Packett and Secretary, Department of Social Services (Social services second review)
[2015] AATA 1009
•23 December 2015
Packett and Secretary, Department of Social Services (Social services second review) [2015] AATA 1009 (23 December 2015)
Division
General Division
File Numbers
2015/1094
2015/1097
Re
Geoffrey Packett
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member Dr Teresa Nicoletti
Date 23 December 2015 Place Sydney The decision under review is affirmed.
.....................[SGD]...................................................
Dr Teresa Nicoletti
Senior MemberCATCHWORDS
SOCIAL SECURITY – age pension – ineligible homeowner – property held on trust – whether Applicant is an ineligible homeowner – ordinary income – whether payments received from a lodger constitute ordinary income – decision affirmed.
LEGISLATION
Social Security Act 1991 (Cth) ss 8(1), (4)–(5), (8), 11(4), 13(1), 1064(1), 1064-E1, 1070, 1070A, 1070C
Real Property Act 1900 (NSW) s 42
CASES
Breskvar v Wall [1971] HCA 70
SECONDARY MATERIALS
Guide to Social Security Law pt 4.3.8.40
REASONS FOR DECISION
Senior Member Dr Teresa Nicoletti
23 December 2015
On 15 March 2013, the Department sent a letter to Mr Packett requesting that he contact the Department to ensure that he was receiving the correct rate of payment in relation to his Age Pension.
On 21 March 2013, the Department contacted Mr Packett by telephone, following which a Rent Certificate was sent to Mr Packett along with a request for further information about a trust account held with the Greater Building Society.
On 5 April 2013, Mr Packett responded to the Department’s request and provided information about the bank account he held with the Greater Building Society.
On 19 June 2013, the Department sent a request for information to the Greater Building Society, and also issued another rent certificate to Mr Packett.
On 10 July 2013, the Greater Building Society responded to the request for information and provided copies of statements for accounts held by Mr Packett.
On 12 July 2013, Mr Packett lodged a rent certificate to determine his eligibility to receive rent assistance.
On 26 July 2013, Centrelink decided that Mr Packett was an ineligible homeowner and was therefore not entitled to receive rent assistance in accordance with the Social Security Act 1991 (Cth) (the Act). On 30 July 2013, the Department contacted Mr Packett by telephone and advised him that he was not eligible for rent assistance because he was a homeowner.
On 1 April 2014, the Department sent Mr Packett a request to complete a Homeowner Questionnaire.
On 7 April 2014, the Department received a completed questionnaire from Mr Packett with an accompanying letter.
On 13 June 2014, the Department decided that the payment Mr Packett received from a lodger was income for the purposes of the Act. At this time, Mr Packett was also asked to provide further information about the nature of his interest in his home at Salamander Bay, New South Wales. On the same day, the Department sent notice of its decision regarding Mr Packett’s ongoing rate of payment.
On 9 July 2014, the Department received a letter from Mr Packett which provided information about his late mother's will and the property at Salamander Bay.
On 21 July 2014, Mr Packett requested a review of the decision to treat the amount paid by the lodger as income and to not pay him rent assistance.
On 16 September 2014, the Department’s Authorised Review Officer (ARO) affirmed the decision to treat the money received by the lodger as income, and also affirmed the decision that Mr Packett did not qualify for rent assistance.
On 9 December 2014, Mr Packett sought review of the ARO’s decision by the Social Security Appeals Tribunal (SSAT).
On 30 January 2015, the SSAT affirmed the decision of the ARO, and decided that:
(a)Mr Packett was not eligible for rent assistance; and
(b)70% of the amount that Mr Packett received for lodgings was deemed to be income under the Act.
On 10 March 2015, the Applicant submitted an application to this Tribunal for review of the SSAT’s decision.
ISSUES
The issues that this Tribunal must decide are whether:
(a)Mr Packett satisfies the eligibility criteria for rent assistance as set out in the Act; and
(b)the money received by Mr Packett from a lodger is income for the purposes of the Act.
LEGISLATION
Part 3.7 of the Act deals with rent assistance, which is a supplementary payment added to the rate of a person's social security payment (see sections 1070 and 1070A of the Act).
The requirements for eligibility for rent assistance are set out in section 1070C of the Act. Paragraph 1070C(b) provides that in order to be eligible for Rent Assistance, the person must not be an 'ineligible homeowner'.
Subsection 13(1) of the Act relevantly defines 'ineligible homeowner':
"ineligible homeowner" means a homeowner other than:
(a)a person who is a homeowner by virtue of paragraph 11(4)(c); or
(b)a person who:
(i) is absent from the person's principal home, in relation to which the person is a homeowner; and
(ii) is personally providing a substantial level of care in another private residence for another person who needs, or in the Secretary's opinion is likely to need, that level of care in a private residence for at least 14 consecutive days; and
(iii) has been absent from the principal home for less than 2 years while providing care as described in subparagraph (ii); or
(c)a person who is in a care situation but is not residing in a retirement village; or
(d)a person who pays amounts for the use of a site for a caravan or other vehicle, or a structure, that is the person's principal home; or
(e)a person who pays amounts for the right to moor a vessel that is the person's principal home.
The term 'homeowner' is further defined in section 11(4) of the Act, and provides:
(4) For the purposes of this Act:
(a)a person who is not a member of a couple is a homeowner if:
(i) the person has a right or interest in the person's principal home; and
(ii) the person's right or interest in the home gives the person reasonable security of tenure in the home; and
...
(c)a person (whether a member of a couple or not) is a homeowner while:
(i) the whole or a part of the proceeds of the sale of the person's principal home are disregarded under subsection 1118(2); or
(ii) the value of a residence, land or a structure is disregarded under subsection 1118(2).
CONSIDERATION
Was Mr Packett an “ineligible homeowner” within the meaning of the Act?
Mr Packett obtained a life interest in his late mother’s home when ownership of the property was transferred into his name on 22 June 1987. Title searches confirm that Mr Packett is the registered proprietor of the property, which is identified as Volume 9973 Folio 9 and is situated at 288 Soldiers Point Road, Salamander Bay.
Mr Packett claimed that the property is subject to a trust and that whilst the terms of his late mother’s will provided that ownership of the property passed to Mr Packett upon her death, he was granted a life interest only, with ultimate ownership of the property passing to Mr Packett’s children as tenants in common. On this basis, one of Mr Packett’s children, De’arn Packett, registered a caveat over the property on 18 August 1989 to protect her (and indirectly her siblings’) interest.
Notwithstanding the caveat, as the registered proprietor, Mr Packett has indefeasible title to the property (see section 42 of the Real Property Act 1900 (NSW) and Breskvar v Wall [1971] HCA 70, at 14).
Further, as the registered proprietor of the property, Mr Packett has security of tenure in his principal home (I note that this security of tenure is for the rest of Mr Packett’s life), and is therefore deemed to be a 'homeowner' for the purposes of the Act.
Given that none of the elements in section 13(1) of the Act apply to Mr Packett, he is deemed to be an 'ineligible homeowner'. As an 'ineligible homeowner', Mr Packett therefore does not satisfy the criteria in 1070C(b) of the Act that would qualify him for rent assistance.
Are payments received from a lodger deemed to be income for the purposes of the Act?
In the Homeowner Questionnaire that Mr Packett provided to the Department on 7 April 2014, he stated that a person named Mr Christopher Damalas lived at the property and paid $360 per fortnight for his accommodation. Mr Packett then contacted the Department on 28 July 2014 to inform them that Mr Damalas’ lodgings had been reduced to $285 per fortnight.
The amount of age pension payable to a person may be affected, inter alia, by any “ordinary income” the person receives (see subsection 1064-E1 of the Act).
“Ordinary income” is defined in section 8(1) of the Act to mean “income that is not maintenance income or an exempt lump sum”. Income is further defined in section 8(1), which provides that:
"income", in relation to a person, means:
(a)an income amount earned, derived or received by the person for the person's own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
Income received by a lodger or boarder is not excluded under subsections 8(4), (5) or (8) of the Act. Bank records confirm that Mr Damalas paid rent into Mr Packett’s bank account held with the Greater Building Society. Mr Packett claimed that he used the rent received from Mr Damalas on expenses required to maintain the property, and therefore argued that the payment constituted “income of the estate”.
However, the Respondent contended that the money paid to Mr Packett by Mr Damalas was paid to him directly as principal, and there was no evidence that the money was held in trust for another beneficiary. The Respondent further contended that whilst it was open to Mr Packett to apply the rent received from Mr Damalas to household bills and the upkeep of the estate, there was no legal obligation on him to do so.
Accordingly, the Respondent contended that the rent paid by Mr Damalas to Mr Packett is “income” for the purposes of section 8(1) of the Act, and must therefore be included in calculation of Mr Packett’s rate of age pension under section 1064(1) of the Act.
Based on the information presented to me, I am satisfied that the money paid to Mr Packett by Mr Damalas was “ordinary income” within the meaning in the Act and was “an income amount earned, derived or received” by Mr Packett for his “own use or benefit”.
How should amounts received from lodgers be taken into account?
Part 4.3.8.40 of the Guide to Social Security Law, which deals with income received from boarders or lodgers, provides that in the case of lodgers (i.e. persons who pay to receive accommodation only), 70% of the amount paid should be regarded as the “income”. This provision recognises that there may be costs associated with obtaining the income and it would therefore be unfair to treat the full amount received by a person as income.
The Respondent concedes that only 70% of the rent received by Mr Packett from Mr Damalas should be considered as “income” for the purposes of the Act and in determining the rate of pension payable to Mr Packett.
DECISION
The Tribunal determines that:
(a)Mr Packett is an ineligible homeowner within the meaning of the Act and is therefore not entitled to rent assistance;
(b)70% of the amount paid by Mr Damalas to Mr Packett as lodgings is income within the meaning of the Act and is therefore to be taken into account in determining Mr Packett’s rate of age pension.
The decision under review is affirmed.
I certify that the preceding 37 (thirty -seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr Teresa Nicoletti ......................[sgd]..................................................
Associate
Dated 23 December 2015
Date(s) of hearing
27 August 2015
Date final submissions received
27 August 2015
Applicant
In person
Advocate for the Respondent
S Davidson, Department of Human Services
Key Legal Topics
Areas of Law
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Social Security Law
Legal Concepts
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Ineligible Homeowner
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Ordinary Income
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Age Pension
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