Ong and Secretary, Department of Education, Employment and Workplace Relations

[2011] AATA 161

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 161

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/4430

GENERAL ADMINISTRATIVE DIVISION		)
Re		PHUC ONG

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Ms N Bell, Senior Member

Date10 March 2011  

PlaceSydney

Decision The decision under review is affirmed.  

...................[sgd]...........................

Ms N Bell, Senior Member  

CATCHWORDS – Social Security - Newstart Allowance - unrealisable asset - controlling interest in this private company - reasonableness

Social Security Act 1991

REASONS FOR DECISION

Ms N Bell, Senior Member

1.      This application was reviewed on the papers. Both the Applicant, Mr Phuc Ong, and the Respondent, the Secretary, Department of Education, Employment and Workplace Relations, consented to this application being determined without a hearing.

2.      In May 2010, Mr Ong lodged a claim for Newstart Allowance. He had been the owner of a newsagency and in 2004 he had borrowed $340,000 from the Commonwealth Bank, using his home as security and a registered a company as the investor and borrower. He and his wife, Mrs Anh Ong, are the only directors and shareholders of that company. In 2008, Mr Ong became ill and ceased to work. He sold the newsagency. Then the stockmarket crashed and he lost approximately $200,000 in share value. At the time of his claim, the value of the shares was approximately $450,000. The loan stood at approximately $308,000. The relevant asset cut-off for payment of Newstart Allowance was $252,500.00 for a couple.

3.      Centrelink rejected Mr Ong’s claim for Newstart Allowance because, it contended, Mr Ong’s assets took him beyond the statutory cut off point for payment of Newstart Allowance.

4.      The following facts are not in dispute:

·      Mr and Mrs Ong are directors and equal shareholders of Itgen Australia Pty Ltd:

·      Mr and Mrs Ong own a unit at Concord;

·      Itgen Australia Pty Ltd has a loan from the Commonwealth Bank which has a security over the property at Concord and Mr and Mrs Ong are guarantors for the loan;

·      Itgen Australia Pty Ltd used the loan funds to purchase shares in publicly listed companies as a retail investor;

·      Mr and Mrs Ong jointly own 2000 shares in Foster’s Group Limtied and 321 shares in Macquarie Group Limited;

·      On 3 August 2010, Mr and Mrs Ong’s assets were as follows:

Savings Accounts:              $7,096

Shares:  $25,308

Other Assets:  $18,000

Itgen Australia Pty Ltd        $435,546

Total:  $485,950

5.      Mr Ong contended that his assets should be offset by the amount of the loan from the Commonwealth Bank and that the shares should be regarded as an unrealisable asset, given that he and his wife would make a loss of some $200,000 were the shares to be sold now. The Secretary contends that because the loan was secured against Mr Ong’s principal home and because that home is required to be disregarded in the calcualtion of assets, no offset is available. The Secretary also contends that shares, which by definition are readily saleable on the stockmarket, cannot be regarded as an unrealisable asset.

6.      The issues for me to consider in determining whether Mr Ong’s assets take him beyond the cut off for payment of Newstart Allowance, are therefore whether:

(a)the loan from the Commonwealth Bank can be offset against the company’s shares; and

(b)the shares attributable to Mr Ong may be regarded as an unrealisable asset.

can the loan be offset against the shares?

7. The shares are owned by Itgen Australia Pty Ltd. Mr Ong is a 50% shareholder of the company. It is uncontroversial that the combined effect of sections 1208E, 1207X, 1207N, 1207P and 1207Q of the Social Security Act 1991 is that 50% of the assets of Itgen Australia Pty Ltd are attributed to Mr Ong, given his 50% controlling interest in this private company.

8.      The loan was taken out by Itgen Australia Pty Ltd, with Mr and Mrs Ong each standing as guarantor. Their principal home was provided as security for the loan.

9.      Section 1121(1) of the Act provides that the value of a secured loan may be deducted from the value of an asset against which it is secured. However, section 1121(3) provides that this offset does not apply to assets that are to be disregarded under section 1118. Section 1118(1) provides for a person’s principal home to be disregarded in the calculation of a person’s assets. It follows that the offset is not available.

can the shares be regarded as unrealisable assets?

10.     Section 11 (1) of the Act provides:

“unrealisable asset” has the meaning given by subsections (12), (13) and (14).

11.     Subsections 11 (12) and (13) provide:

(12) An asset of a person is an unrealisable asset if:

(a) the person cannot sell or realise the asset; and

(b) the person cannot use the asset as a security for borrowing.

(13)For the purposes of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:

(a) the person could not reasonably be expected to sell or realise the asset; and

(b) the person could not reasonably be expected to use the asset as a security for borrowing.

12.     There is no evidence of any bar to the selling of the shares on the stock exchange. It would be a commonplace transaction. The shares are realisable.

13.     There is a view that the notion of “reasonableness” in subsection 11(13)(b) applies only in the context of a social security pension – as opposed to an allowance or a benefit. If that is so, then there could be no inquiry as to whether it would be reasonable to expect Mr Ong to sell the shares owned by the company.

14.     However, even if the “reasonableness” inquiry could be made, the sole basis for Mr Ong’s assertion that the shares are unrealisable is that they have decreased in value since their purchase and he would lose gains that were made, but have now been lost, since he purchased them. I do not consider that this would make it unreasonable to sell them. The shares were purchased as an investment and they have gone the way of many such investments since the global economic crisis. No particular sentimental value attaches to the shares; no third party would be adversely affected by their sale; there is no evidence that they are relied on as a source of income, although I note some dividends would be paid.

15.     Mr Ong submitted, with his consent to the determination of this application on the papers, that the effect of the law is harsh and unjust. Mr Ong said that he has worked hard and paid his taxes for many years but now needs some assistance because he has been sick.

16.     I appreciate that Mr Ong feels in need of help now after years of productive self reliance. It is not an uncommon view that those who have worked hard and reaped the benefits should be entitled to help in harder times. However, public monies for income support are limited and the purpose of assets assessment is to determine where the most need lies. I must decide in accordance with the provisions of the Act and with the need to ensure that limited public funds are available to those most in need because they have no realisable assets.

decision

17.     The decision under review is affirmed.

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member

Signed: ...................[sgd]...........................................................
  Associate

Date of Decision  10 March 2011