Pavilupillai and Secretary, Department of Social Services (Social services second review)
[2018] AATA 13
•12 January 2018
Pavilupillai and Secretary, Department of Social Services (Social services second review) [2018] AATA 13 (12 January 2018)
Division:General Division
File Number:2016/4695
Re:Alfred Pavilupillai
APPLICANT
Secretary, Department of Social Services And
RESPONDENT
DECISION
Tribunal:Mr Andrew Cameron, Member
Date:12 January 2018
Place:Melbourne
The Tribunal affirms the decision under review.
Mr Andrew Cameron, Member
SOCIAL SECURITY – Newstart Allowance – Assets Value Limit – Financial Hardship Rules – Decision Affirmed.
Legislation
Social Security Act1991 (Cth)
Cases
Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Secretary, Department of Family and Community Services and Kulshrestha [2003] AATA 227
Secretary, Department of Employment and Workplace Relations v Vanderpluym (2007) 161 FCR 388
Secondary Materials
Guide to Social Security Law
REASONS FOR DECISION
Mr Andrew Cameron, Member
12 January 2018
INTRODUCTION
Mr Alfred Pavilupillai (the Applicant) applied for review of a decision of the Administrative Appeals Tribunal Social Services and Child Support Division. That decision affirmed a decision made by an Authorised Review Officer (ARO) from the Department of Human Services, who rejected his application for Newstart Allowance lodged on 10 February 2016.
There are two issues for consideration by this Tribunal, namely whether:
(a)first, the Applicant’s claim for Newstart allowance was correctly declined on the value of his assets as at 10 February 2016; and
(b)secondly, the Applicant’s claim for consideration under hardship grounds should be accepted.
By way of procedural background, on:
(a)10 February 2016, the Applicant completed a claim for Newstart allowance;
(b)1 April 2016, the Applicant’s claim for Newstart was rejected on the basis that the Applicant’s assets and his wife’s assets exceeded the allowable limit;
(c)5 April 2016, the Applicant completed a claim for consideration under the hardship provisions;
(d)6 April 2016, the Applicant’s claim under the hardship provisions was rejected. The Applicant was not considered to be in severe financial hardship due to readily available funds that could be realised;
(e)17 May 2016, an ARO affirmed the original decision as well as the decision to reject the claim under the hardship provisions; and
(f)17 August 2016, the Social Services and Child Support Division of the Administrative Appeals Tribunal held, among other things, that the Applicant’s assets exceeded the asset limit for a non-homeowner member of a couple and that the Applicant was not in severe financial hardship.
The Applicant appeared before this Tribunal, self-represented, with the assistance of a Tamil interpreter.
LEGISLATIVE PROVISIONS AND RELEVANT CASE LAW
The relevant legislative provisions are contained within the Social Security Act 1991 (Cth) (the Act).
Section 593 of the Act provides that a person qualifies for Newstart allowance if, amongst other requirements, they are unemployed and satisfy the activity test.
Assets Value Limit
Section 611 of the Act provides that Newstart is not payable to a person if the value of the person’s assets is more than the person’s assets value limit. Section 612(1) of the Act provides that, if a person is a member of a couple and the person’s partner is not in receipt of a social security or service pension or income support supplement and is not in receipt of a social security benefit, the value of the person’s assets include the value of their partner’s assets.
As at 10 February 2016, the sum of $286,500 was the assets value limit for coupled homeowners and the sum of $433,000 was the assets value limit for coupled non-homeowners.
Under section 11 of the Act:
“asset” means property or money (including property or money outside Australia).
…
“homeowner”… [means]…
(b) a person who is a member of a couple is a homeowner if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(A)the person’s principal home; or
(B)the partner’s principal home; or
(C)the principal home of both of them; and
(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home… (emphasis added)
A person’s principal home for the purpose of the assets test is defined under s 11A of the Act. In Re Secretary, Department of Family and Community Services and Kulshrestha [2003] AATA 227, Forgie DP and Eriksen M held at [24], “…a person’s principal home is the place of residence that is his or her chief or first and foremost residence.”
Section 11A(10) of the Act provides that if a person has a right or interest in a person’s principal home, that person is taken to have a right or interest that gives the person reasonable security of tenure in the home unless the Secretary is satisfied that the right or interest does not give the person reasonable security of tenure in the home.
In Secretary, Department of Employment and Workplace Relations v Vanderpluym (2007) 161 FCR 388 (Venderpluym), Greenwood J held at [58]:
Section 11(4)(b) of the Social Security Act contemplates a point on a continuum of possible rights or interests. An applicant may be a registered proprietor; a beneficiary under a unit or discretionary trust; a party with the benefit of an agreement for lease for 3 years or more; a lessee under a registered lease pursuant to such an agreement; a lessee occupying premises pursuant to such arrangements where the lease has not been registered by the lessor; a lessee under an unregistered short term lease for a period of less than 3 years; a tenant under a written tenancy agreement for a fixed term; a weekly tenant under a written agreement or a weekly tenant under oral arrangements with no fixed term and no terms other than those implied by law. In the last case, the measure of the right or interest enjoyed by the applicant tenant might simply be a right to remedial relief in aid of occupation of the premises to restrain a breach of an obligation implied by law and in that sense the tenant might enjoy an equitable interest. Of course, vesting property (land and a residence) in a company or, for example, a corporate trustee of a discretionary trust coupled with a tenancy agreement conferring occupation in favour of a pension applicant related to the shareholders or directors of the entity has the apparent structural advantage of placing ownership of the home at arms length yet retaining security of tenure in the home so as to enable a pension applicant to say that he or she is not, in orthodox terms, a homeowner and therefore entitled to a higher assets value limit for the calculation of the relevant pension entitlement. The social policy of the Social Security Act is to adopt a broad notion of ‘homeowner’ by s 11(4)(b) so as to ensure that those applicants (or their partners) who have a right or interest in residence which gives reasonable security of tenure in the home are to be treated as homeowners for the purposes of calculating assets value limits and thus pension entitlements (emphasis added).
Greenwood J went on to hold in Venderpluym at [61]:
To the extent that the right enjoyed by the relevant applicant is an attenuated personal right in the sense that it is a right derived from a contract or licence and not necessarily a right measured in terms of a legal or equitable “interest” in the residence attached to the land, it would be difficult to envisage circumstances in which such an attenuated right could give reasonable security or continuity of assured occupation. It is the conjunction of the character of the right or interest and the circumstances in which it arises that conveys an objective sense of whether the right or interest confers reasonable security of tenure in the home (emphasis added).
Section 1118 of the Act lists certain assets to be disregarded in calculating the value of a person’s assets. Those assets that can be disregarded include, if the person is a member of a couple – the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home – as well as the value of that person’s investment in a superannuation fund.
Section 1121 of the Act provides that if there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of the Act is to be reduced by the value of the charge or encumbrance. The section does not, however, apply to a charge or encumbrance over assets that are to be disregarded under s 1118 of the Act.
Section 1123 of the Act provides, among other things, that a person disposes of an asset if the person directly or indirectly disposes of the asset and the person receives no consideration for its disposal or inadequate consideration for its disposal. Under s 1124 of the Act:
(a)if the person receives no consideration, the amount of the disposal is the value of the assets that are disposed of; and
(b)if the person receives consideration, the amount of the disposal is the value of the assets less the amount of the consideration received.
Finally, s 1126AC(2) of the Act provides that:
Subject to this section, if the amount of the relevant disposal, or the sum of that amount and the amounts (if any) of other disposals of assets previously made by the person, the person’s partner, or the person and the person’s partner, during the income year in which the relevant disposal took place (whether before or after they became members of the couple), exceeds $10,000, then, for the purposes of this Act, the lesser of the following amounts is to be included in the value of the assets of the person and in the value of the assets of the partner for the period of 5 years starting on the date on which the relevant disposal took place:
(a)one-half of the amount of the relevant disposal;
(b)one-half of the amount by which the sum of the amount of the relevant disposal, and the amounts (if any) of other disposals of assets previously made by the person, the partner, or the person and the partner, during the income year in which the relevant disposal took place, exceeds $10,000.
Access to Financial Hardship Rules
Section 1131 of the Act outlines the access to financial hardship rules for benefits. It provides that:
(1) If:
(a)a social security benefit is not payable to a person because of the application of an assets test; and
(b)the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
(c)the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
(d)either:
(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC, 1126AD and 1126E (so far as section 1126E relates to sections 1126AA, 1126AB, 1126AC and 1126AD) (disposal of assets) do not apply to the person; or
(ii) the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(e)the person, or the person’s partner, has an unrealisable asset; and
(f)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(g)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Secretary must determinate that this section applies to the person (emphasis added).
MATTERS CONSIDERED
In considering this matter, I have had regard to the following:
(a)the Applicant’s oral evidence and submissions made during the hearing;
(b)the Respondent’s oral submissions;
(c)the Respondent’s Statement of Facts, Issues and Contentions, dated 12 January 2017;
(d)documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth), referred to as the “T-Documents”; and
(e)a letter dated 23 September 2016 from Australian Super addressed to the Applicant’s wife which was handed-up by the Applicant during the course of the hearing.
CRITICAL FACTS
The Applicant was born on 27 December 1954.[1]
[1]T-Document 12.
The Applicant resides, with his wife and children, at a property in Gower Street, Preston (Gower Street Property).[2] The Gower Street Property was:
(a)previously owned by the Applicant and was transferred to his daughter (50%) and two sons (25% each) on or about 5 March 2014;[3] and
(b)transferred for the sum of $150,000 but was in fact worth $835,000.[4]
[2] Ibid.
[3] T-Document 9.
[4] Ibid.
In a handwritten statement, dated 19 June 2016 and provided to the Tribunal[5], the Applicant stated that the Gower Street Property was built to cater for his daughter who has a disability and cannot walk. The Applicant specifically stated:
Our daughter has disability and can not (sic) walk. She is using three wheel electric scooter. We build our family home (Gower Street) with big bathroom, toilet attached to her room and a ramp for scooter to easy in and out from home. I am looking after her and I can not (sic) sell this home because of my daughter.
[5] T-Document 1.
During the course of the hearing, the Applicant stated that he had lived at the Gower Street Property since 1 May 2007.
He confirmed in his oral evidence that there was no lease agreement in place with respect to the Gower Street Property with his children and no rent was payable to them.
The Applicant also owns, together with his wife, a rental property at Watson Street, Preston (Watson Street Property). The Watson Street Property:
(a)had a capital improved value, commonly referred to as “CIV”, according to the Darebin council rates’ notice, dated 14 January 2016, of $597,000;[6] and
(b)was encumbered by two mortgages for two loans[7], namely:
(i)account no 610229101 for the period 27 October to 31 December 2015 indicated that the Applicant and his wife had a loan balance of $26,032.45 and had accumulated special repayments of $78,000.00 which could be drawn on upon request; and
(ii)account no 701676118 for the period 1 July to 31 December 2015 indicated that the Applicant and his wife had a loan balance of $813.63 and had accumulated special repayments of $98,742.94 that could be drawn on upon request.
[6] T-Document 8.
[7] T-Document 19.
The Applicant gave evidence during the hearing that the net rental income for the Watson Street Property was $11,770.00.
The Tribunal had before it a Colonial First State pension account summary, which showed the Applicant’s balance in his “FirstChoice Wholesale Allocated Pre-Retirement Pension” account as at 21 August 2015 was $115,024.91 and his gross annual payment was $11,790.00.[8] The Tribunal also had before it evidence that the Applicant’s wife received a defined benefit disability payment of $10,736.00[9], albeit the Applicant gave oral evidence that this payment ceased in September 2016.
[8] T-Document 7.
[9] T-Document 1.
Furthermore, the Applicant in his claim for Newstart allowance listed the following items that he owned:[10]
(a)household contents and personal effects – $8,000.00 (50% owned with his wife);
(b)Toyota RAV4 – $500.00;
(c)Holden Combo Van – $500.00;
(d)Commonwealth Bank savings account – $3,851.00;
(e)Commonwealth Bank savings account – $1,333.00; and
(f)cash on hand – $200.00 (50% owned with his wife).
[10] T-Document 12.
In his application for hardship, dated 5 April 2016[11], the Applicant stated, among other things, the following in relation to various questions asked:
[11] T-Document 16.
13. Why do you (and/or your partner) think the asset(s) should be disregarded?
My daughter has disability (can not walk) so I built this house with big bathroom toilet designed for her (attached) easy access in and out with ramp for three wheel scooter so we transfer half share of the house for her.
…15.Why are you (and/or your partner) unable to sell the asset(s) or if you are a pensioner, why is selling unreasonable?
Our daughter has a disability (can not walk) and we have to look after (care) her and she need suitable home for living for long run. That is why we transfer this property (half share) for her.
….17. Why are you (and/or your partner) unable to borrow against the asset(s)?
We cannot afford to make regular loan repayments.
My income under $16000 per annum
My wife $894/month, but last two months Australian Super did not pay…”
In his application for review, dated 30 August 2016[12], the Applicant stated among other things:
Super is for retirement and I want to keep it for my retirement. The reason I did not stop taking money out of my super because I need money for living. If I stop, the combined income is $22,626 and this is under $24,896 and I qualify for newstart allowance under hardship provisions.
[12] T-Document 1.
ASSETS VALUE LIMIT
For the reasons below, I find that the Applicant is not a homeowner for the purposes of the Act and, therefore, the applicable asset threshold for the Applicant is the sum of $433,000, as opposed to the sum of $286,500.
Whilst clearly the Gower Street Property is the Applicant’s principal home, he and his wife do not, on the evidence before the Tribunal, have a right or interest in the Gower Street Property that gives security of tenure in the home. It seems that the Applicant and his wife simply occupy the Gower Street Property based on the goodwill of his children that could be revoked at any particular time. Furthermore, by reason of the presumption of advancement (see the High Court in Calverley v Green (1984) 155 CLR 242[13]), the Applicant and his wife did not retain an equitable interest in the Gower Street Property upon its legal transfer to their children.
[13] Deane J held at 267 that, “…there are certain relationships in which equity infers that any benefit which was provided for one party at the cost of the other has been so provided by way of ‘advancement’ with the result that the prima facie position remains that the equitable interest is presumed to follow the legal estate and to be at home with the legal title…”
The Applicant had the following assets, for the purposes of the Act, as at 10 February 2016:
(a)Watson Street Property – $570,153.92.[14] Section 1121 of the Act applies so that the loan encumbrance is taken into account in valuing the said asset;
(b)Savings – $5,384.00;[15]
(c)Household contents and motor vehicles – $9,000.00;[16]
(d)Disposal amount in relation to the Gower Street Property – $675,000.[17] Sections 1123 and 1124 of the Act apply as the Gower Street Property was valued at $835,000 but sold for $150,000. Section 1126AC of the Act also applies as the Gower Street Property was disposed of inside of five years (12 March 2014) from the date of the application for Newstart (10 February 2016); and
(e)Disposal amount: gift to children for payment of stamp duty on transfer of Gower Street Property – $45,170.00.[18] Likewise, ss 1123, 1124 and 1126AC of the Act will apply with respect to this disposal.
[14] $597,000 - $26,846.08 (being the loan encumbrance).
[15] The sum of $3,851.00, $1,333.00 and $200.00.
[16] The sum of $8,000.00, $500.00 and $500.00.
[17] $835,000 - $150,000 (being the consideration paid to the Applicant) - $10,000 (being the discount).
[18] The Applicant gave oral evidence that he paid the stamp duty that was payable by his children as purchasers of the Gower Street Property.
Accordingly, the Applicant’s assets totalled $1,304,707.92. This clearly exceeded the limit for coupled non-homeowners of $433,000.
FINANCIAL HARDSHIP RULES
The next issue for consideration by the Tribunal is whether the hardship provisions apply to the Applicant.
Under s 1131 of the Act, the hardship provisions only apply if all the elements of s 1131(a) – (g) are met. In my view, it is clear that the following are not met and, on that basis, it is unnecessary to consider the remaining elements of s 1131 of the Act:
(a)the person, or the person’s partner, has an unrealisable asset (s 1131(e) of the Act). Pursuant to s 11(12) of the Act, an unrealisable asset is an asset that the person cannot sell or realise and cannot use as a security for borrowing; and
(b)the Secretary must be satisfied that the person would suffer severe financial hardship if this section did not apply (s 1131(g) of the Act).
Under the Guide to Social Security Law at 1.1.S.120 (Guide), in order to be considered to be in severe financial hardship, the person’s combined readily available funds must be equal to or lower than the allowable limit and they cannot reasonably be expected to sell or borrow against assets to improve their financial position.
Policy advice contained within the Guide should be followed, unless there is a cogent reason for not doing so, as explained in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.[19] In the present case, no cogent reason has been demonstrated which would indicate that the Guide should not be followed.
[19] Brennan J, the then President of the Tribunal, held at 640: “There are powerful considerations in favour of a Minister adopting a guiding policy. It can serve to focus attention on the purpose which the exercise of the discretion is calculated to achieve, and thereby to assist the Minister and others to see more clearly, in each case, the desirability of exercising the power in one way or another. Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy.”
For a member of a couple, the allowable limit is twice the annual maximum basic rate of Newstart allowance (plus energy supplement) payable to a partnered person. At the applicable time, this amounted to the sum of $24,986.00.
During the course of the oral hearing, the Applicant gave evidence that he did not intend to sell the Watson Street Property because he wanted to keep it for retirement. He did not, however, provide any explanation as to why he could not sell the said property.
First, I find that the Applicant had realisable assets and note, in particular, that the Watson Street Property is a realisable asset as it could be sold and borrowed against. The Applicant’s submission that he wanted to keep the said property for retirement does not, in any way, indicate that the asset was not realisable. The Watson Street Property is a residential property in metropolitan Melbourne that could be realised. Furthermore, an existing redraw facility of $176,742.94 existed against the said property as set out in paragraph 25(b) above and it can, therefore, be used as a security for borrowing consistent with s 11(12) of the Act.
Secondly, I am also of the view that the Applicant would not suffer severe financial hardship if the hardship provisions do not apply. I am of this view because, applying the approach set out in the Guide, the Applicant’s readily available funds (i.e. assets that could be converted to cash), including the Watson Street Property alone, are clearly in excess of the allowable limit of $24,986.00.
CONCLUSION
By reason of the foregoing paragraphs, the decision under review should be affirmed.
44. I certify that the preceding 43 (forty-three) paragraphs are a true copy of the reasons for the decision herein of Mr Andrew Cameron, Member
45.
...........................[sgd].............................................
Associate
Dated: 12 January 2018
Date of hearing 16 January 2017 Applicant In person Advocate for the Respondent Mr Nam Nguyen, Solicitor Solicitors for the Respondent Sparke Helmore Lawyers
0
2
0