Pikoulas and Secretary, Department of Social Services (Social services second review) - [2017] AATA 12

Pikoulas and Secretary, Department of Social Services (Social services second review) [2017] AATA 12 (10 January 2017)
Division:GENERAL DIVISION
File Number(s): 2015/6021
Re:Aristomenis Pikoulas
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Ms N Isenberg, Senior Member
Date:10 January 2017
Place:Sydney

The decision under review is set aside and the matter is remitted to the Secretary, Department of Social Services for reconsideration with directions that Mr Pikoulas’ assessable assets, for the purposes of the assets test, include:
·his property in Greece valued at AUD300,000;
·his Greece bank account in which there was a balance of EUR108,400; and
·his Dutch pension.

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Ms N Isenberg, Senior Member
CATCHWORDS
SOCIAL SECURITY – age pension – Dutch pension as income – estopped from reconsidering whether Dutch pension is income – intention to use proceeds of sale from former principal home towards a new principal home – homeowner – financial assets – decision set aside and remitted
LEGISLATION
Social Security Act 1991 ss 9, 11A, 1064, 1076, 1118
CASES
Marchlewski and Secretary, Department of Family and Community Services [2004] AATA 1027
Pikoulas and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 250
Re Secretary, Department of Family and Community Services and Kulshrestha [2003] AATA 227
Secretary, Department of Social Security v Garvey [1989] FCA 496; 22 FCR 132
Soames v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 107
Soames and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 699
REASONS FOR DECISION
Ms N Isenberg, Senior Member
10 January 2017
BACKGROUND TO THE APPLICATION

The Applicant, Mr Pikoulas, has been paid age pension since 23 February 1995. In January 2015 Centrelink decided that his pension should be reduced to take into account that he received a pension from the Netherlands and that he had deemed income from his assets, including the proceeds of sale of his principal home at Hurlstone Park (the Hurlstone Park property). On internal review it was decided that assessment of his pension in relation to the sale of his home was to be on the basis that he was a homeowner with his principal home then being in Greece. That decision was affirmed on review by this Tribunal’s Social Services & Child Support Division (AAT1). The Applicant now seeks review of the AAT1 decision.
ISSUES
The issues in this matter are as follows:
·should the Dutch pension received by Mr Pikoulas be counted as income for the purposes of the means test for his Australian age pension;
·at the time of sale, did Mr Pikoulas intend to apply the proceeds of sale from his former principal home towards the purchase or renovations of a new principal home in Greece within 12 months;
·should Mr Pikoulas have been regarded as a homeowner so as to exempt his Greek home from inclusion in his assets; and
·what is the amount of Mr Pikoulas’ financial investments on 22 July 2015 apart from the proceeds of sale?
LEGISLATION
The relevant legislation is the Social Security Act 1991 (the Act).
CONSIDERATION
Means testing the age pension
The age pension is means tested. The fundamental policy underlying this principle is that it is ‘a basic level of income for those who [are] unable to receive sufficient income to provide for themselves’: Secretary, Department of Social Security v Garvey [1989] FCA 496; 22 FCR 132.
The rate of age pension is worked out in accordance with s 1064(1)(a) of the Act. The income test includes “deemed income”.
The proceeds of sale of the Hurlstone Park property, which up until its sale was Mr Pikoulas’ principal home, would be deemed income under s 1076 unless the exemption in s 1118 of the Act applies. Relevantly, s 1118(1B) and s 1118(2) of the Act extend the exempt asset status to the proportion of the proceeds of sale of a pensioner’s former principal home that the person intends, within 12 months, to build, rebuild, repair or renovate another residence that is to be the pensioner’s principal home.
The Dutch pension
Mr Pikoulas contended that his Dutch pension should not be counted as income for the purpose of calculating the rate of his age pension. This issue has previously been canvassed by Mr Pikoulas before this Tribunal. On 7 April 2011, the Tribunal, constituted by Senior Member Allen, in Pikoulas and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 250 (the Applicant’s first case) relevantly found that:
·Mr Pikoulas was receiving a Dutch pension paid as a result of having been employed in the Netherlands and contributing towards a compulsory superannuation scheme;
·Mr Pikoulas was in dispute with the Dutch authorities as to the amount of the pension paid to him; and
·the Dutch pension was income in Mr Pikoulas’ hands for the purpose of calculating the rate of his Australian age pension.
Is the Tribunal estopped from reviewing its earlier decision?
The question of estoppel was considered by Senior Member Bell in Soames and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 699 (the second Soames case), where there was an issue about Mr Soames’ disposition of assets for the purpose of calculating his disability support pension. That issue had previously been decided by the Tribunal in Soames v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 107 (the first Soames case). In the second Soames case, the Tribunal adopted the decision in the first Soames case, relying on the principles in Marchlewski and Secretary, Department of Family and Community Services [2004] AATA 1027 which discusses the authorities relevant to the application of estoppel principles in the Tribunal.
Mr Pikoulas did not produce any new evidence with respect to the Dutch pension since the Tribunal’s first decision. Nonetheless, at the hearing he was given the opportunity to clarify the position in relation to his Dutch pension. He was distressed that, although he had become eligible for a Dutch age pension in 1995, that is, at age 65, he had not applied until 2010, and now ‘on a technicality’ it had been finally resolved that he could not receive arrears for the intervening period. Since 2010, he said, he had received, on average, EUR270 a month. Mr Pikoulas sought to re-agitate the issue of how his Dutch age pension should be treated. He observed that the ATO regarded it as an asset, but as was pointed out, that agency applies different criteria to those under consideration here.
The estoppel principles referred to above demonstrate that the Tribunal is effectively prevented from reviewing its earlier decision in circumstances where the same issue is being considered by the Tribunal on both occasions. In the Applicant’s first case and in the current proceedings the issue in relation to how his Dutch pension should be treated are the same. In the absence of new evidence the Tribunal is estopped from reconsidering that matter. As a result, his Dutch pension is to be included in calculating his income for the purposes of the assets test associated with his age pension.
The Hurlstone Park property
Mr Pikoulas told me he and his former wife bought the Hurlstone Park property as their family home. When they divorced in 1989 he bought out his wife’s share of the property, taking out a second mortgage to do so. He lived there with his children, who ultimately moved out as they grew to adulthood. Then he took in Nepalese boarders, who lived with him at the property until 2014.
He said he had wanted to secure his children’s future. He said he received some advice to gift the property to his daughter and obtain a right to live there forever. He decided against that approach and decided instead to sell it to his daughter. In that way, he would be able to buy a house in Greece and have some funds left over. The sale of the Hurlstone Park property, for AUD650,000, was to a company as trustee for his daughter’s family trust. In his evidence he said the price was reached following advice from a real estate agent about comparable five bedroom properties in the area. Centrelink raised no issue as to whether this was an arm’s length transaction.
On 27 July 2014, Mr Pikoulas purchased a property in Greece, utilising the AUD300,000 deposit released to him on the sale of the Hurlstone Park property. On 8 August 2014, he settled the sale of the Hurlstone Park property for a further AUD350,000. According to the settlement adjustment sheet, on settlement, Mr Pikoulas received approximately AUD305,000 after payment of solicitor’s fees and the mortgage balance. That money was deposited first into his Australian bank account, then nearly EUR106,000 was transferred to his Greek bank account. Because of instability in Greece he transferred most of that money into his Dutch account, into which his Dutch pension is also paid. A copy of a recent statement was produced.
On 18 December 2014, Mr Pikoulas completed a Centrelink "MOD R” (Real Estate details) form in which he stated that he did not live in the Greek property; and that the general condition of the building was "New: very good”.
In contrast, in his evidence he said that when he purchased the Greek property it needed fencing, balustrades to the upper level, curtains, air-conditioning, kitchen appliances and a washing machine. In December 2014 he provided Centrelink with an estimate of costs associated with the purchase of the Greek property and the estimated expenses required to furnish the property and make some changes. In cross-examination he said the only work done to date was the partial erection of a fence and the installation of a gas oven, and possibly the purchase of a washing machine. He has spent, he said in cross-examination, about EUR3000-4000 on fencing and he had paid about the same amount to a builder to negotiate with planners. He agreed in cross-examination that, in total he had spent about EUR7000 on the renovations.
He was asked about time he had spent at the property since its purchase. He said he lived there April to November 2014, and February to November 2015. He has not lived there at all since, and he said, it is empty, although he has some clothes there. His oral evidence about travel outside Australia did not entirely match the information Centrelink had obtained about his travel. That information relevantly recorded his absences as: 26 May 2014 to 27 October 2014, and 13 April 2015 to 8 November 2015. The information indicates that Mr Pikoulas, could not, as he claimed, have continuously lived in the house in Greece between April and November 2015 except for about 15 days he lived in the Netherlands.
As to where he has otherwise resided, he said that he had lived for a few days with his sister in Athens in 2015 and had provided her address to the Dutch authorities. He did not provide the address of his own property in Greece, he said, because it does not have a proper mail address.
For the most part though, he continues to occupy a room at the Hurlstone Park property, where his daughter, her husband and his granddaughter now live. The contents of the house were also apparently transferred to ‘his daughter’, as these remain in the house and were not sent to his property in Greece. He retains a key to the house and comes and goes as he pleases. There is no formal arrangement between them; he does not pay his daughter board but contributes half the cost of utilities while he stays there.
On 12 January 2015, Mr Pikoulas wrote to Centrelink giving his address as the Hurlstone Park property. On 18 November 2015, when Mr Pikoulas filed his Application for Second Review of Decision in this Tribunal he gave his address as that of the Hurlstone Park property.
The Respondent contended that at the time of sale, namely on 8 August 2014, Mr Pikoulas did not intend to apply the proceeds of sale towards the purchase of a new principal home in Greece within 12 months and consequently, Mr Pikoulas should not be regarded as a homeowner, and the proceeds of sale should be taken into account in calculating Mr Pikoulas’ deemed annual income.
There was no dispute that before he sold the Hurlstone Park property it was an exempt asset in accordance with s 1118(1)(a) of the Act, namely that it was his principal home.
Is the property in Greece Mr Pikoulas’ ‘principal home’?
Section 11A(1) of the Act is unhelpful in the present matter in defining a ‘principal home’ for the purposes of the assets test. I was referred to Re Secretary, Department of Family and Community Services and Kulshrestha [2003] AATA 227 where the Tribunal said:
Taken together, a person’s principal home is the place of residence that is her or her chief or first and foremost residence.
The exemption in s 1118(2) of the Act applies up to the earlier of the date that the pensioner ceases to have the intention, or the end of a 12 month period, although there is a discretion to extend the period to up to 24 months in the circumstances in s 1118(2B) of the Act.
Mr Pikoulas sold the Hurlstone Park property on 8 August 2014. Since that time he continuously retained a room at the Hurlstone Park property. I found his evidence to be vague but it is clear he is living at the Hurlstone Park property most of the time with occasional visits overseas. For example, according to his movement records he left Australia on 13 April 2015 for the Netherlands and returned to Australia on 8 November 2015. I find that in the 12 months from that date the property in Greece cannot be regarded as his principal home.
Even if I could be satisfied that he had the intention of making it his principal home, I consider that the evidence supports a finding that he did not intend to apply the proceeds of sale from the Hurlstone Park property towards rebuilding, repairing or renovating his property in Greece as his principal home. His lack of attention to the matters he identified as requiring attention lead me to a view that he did not intend, within 12 months of the sale of the Hurlstone Park property to apply the proceeds to those matters. His evidence was of minimal effort in attending to those renovations and improvements. There was no explanation, other than some vague comments about the complexities of Greek building regulations, that might persuade me that the period of an exemption in s 1118(2) of the Act should be extended.
I therefore do not consider that Mr Pikoulas’ Greek property is properly regarded as his principal home, nor that within 12 months of the sale of his former principal home (ie the Hurlstone Park property) he intended to apply the proceeds of sale from that property towards rebuilding, repairing or renovating his property in Greece.It must necessarily be regarded as an investment.
Is the Hurlstone Park property still his ‘principal home’?
Section 1118, in relation to assets that can be disregarded in calculating the value of a person’s assets, refers to the value of any right or interest of the person in the person’s principal home that is a right or interest that gives the person reasonable security of tenure in the home. Although Mr Pikoulas mostly resides at the Hurlstone Park property, I do not consider that he has a right to continue to reside there, other than through the goodwill of his daughter and her family. It cannot be said that he has reasonable security of tenure, in the absence of any formal arrangement.
The calculations
Section 1076 refers to deemed income from “financial assets”, defined in s 9 of the Act to include a financial investment. A financial investment is defined in s 9 to include available money and deposit money. It follows that s 1076 applied to the proceeds of sale of the Hurlstone Park property.
The Respondent contended that the calculation undertaken by the original Centrelink decision-maker was correct; Mr Pikoulas’ age pension was reduced from 25 December 2014 to AUD386.30 per fortnight, taking into account that he was a non-homeowner. Mr Pikoulas’ assessable assets, for the purpose of the assets test, were calculated as totalling AUD660,515.00 including:
·his property in Greece valued at AUD300,000; and
·his Greece bank account in which there was a balance of EUR108,400.
Although it differs from the decision of the ARO, which was affirmed by AAT1, I agree with this calculation, as far as it goes. However, it does not appear to take into account the Dutch pension.
DECISION
Accordingly the decision under review is set aside and the matter is remitted to the Secretary, Department of Social Services for reconsideration with directions that Mr Pikoulas’ assessable assets, for the purposes of the assets test, include:
·his property in Greece valued at AUD300,000;
·his Greece bank account in which there was a balance of EUR108,400; and
·his Dutch pension.

I certify that the preceding 31 (thirty - one) paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member

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Associate
Dated: 10 January 2017

Date(s) of hearing: 21 November 2016

Applicant: In person

Solicitors for the Respondent: S Thompson, Department of Human Services

Date(s) of hearing:	21 November 2016
Applicant:	In person
Solicitors for the Respondent:	S Thompson, Department of Human Services