Plavan and Secretary, Department of Employment and Workplace Relations
[2005] AATA 784
•17 August 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 784
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/228
GENERAL ADMINISTRATIVE DIVISION ) Re DANICA PLAVAN Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal REAR ADMIRAL A R HORTON AO Date17 August 2005
PlaceSydney
Decision The decisions under review are affirmed.
[Sgd] Rear Admiral A R Horton AO
CATCHWORDS
SOCIAL SECURITY – eligibility for Disability Support Pension – conditions of section 94 of Social Security Act 1991 met – disability support pension not granted due to assets being above prescribed limits – consideration of assets and circumstances – assets of $2.6m in respect of properties (excluding home) not disputed – applicant does not meet asset test – decision affirmed – not eligible for disability support pension - eligibility for Low Income Health Care Card – not considered eligible as income in excess of prescribed limits – consideration of income and circumstances – disputation re income derived from assets – applicant does not meet income test – decision affirmed – not eligible for Low Income Health Care Card.
Social Security Act 1991 – ss8(1), 11, 98(1), 117, 1061ZO, 1064, 1071A, 1071A-1, 1071A-4, 1118(1)
Social Security (Administration) Act 1999 – schedule 2 part 2
Guides to Australian Government Payments 1 July – 31 December 2004
Kidner v Secretary, Department of Social Security (1993) 31 ALD 63
REASONS FOR DECISION
17 August 2005 REAR ADMIRAL A R HORTON AO 1. This is an application for review by the Administrative Appeals Tribunal (“the Tribunal”) of a decision by the Social Security Appeals Tribunal (“the SSAT”) of 8 February 2005 that affirmed decisions of an Authorised Review Officer of Centrelink of 21 December 2004 that Mrs Danica Plavan (“the Applicant”) was not eligible for the Disability Support Pension (“DSP”) and the Low Income Health Care Card (“LIC”). The original decision in these two matters was made by Centrelink on 19 November 2004.
2. At a hearing before me on 15 July 2005, Mrs Plavan was self represented. Ms Pankaj Sharma, an advocate in the Legal Services Branch of Centrelink, represented the Secretary, Department of Employment and Workplace Relations (“the Respondent”). An interpreter fluent in the Croatian language was not present at the outset, and I decided that a delay whilst an interpreter was obtained would be appropriate in the circumstances. Ms Goranka Horvatic, subsequently provided that service to assist the Tribunal.
3. I took into evidence the documents provided pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (T documents), a report of income and expenditure for the financial year 2004-2005 prepared for the hearing by Mrs Plavan (Exhibit A1) and the Respondent’s Statement of Facts and Contentions dated 8 July 2005 (Exhibit R1). Mrs Plavan gave oral evidence, and whilst her husband was present and was able to clarify one or two matters, he did not give evidence.
4. Mrs Plavan provided a number of documents and reports in respect of her medical impairments and circumstances. These were not taken into evidence as the Respondent conceded (at T220 p148 and orally) that the impairment conditions pursuant to section 94 of the Social Security Act 1991 (“the Act”) in respect of the DSP were met, the issue before the Tribunal being whether Mrs Plavan met the assets test as defined at the time of the claim. Whilst not addressed during the course of the hearing, that test must be met within the 13 week eligibility period from the date of lodgement of the claim pursuant to schedule 2 part 2 of the Social Security (Administrative) Act 1999. This same 13 weeks eligibility period also applies to the Low Income Health Care Card.
BACKGROUND
5. Mrs Plavan applied for the DSP on 29 August 2004 and the LIC on 2 November 2004. The T documents indicate that LIC was initially granted (or renewed) in September 2004, that decision being reversed almost immediately pending review of income and assets. The claim for DSP was accompanied by various medical reports in respect of breast cancer surgery/mastectomy and the initial staff assessment in Centrelink was that she was eligible for the DSP. However, on 19 November 2004, neither this payment nor the LIC was granted on the basis that her assets and income exceeded the permissible limits. These decisions were affirmed by an ARO on 21 December 2004.
6. The asset limit in order to receive full pension (DSP in this instance) is defined in periodic Guides to Australian Government Payments, produced by Centrelink (Exhibit R1 Attachment B). On the date that the DSP claim was lodged, for a partnered (combined) family situation, it was up to $217,500 for a full pension and less than $478,000 for a part pension. From 20 September 2004, that is within the 13 weeks eligibility period, those limits became $217,500 and $481,500.
7. Income thresholds are applicable to eligibility for the LIC, and are also defined in the periodic Guides. At the date of claim for the LIC, for a couple (combined), was $572 per week.
8. Mrs Plavan lives with her husband in an unencumbered property they own at Fairfield Heights. In equal partnership they own seven other unencumbered residential properties, six of which were permanently tenanted and providing income (other than when in between tenancies) at the time of the claim. Ownership of the six rented properties is not disputed, the details of each, local government rates, the gross amount of weekly rent, and an estimate of the value of each being provided on Module R Real Estate Detail Forms signed by Mrs Plavan and Mr Plavan on 12 November 2004 (T17 pp 109 – 140 refer). The combined value, estimated by Mr and Mrs Plavan at that time was $2,200,000.
9. An Income and Assets Form completed by Mrs Plavan on 12 November 2004 and signed by both Mrs and Mr Plavan (T14 pp63 – 79), listed various joint bank accounts to the value of $236,175, and household contents and personal effects and motor vehicles to the value of $5000. That form also provided details of the seventh property which is located at The Entrance, was not rented and thus earned no income, and had an estimated value of $230,000. The family home is an exempt asset in accordance with section 1118 of the Act. The total asset value on 19 November 2004 (T25, p165), based on the estimates of Mrs Plavan and her husband, was recorded as $2,671,174. Accordingly, the assets of Mrs Plavan were found to be well in excess of the defined limits for payment of part or whole of DSP, and her claim was rejected.
10. The Asset and Income Form completed on 12 November 2004 shows that Mr and Mrs Plavan receive no income from any source other than from bank interest and the six rental properties referred to above. Gross rental income for 2004, as shown on a Rental Property Schedule forming part of the 2003/2004 tax return, amounts to $79,891 or $39,945 to Mrs Plavan. Weekly rental returns shown on the Module R Real Estate Detail Forms of 12 November 2004 equate to that gross amount. Application of the formula in section 1064 of the Act resulted in the claim for LIC being denied.
LEGISLATION
11. Eligibility for DSP is as defined in section 94 of the Act. Pursuant to subsection 117(a), the rate of such pension is calculated using the Pension Rate Calculator A at section 1064 of the Act, Module A establishing the rate calculation process and Module G being used to calculate the effects of assets.
12. Eligibility for the LIC is as defined in section 1061ZO(2) which relevantly states:
“(a) …
(b) in the case of a person other than a child – the person is:
(i) an Australian resident …; and (ii) in Australia; and
(c) …
(d) the person satisfies the health care card income test.”
Section 1071A of the Act requires that the income test calculator at the end of the section (subsections 1071A-1, 1071A-2, 1071A-4(b) and 1071A-6 in this instance), be used in working out whether a person satisfies the LIC income test. In the context of this matter, “Income” is defined in section 8(1) of the Act as “an income amount earned, derived or received by the person for the person’s own use or benefit”. “Ordinary income” is defined in section 8(1) as income that is not maintenance income or an exempt lump sum.
EVIDENCE
13. Mrs Plavan, born in Croatia in September 1946, migrated to Australia in 1970 and was granted Australian citizenship in July 1978. She married Mr Ivan Plavan in July 1970, and they have one daughter. She was initially employed (for 5 years) by a shoe factory at Regents Park, and then for the next 28 years by Capral Aluminium Limited. In late 2003 she was made redundant, receiving a redundancy payment. She is very proud that she was never on government support throughout that period.
14. Some six months later, Mrs Plavan was diagnosed with carcinoma of the breast, subsequently undergoing a mastectomy and axillary dissection, followed by chemotherapy. Mrs Plavan also referred to radiotherapy. Medical documents before me refer to her distress and anxiety at the diagnosis and postulate that some decline in quality of life would result. Mrs Plavan told me that she had found her illness, diagnosed so soon after being made redundant and whilst she was considering alternate work, as difficult to comprehend “why me?” after all those years of good health. In the aftermath of surgery, she considers she cannot return to physical work, and her limited language skills deny employment in an office environment.
15. Mrs Plavan stated in evidence that she was required to see her doctor every three months, and that she was incurring costs for such procedures as breast screening and medication in the order of $150 month in excess of the rebates provided under her private health insurance. In the report of income and expenditure tabled for 2004/2005 tabled at the hearing (Exhibit A1), this having been prepared by Mr and Mrs Plavan, but having not yet been referred to their accountant/tax agent, a medical expense figure of $6,120.80 is shown. Mrs Plavan stated that this figure included the cost of private health insurance, and I assume it may also reflect some of the costs in the early months associated with hospitalisation for surgery and treatment.
16. Mr Plavan has not worked for about eight years, having retired from the same firm that employed Mrs Plavan, because of ill health. In the ensuing period, they lived on the income of Mrs Plavan and rent from their various investment properties. Since Mrs Plavan ceased work, they have withdrawn money from the bank as it is needed to supplement return from property investment. In respect of the latter, Mrs Plavan said there was “not much left for us when we pay land tax” and that they had to pay agent’s fees, rates, water rates, insurance, repair and maintenance and indeed to all damage to the properties or fittings therein. She referred to provisional tax as a liability and expense, and seemed reluctant to accept that such payments in time offset tax liabilities in the following year.
17. Mrs Plavan confirmed that she and her husband jointly own seven properties as well as their home. The property at The Entrance was not let during the eligibility period, nor is it currently let. The remaining six properties are let on a permanent basis, with occasional vacancy between tenants. Mrs Plavan confirmed that she had estimated the current market value of each property in November 2004, these estimates being recorded in the various Forms R – Real Estate Details, resulting in an assessed total property asset value, excluding the family home, of $2,400,000. She had not sought valuation by any professional body, and suggested at the hearing that the values she gave may not now be appropriate given the downturn in the market. Nonetheless, they were her assessed values in the eligibility period.
18. An Income and Assets Form completed by Mr and Mrs Plavan on 12 November 2004 provides details of four bank accounts, totalling an account balance of $226,175. No evidence was put to me that the account figures were in error, albeit that Mrs Plavan stated that the account(s) balance is currently in the order of $210,000 as she draws on the accounts to support her living expenses, and that the cumulative bank account figure at that time was inflated over what would henceforth be the normal amount because she had been working for part of that year. The Assets and Income Form also refers to the market value of two vehicles as being $1,000 in total, and a net market value of $4,000 for household contents and personnel effects. Again, there was no evidence before me to suggest that these estimates were in error. In summary, and excluding the family home, the value of the assets of Mr and Mrs Plavan, as estimated by Mrs Plavan in November 2004, was $2,671,175, this being the figure within one dollar of that determined by the Respondent and agreed by the SSAT.
19. Income received by Mrs Plavan is derived from net rents of the six rental properties and interest received from the various bank accounts. In the form specifying Real Estate Details for each rental property, Mrs Plavan noted the gross amount of rent received (before tax) per week for each property, the annual cumulative total being $79,820. Her 2003/2004 tax return (T15) refers to a gross rental income of $79,891, with $39,945 being her share of that gross income. Net rent reflecting the expenses of rates, land tax, capital works reductions and numerous other lesser costs for Mrs Plavan as shown in the tax return as $13,740. This figure differs from that shown in an accompanying Rental Property Schedule where the net rent is shown as $16,549. There is no explanation as to where this difference originated, and of note, the latter document itemises expenses under a series of headings, whereas the former does not.
20. As earlier noted, Exhibit A1 is an income and expenditure report for rental properties for the financial year 2004/2005 prepared by Mrs Plavan. She confirmed that this document had not been considered by her tax agent. It notes a gross rental income of $63,955.12, with expenses on the six rental properties and that at the Entrance amounting to $13,087.51, and land tax of $16,563.75 giving a net rental return of $34,305. Thus her share of this return on the figures provided would be $17,157.50. In her calculations, Mrs Plavan also noted a tax deduction of $4419.10 for herself and $2750.60 for Mr Plavan; I have not taken these into account as these proposed deductions reflect provisional tax which do not relate to the business and are not deductible, being applied to the tax assessment process in the following year.
21. The cumulative rental income and expenditure for 2004/2005 put to me in Exhibit A1, has not, as I have stated, been subject to review and scrutiny by Mrs Plavan’s tax agent, whereas the figures provided in the tax return for the 2003/2004 resulted from consideration by the tax agent. There is a differential between the net rent as now provided for 2004/2005 and that accepted by the ATO for 2003/2004 of $608.50. It is likely that nothing significant will hang on that differential in this matter.
22. At Exhibit A1, Mrs Plavan addressed family and other expenditures, covering such matters as medical expenses, vehicle running costs and expenses occurred in the maintenance and upkeep of their home. Whilst these provide an indication of total outgoings and reflect the reduced finances that may be available to meet everyday living expenses, those outgoings have no relevance to the calculation of income for consideration of eligibility for the LIC as is required pursuant to sections 1071A-1, 1071A-4 and 1072 of the Act, whereby defined income means gross income of Mrs Plavan and her husband.
23. In relation to income, Mrs Plavan gave evidence that she accepted the calculations of the Respondent in respect of the income over an eight week period, which is used to determine eligibility for the LIC, but those calculations did not take into account the tax she paid on the properties, and the totality of repairs, some of which her tax agent would not accept as claimable. She particularly referred to provisional tax, which I have addressed in paragraph 19 above.
24. Mrs Plavan spoke at some length, and again by way of final submission, on the inequities of the legislation as she perceived it and as it effected her eligibility for a pension (the DSP) and the LIC. She recalled that when applying to migrate to Australia, the Australian Embassy impressed upon her the need for migrants who were prepared to work and in later conversation after arrival, she understood that work and self improvement was essential to augment the pension which people indicated “was not really big”. Years later, and having achieved success through hard work, she found that her hard work had resulted in her not being eligible for a pension. At the least, she expected that the government would have informed all citizens of the implications of the means test for pension and any changes. That the government had not done. In response to my question “was your impression when you arrived that no matter what your assets were, you would be eligible for Social Security payments” she replied “Well, maybe not – I knew I may not be entitled to full payment but at least something”. Mrs Plavan is clearly aggrieved that those who do not properly plan and work for their future, become eligible for government support. Her sickness had exacerbated this view.
25. Mrs Plavan expressed concern that her expenses were such that in time her bank assets would be used, with no prospect of finding additional income. She reluctantly accepted that in the event of such a situation she may have to recourse to the sale of a property, all of which are unencumbered, but vendor and capital gains tax would reduce the benefit.
CONSIDERATION AND DECISION
Disability Support Pension
26. Eligibility for the DSP is subject to meeting the provisions of section 94 of the Act and the asset test as prescribed in section 117(a). Mrs Plavan has met the provisions of section 94, the only issue being whether she meets the asset test. She and her husband own all the rental properties and that at The Entrance previously referred to. Asset values are periodically amended, and the maximum asset value to be eligible for the full pension on the date of lodging the claim for the DSP (24 August 2004) for a person with a partner getting neither a pension nor benefit (as is the situation with Mrs Plavan), was $217,500. As defined in periodic Guides to Australian Government Payments, there is an upper limit of combined assets at which eligibility for a part pension ceases. In this case, that was $478,000 on 24 August 2004, and $481,500 from 20 September 2004, at which date the consideration of eligibility was within the thirteen week eligibility period.
27. In considering the assets of Mrs Plavan, I take account of the Federal Court decision in Kidner v Secretary, Department of Social Security (1993) 31 ALD 63 wherein the Court required that on the proper construction of Module G, the asset test must apply to the value of the beneficial interest a person has in property of which he or she is the legal owner. That is the situation with the properties owned by Mr and Mrs Plavan. It is evident that the value of their assets, based on the estimates by Mrs Plavan of property value at the time of lodging her claim and in the period of thirteen weeks thereafter, which have not been disputed, as well as financial and other assets as also provided by Mrs Pavlan, and totalling $2,671,175, are well in excess of the allowable value for a part pension. Hence the decision of the SSAT that Mrs Pavlan is not eligible for the DSP must be affirmed.
Low Income Health Care Card
28. Reference has been made to the overriding legislation in respect of the conditions for eligibility for the LIC. The income test is set out in section 1071A of the Act, and under that test, a person’s ascertained income must be calculated for the 8 weeks prior to lodgement of the claim, which in this instance occurred on 2 November 2004. That income, vide subsection 1071A–4 must be less than the allowable income. Ascertained income of a married person is defined in subsection 1071A-4 as relevant to this matter, as “the income of the person and his or her partner in respect of that period”. “Income” has been earlier defined (section 8(1) of the Act refers), and “ordinary income” has the same meaning but excludes some categories of income that are not relevant in this matter.
29. The income from financial investments must be considered when calculating ascertained income. Here the “deeming rules” pursuant to Division 1B of Part 3.10 of the Act are relevant, the concept being that the financial assets are totalled and applied to deeming threshold rates. That is, actual dividend or interest earned is not applied. The explanation for “deeming rules” is at section 1078 of the Act for non-pensioner couples, section 1081 in respect of ascertaining deeming threshold and where appropriate, section 1082 which states that the above and below threshold rates are determined by the Minister. In accordance with those provisions in the Act, the secretary has determined that the deeming income on the financial investment ($236,174) of Mr and Mrs Plavan is $ 10,596 per annum or $1,625.65 for 8 weeks. I must accept this calculation of deeming income as being correct in the circumstances.
30. In respect of the calculation of the 8 week prior to the date of lodgement of the claim for the LIC, I resort to the net combined rental income shown in the 2003/2004 tax return, this being $27,480, which equates to $4,227.60 for an 8 week period. I note that the Respondent (Exhibit R1) assessed the eight week period income as $4,216.10 and I accept this lower figure as being beneficial to Mrs Plavan. So too, net rental income is beneficial to Mrs Plavan, albeit I find the legislation does not define whether gross or net rental is to be used.
31. When rental income and deemed income are combined for an 8 week period prior to lodgement of the claim for LIC, the income is $5,841.75 or a weekly income of $730.21. The income limit for the LIC as periodically defined in the Guides to Australian Government Payments was $572 on the date the claim was lodged. I note the Respondent’s view in the Statement of Facts and Contentions that “average weekly income must be under the 100% limit to qualify at the new claim stage”; reference in the Guide that the limit may be exceeded by up to 25% before eligibility is lost applies only to the situation where a LIC has been granted and is current. That is not the case in this matter. Accordingly, as Mrs Plavan’s income well exceeds the approved limit, she is not eligible for the Low Income Health Care Card. Even were I to use her revised estimated figure of annual net rent (for 2004/2005) as at Exhibit A1, but recalculated to exclude provision tax, her income would still be well in excess of the allowable limit.
32. In respect of the concern of Mrs Plavan, as earlier referred to, that she has been disadvantaged by the Government imposing significant means testing for social security benefits well after her migration to Australia, I can only respond by advising her that means testing was in force from the introduction of the old-age pension in 1909 (Social Security Payments for the Aged, People with Disabilities and Careers 1909 to 2004 by Dale Daniels of the (Commonwealth) Parliamentary Library), albeit the means test conditions were varied periodically. Suffice that the situation in respect of Mrs Plavan must be considered against the extant legislation at the time of lodging her claims for the DSP and the LIC. It follows that the expectation of government is that those who have made provision for the future may need to utilise that provision as necessary to sustain their living arrangements, and Mrs Plavan must give due consideration should the need arise, to the selling of an investment property in order to do so.
33. The decisions of the SSAT of 8 February 2005 that Mrs Plavan is ineligible for the Disability Support Pension because her assets exceed the limit for such pension, and is ineligible for the Low income Health Care Card because her income exceeds the limit for that benefit, are affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of REAR ADMIRAL A R HORTON AO
Signed: N. Glaser
AssociateDate of Hearing 15 July 2005
Date of Decision 17 August 2005
Representative for the Applicant Danica Plavan
Advocate for the Respondent Pankaj Sharma
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