Port and Department of Family and Community Services

[2001] AATA 229

DECISION AND REASONS FOR DECISION [2001] AATA 229

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2000/1043

GENERAL ADMINISTRATIVE  DIVISION       )       
           Re      RICHARD PORT    
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Deputy President SP Estcourt QC          

Date19 March 2001

PlaceCoolangatta

Decision      The Tribunal affirms the decision under review.           

(Sgd)       SP ESTCOURT                
  DEPUTY PRESIDENT
CATCHWORDS
SOCIAL SECURITY - Newstart Allowance - whether the applicant was carrying on a business as a share trader - whether borrowing costs were a permissible reduction from business income.

Social Security Act 1991 ss 1075(1) and (2)

REASONS FOR DECISION

19 March 2001        Deputy President SP Estcourt QC   

1. This was an appeal against a decision of an Authorised Review Officer made on 4 September 2000 to deem income from Mr Port's share investments without allowing deductions for borrowing costs for the purpose of the income test for newstart allowance.  As a consequence of this decision, Centrelink reduced Mr Port's newstart allowance and raised a debt for overpayment.  The Social Security Appeals Tribunal affirmed that decision and its consequences on 9 October 2000.

2. The matter was heard by me on 19 March 2001 in Coolangatta.  Mr Port, the applicant, represented himself.  Mr N Foster, Departmental Advocate, represented the respondent.  The "T" Documents were taken into evidence and both parties made submissions to the Tribunal.

3. An oral decision was given at the conclusion of the hearing.  These are the edited reasons for that decision.

4. Between 5 August 1999 and 2 February 2000, Mr Port, according to Document T12 Folio 81, invested in a number of publicly-listed shares.  In order to do so he borrowed significant amounts of money from a share acquisition scheme operated by Suncorp.  He invested, as a result of those borrowings, $20,000 initially, purchasing AMP shares, $50,000 purchasing further AMP shares and then $8,800 purchasing AI Engineering shares.  At that time, Mr Port had exhausted his equity through Suncorp's "Share Gear Plan", but using his own savings he purchased further shares in E Cat Development Capital Limited.

5. For the purposes of Section 1075(1) of the Social Security Act 1991, the question arises as to whether Mr Port was carrying on a business.  The Social Security Appeals Tribunal found that Mr Port was not carrying on a business because of the small range of share investments, he had only owned shares in six listed companies since 1995 and that the buying and selling of those shares generated insufficient income for him to make a living.

6. I am satisfied on the basis of evidence given by Mr Port today that the Social Security Appeals Tribunal took into account an irrelevant consideration, namely, the purchase of some shares earlier than the AMP share purchase.  Mr Port's evidence today is that he did not deliberately set out to carry on the business of trading in shares until about June 1999 when he made a decision to do so and borrowed money for the purpose of acquiring shares.

7. The phrase "carries on a business" is often found in legislation.  I have not been referred to any authority as to the meaning of the phrase.  However, as is well known, the meaning of such a phrase will vary from Act to Act and any authority, unless it was on Section 1075 itself, would be of little assistance.  General notions are involved.  The question is one of fact and degree.  In my view, during the relevant period, Mr Port could be said to have been carrying on the business of a person trading in shares.

8. The considerations that I find to be relevant to that decision are:

• firstly, that Mr Port borrowed money (whereas other people use capital they have at their disposal for the purposes of increasing the amount of that capital);

• secondly, the amount of the borrowings was not insubstantial (by the time Mr Port had acquired the E Cat shares, he had expended an amount in excess of $88,000 in the purchase of shares and his borrowings were in excess of $80,000);

• thirdly, after making a deliberate decision to carry on the business of trading in shares, Mr Port acquired shares in three separate listed companies (all sizeable acquisitions);

• fourthly, I take into account that Mr Port acquired an Australian Business Number; and

• finally, I take into account the fact that Mr Port declared his income and claimed deductions in his 30 June 2000 income tax return on the basis that he was trading in shares.

1. In all the circumstances, I am satisfied that during the relevant period Mr Port was carrying on the business of a person buying and selling shares, and I reach that view notwithstanding that the unusual fact of the matter is that Mr Port's major source of income was a Newstart Allowance paid to him under the Social Security Act.

2. The matter, however, does not end there.

3. Mr Foster, on behalf of the Department, has drawn attention to a provision in the Social Security Act to which the Social Security Appeals Tribunal was not referred.  That Section is Section 1075(2) of the Act, which provides as follows:

   "If under Division 1B a person is taken to receive ordinary income on a financial investment, that ordinary income is not to be reduced by the amount of any expenses incurred by the person because of that investment."

1. Mr Port, in the circumstances of this case, is taken to have received ordinary income and his shares are a financial investment as defined by the Act.  In those circumstances, the provision of Section 1075(2) is clear.  He is not entitled to have his ordinary income reduced by the amount of expenses incurred because of the investments. 

2. This construction is correct, notwithstanding that Section 1075 is headed "Permissible Reductions of Business Income" and provides that a person's ordinary income from business is to be reduced by, amongst other things, amounts that relate to business and are allowable deductions under Section 82AAC(1) of the Income Tax Assessment Act 1936.

3. There is, however, no incongruity in that because Section 1075(1) commences "Subject to subsection (2)" and subsection (2) clearly provides that expenses incurred by a person because of a financial investment from which ordinary income is taken to have been received are not to be taken to reduce that ordinary income.

4. In those circumstances, my decision can only be, although for different reasons, that the decision of the Social Security Appeals Tribunal under review is affirmed.

   I certify that the 15 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President S Estcourt

   Signed:         Emma Oettinger
     Associate

   Date/s of Hearing  19.3.01
   Date of Decision  19.3.01
   Rep. for the Applicant              Applicant appeared in person
   Solicitor for the Respondent    Mr N Foster, Departmental Advocate