 September 2023) will have consequences that would deprive any successful review in that regard of having practical utility in circumstances where Centrelink has already increased Ms MWPL’s rate of DSP from 8 June 2022, and the date of effect of any favourable determination arising from these proceedings could not be before 20 September 2023.  I will elaborate on this aspect later in these reasons.

24. I turn to review the matter by reference to the questions posed by Mr B in his written submissions.

    Whether the funds transferred to Mr S should be classified as a loan for social security purposes and whether Ms MWPL’s lack of understanding and the fraudulent nature of the transaction invalidate the existence of a loan contract.

25. Ms MWPL’s argument in this regard is essentially that the transaction that took place between Ms MWPL and Mr S should not be viewed as a loan agreement because Mr S had fraudulent intent and Ms MWPL lacked contractual understanding.

26. Ms MWPL has spina bifida and related medical issues. She is a vulnerable person.  She came to be in possession of the funds as a result of her husband’s untimely death in a motor vehicle accident in 2012.  It is asserted that Mr S befriended, deceived and manipulated Ms MWPL to extract the funds.  In the hearing, Mr B noted there was no written evidence of a loan contract, no clear terms as to its repayment and no security required.  It is in these circumstances that it is contended that I should find that no loan ever existed.

27. The documentary evidence indicates that at about the time the decision was made to reduce Ms MWPL’s rate of DSP due to the existence of the loan as an asset, Ms MWPL had written to Centrelink describing the transaction as a loan but also expressing the view that she will be unlikely to receive any repayment, as she by then believed Mr S to be a con artist.[3]  Ms MWPL’s statement to Centrelink was supported by evidence of a bounced cheque from Mr S in 2014[4], correspondence from Mr S to Ms MWPL to the effect that he was awaiting settlement from the sale of property, and a written promise to pay  $55,000 dated 1 April 2014.[5]  As I observed in the hearing, a letter of demand issued by Ms MWPL through a solicitor on 19 April 2018 also refers to the arrangement as being a loan[6].  I note also that on 19 April 2018 Ms MWPL reported the incident to police but received little assistance at that time.[7] In early 2018, Centrelink had asked for evidence of any legal action taken to try and recover the loan, and queried whether it had been reported to police.

    [3] T36

    [4] T42

    [5] T53

    [6] T67

    [7] T70

28. As mentioned above, more recently the police were again approached and the matter apparently investigated more thoroughly.  Mr B has given evidence that the police arrested Mr B and the file is with the DPP with a view to laying charges.  I accept his evidence in that regard.

29. Having taken into account all the evidence, including significantly Mr B’s evidence that Mr S has been arrested and a file is with the Director of Public Prosecution and charges are pending, I have concluded (on the basis of satisfaction on the evidence before me) that:

    ·Ms MWPL believed at the time of the transactions that she was lending the money to Mr S; but

    ·Mr S had fraudulently induced her into that state of belief and had no intention of ever repaying the funds. 

30. As to whether Ms MWPL therefore had a loan as an assessable asset, consideration in the social security context of the meaning of a ‘loan that has not been repaid in full’ identifies a distinction between a loan and a gift, with a loan entailing a contractual obligation and an intention in the receiving party to repay[8]: Secretary, Department of Social Security v Brian McLaughlin & Anor.[9]

    [8] See generally the discussion at [9.08] of Sutherland and Anforth, Social Security and Family Assistance Law, 4^th ed.

    [9] [1997] FCA 1456 (18 December 1997)

31. It is clear enough from the documentary evidence that the money was not a gift, in that Ms MWPL clearly expected the money to be repaid.

32. Given the extent to which the matter has now proceeded in relation to police investigation, arrest and consideration of charges, I am satisfied to view the transactions for present purposes in the context of Ms MWPL being the victim of crime, probably a crime of obtaining advantage by deception or similar.  I accept that at the time of Centrelink’s decisions, and at the time of the AAT’s decision these circumstances were less clear, and no part of my conclusion as to the facts is a criticism of the findings of previous decision makers in that regard given the information available to them at the time.

33. However, it is not unusual in the course of review proceedings that further evidence comes to light such that findings as to the nature of circumstances changes in light of that further evidence.  I have taken into account the evidence of subsequent events, in particular Mr S’ arrest and the evidence that it is possible that he will be charged with offences to inform my findings as to whether Ms MWPL had a loan as an asset at material times.  To put this another way, I proceed on the basis that the evidence relevant to the nature of the transactions has changed over time, but the inherent nature of what has taken place has not changed. Limitations of Actions Act 1958 (Vic).  In this regard I apply the principle in Shi v Migration Agents Registration Authority[10] to the effect that I must take into account evidence of the circumstances probative to the rate determination of c.7 February 2018 even if that evidence has come into existence subsequently.  In this regard, my relevant task is in part to identify whether or not a loan existed for the purpose of applying the assets test at that time.  I see nothing in the scheme of the legislation pertaining to rate calculations or the identification of assessable assets that requires me to restrict my consideration to only the evidence that was before previous decision makers or excludes evidence of subsequent events that may be probative to that assessment.

    [10] (2008) 235 CLR 286

34. The question therefore arises as to what the consequence is for the characterisation of the transaction(s) as a loan for the purposes of section 1122 of the Act if it is subsequently established that Mr S, as the receiver, while fraudulently representing that they would repay the funds, did so in the course of the commission of a crime of deception against Ms MWPL and never intended to make any repayments.  Does that state of affairs mean that what was once understood to be a loan in fact never had that characteristic?

1. It is a difficult question in my view, and I have been unable to identify clear guidance in authorities.  Turning back to the text of the Act, section 1122 of the Act focuses on the person, the lender, and the act of lending an amount, but this focus is circular in that it introduces essentially the same question as to whether a person ‘lends’ an amount to a recipient in circumstances where they have fraudulently been induced to do so and the recipient has no intention of repaying the amount.  

2. The alternative characterisation of the circumstances as a failed investment or a non-performing loan is very unattractive.  Once satisfied that funds have been lost as a result of the perpetration of a crime, I am not satisfied to assign to the circumstances the description of a ‘failed investment’ or ‘non-performing loan’.

3. On balance, and only with the benefit of the evidence of further developments, I am not satisfied that Ms MWPL lent moneys to Mr S at any material time, now that I am satisfied on the evidence before me that Mr S had fraudulently induced her to do so in circumstances that have led to his arrest and possible prosecution for offences of deception.

4. The reference in Departmental policy as to the consequences of fraud appear in the context of the hardship rules, and appropriately in my view call for somewhat conclusive evidence establishing misappropriation of funds before the conclusion can be reached that what has taken place was no investment.   In my view, if the evidence is sufficiently clear to demonstrate there has been misappropriation of funds, theft or the obtaining of the funds through deception with no intention on the part of the recipient that they will ever be repaid, the person has not lent the money within the meaning of section 1121 of the Act, and there is no loan for social security purposes in respect of the lost funds.

5. As this case demonstrates, fact finding about such matters can be difficult, and reasonable perceptions change as further information comes to light.  Indeed it appears that the perception of the victim and those advising her also changed over time. However, as I am now satisfied that what transpired was not the extension of a loan to Mr S, nor any form of investment that was to subsequently fail, I consider that Ms MWPL did not have the loan as an assessable asset or a financial investment at any material time.  The rate decision that was made on that basis is therefore incorrect in my view.

   Whether Ms MWPL is entitled to back pay from the date her pension was reduced given Centrelink accepts the loan was fraudulent to begin with and ultimately irrecoverable. Whether Ms MWPL is entitled to back pay from 20 October 2018 as the ARO did not assess the situation correctly.

6. My conclusion set out above that no loan ever existed in the circumstances of Ms MWPL can now being understood to be the victim of a crime would mean that there was not at any material time an asset affecting her rate of DSP of that nature.  The removal of an asset from the rate calculation would result in an increase to the rate.

7. However, as explained above, the date of effect of any favourable determination such as a rate increase determination where it arises from a review is affected by the legislative provisions that serve to limit the date of effect of favourable determinations arising from review where review rights have not been exercised within 13 weeks of a person being notified of the reviewable decision.

8. This means in practice in this case that no practical effect can be given to my conclusion that the loan did not exist.

9. In submissions, Mr B questioned whether such restrictions applied if it could be established that the original decision (that is, the decision of the ARO) was wrong, but is in the nature of a person obtaining a favourable decision on review that the decision being reviewed was, if not ‘wrong’, at least not correct or less preferable based on the evidence now available.  As I have explained, I cannot criticise the findings of earlier decision makers in circumstances where my view of the facts has been influenced substantially by events that had not happened at the time those decisions were made.

10. The provisions limiting the date of effect of favourable determinations where review was not requested within 13 weeks (in this case, section 147 of the Administration Act) do not encompass any discretion as to their application. In this way, Ms MWPL is not entitled to back pay.

11. Finally, I note that Mr B points to a particular electronic file note of 25 September 2017 as a finding that there was no loan agreement and that Ms MWPL had been conned.  I have examined that record and consider the record is amenable to different interpretations, one of which is the officer was merely noting what Ms MWPL had said and the note itself was not a record of any findings or decision.

    Whether Centrelink failed in its duty of care by not informing Ms MWPL of the hardship provisions, ignoring evidence of fraud and delaying the application of the Tribunal’s decision. Whether compensation under the CDDA scheme (the scheme for Compensation for Detriment caused by Defective Administration) is warranted.

12. As discussed at the hearing, the Tribunal does not have jurisdiction or authority to make findings or recommendations in relation to the CDDA scheme.  Similarly, the Tribunal’s role does not generally encompass enquiring into and reaching findings about the nature and extent of any legal duty of care the Secretary or Centrelink may owe to its customers.

13. Mr B’s case in this regard is essentially that Ms MWPL is a very vulnerable person, and had been in contact with Centrelink on a number of occasions experiencing and expressing distress and financial hardship due to her reduced rate of DSP.  Mr B contends that Ms MWPL provided information consistent with her being the victim of fraud, and yet Centrelink did not suggest an appropriate course of action was to submit an application under the hardship rules or assist Ms MWPL to lodge one.  In this way Mr B suggests that Ms MWPL suffered detriment in not having the loan disregarded earlier under those provisions and argues that this is due to defective administration.

14. I have noted Mr B’s contentions in this regard.  Ms MWPL and Mr B may wish to pursue an application for compensation under the scheme with Centrelink.

Date(s) of hearing:	12 August 2025
Solicitors for the Respondent:	Mr de Uray, Services Australia