Pratap and Secretary, Department of Social Services (Social services second review)

Pratap and Secretary, Department of Social Services (Social services second review) [2017] AATA 843 (9 June 2017)
Division:GENERAL DIVISION
File Number:2016/6349
Re:Katherine Pratap
APPLICANT

Secretary, Department of Social ServicesAnd
RESPONDENT

DECISION
Tribunal:Dr L Bygrave, Member
Date:9 June 2017
Place:Sydney

The decision under review is affirmed.
............[sgd]............................................................
Dr L Bygrave, Member

CATCHWORDS
SOCIAL SECURITY – disability support pension – overpayment of pension – recovery of debt – assets test – whether assets disposed of or gifted – value of gifted assets – whether applicant has a debt – whether debt can be written off or waived – decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 11, 1064, 1123, 1124, 1126AA(2), 1223(1), 1236, 1237A, 1237AAD
CASES
Groth v Secretary Department of Social Security [1995] FCA 1708
REASONS FOR DECISION
Dr L Bygrave, Member
9 June 2017
INTRODUCTION

The applicant, Ms Katherine Pratap, has received the disability support pension since 29 May 2002.
In 2014, the applicant sold two properties. She subdivided her Moorebank property into two titles, retaining one title and selling the other title (Cooper Ave property) to her son for $100 on 5 May 2014. On 4 June 2014, she sold another property at Watanobbi (Watanobbi property). She received payment of $127,678.19 on settlement of the Watanobbi property and gave her son $103,355 from the proceeds of sale.
On 19 January 2016, the Department of Human Services (the Department) made a decision to pay the applicant at a reduced rate of disability support pension, based on her having assets of $488,433 and an annual income of $9,457.57. The Department relied on a council rateable land value of $220,000 to determine the value of the Cooper Ave property.
On 3 February 2016, the Department made a separate decision to raise and recover a disability support pension debt from the applicant of $12,516.10 for the period of 5 May 2014 to 18 January 2016.
After the applicant requested an internal review of the Department’s decisions, an authorised review officer sought an historical assessment of the Cooper Ave title property. On 15 June 2016, MVS National (MVS) provided a market valuation of the Cooper Ave property as at 5 May 2014 of $380,000. Based on this new valuation of the Cooper Ave property, the Department decided on 21 June 2016 that:
(a)the applicant had a disability support pension debt totalling $25,853.25 for the period 5 May 2014 to 20 June 2016; and
(b)the applicant’s rate of disability support pension be reduced to $215.03 a fortnight from 5 July 2016.
The applicant applied to the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal for a review of the Department’s decision. The SSCSD affirmed the Department’s decision on 1 November 2016.
On 23 November 2016, the applicant applied to the General Division of the Administrative Appeals Tribunal for a review of the SSCSD decision.
The matter was heard in Sydney on 19 May 2017. The applicant attended the hearing in person. She was represented by her son and assisted by an interpreter of the Indian-Fijian language.
ISSUES
The issues for determination by the Tribunal are:
(a)whether the applicant disposed of, or gifted, the value of the Cooper Ave property and the Watanobbi property, and if so, the value of the gifted assets; and
(b)whether the applicant owes a debt of disability support pension, and if so, whether there are any grounds to write off or waive the debt.
RELEVANT LEGISLATION AND CONSIDERATION
The rate of a person’s disability support pension is calculated in accordance with section 1064 of the Social Security Act 1991 (Cth) (the Act).
Section 1123 of the Act sets out the circumstances in which a person ‘disposes of assets’. An ‘asset’ is defined in section 11 of the Act as including ‘property or money’. If a person disposes of assets for the purposes of section 1123 of the Act, section 1124 stipulates the amount of disposal or disposition of assets. Relevantly, in circumstances where a person receives no consideration for the diminution in value of the asset, the amount of the disposition is equal to the amount of the diminution in value of the assets.
Pursuant to subsection 1126AA(2) of the Act, if the amount of the disposal exceeds $10,000 in an income year, then the amount of the excess is to be included in the value of a person’s assets when assessing the rate at which a social security payment is paid from a period of five years from the date of the relevant disposal. This is known as the ‘disposal free limit’; any amounts disposed of in excess of the disposal free limit are called ‘deprived assets’ and are assessable under the assets test set out in Module G of section 1064 of the Act.
Issue 1 – Did the applicant dispose of, or gift, the value of the Cooper Ave property and the Watanobbi property, and if so, what is the value of the gifted assets?
A contract for the sale of land for the applicant’s Moorebank property dated 5 May 2014 shows the applicant sold the Cooper Ave property to her son for $100.
This was confirmed by the applicant at the Tribunal hearing. The applicant said she purchased the Moorebank property in 1989. She then subdivided the property in 2014 and sold the Cooper Ave property to her son for $100 so that he could build a house.
However, both the applicant and her son disputed the value of the Cooper Ave property. In a written submission dated 19 May 2017, the applicant’s son stated the Cooper Ave property was valued ‘at $105,000 on 25/7/2014’. The Tribunal notes that $105,000 was the ‘dutiable amount’ stated on the contract for the sale of land, which was the amount that required no stamp duty to be paid. Consequently, the Tribunal is not persuaded that this amount was an independent valuation of the Cooper Ave property.
The Secretary submitted that the Tribunal rely on the valuation undertaken by MVS. This valuation of the Cooper Ave property was undertaken by MVS on 15 June 2016 but states the valuation date was the date of transfer, 5 May 2014. The MVS valuation is for vacant land of 413 sqm and provides a comparison of three other land sales in Moorebank in early 2014. MVS provided a market valuation for the vacant land of $380,000. This is consistent with the descriptions and amounts of the three other land sales set out in the report by MVS. The applicant has not provided another independent valuation. The Tribunal is satisfied the MVS valuation is an accurate historical assessment of the Cooper Ave property on 5 May 2014.
Conveyancing documents dated 4 June 2014 disclose the applicant sold the Watanobbi property for $142,000 and she received $127,678.19 on settlement. The applicant’s bank account statement shows a deposit of $103,355.29 on 4 June 2014 and a transfer of $9,982.60 on 6 June 2014. Her bank statement also shows 13 withdrawals between 17 September 2014 and 11 November 2014 in the total amount of $113,000. The dates and amounts of these withdrawals from the applicant’s bank account correlate with the amounts of deposits into the bank account of the applicant’s son. The sole exception is 3 November 2014, which showed a withdrawal of $9,000 from the applicant’s bank account and a deposit of $5,000 into her son’s account.
At the Tribunal hearing, the applicant confirmed she had given money to her son so that he could build a house on the Cooper Ave property. In a written submission on 19 May 2017, the applicant’s son claimed he received $103,000 from his mother as a ‘gift amount…for building the house’. The Department has determined the applicant gave her son an amount of $103,355.
The applicant told the Tribunal that she had sold the Cooper Ave property to her son for $100 and had given him money from the sale of the Watanobbi property because it was ‘his money’. She explained that her son had received a compensation payment and she had used this money to pay her mortgage and expenses.
The applicant provided the Tribunal with a determination from the Victim’s Compensation Tribunal dated 23 May 2000, which shows a compensation payment to her son of $48,000. The applicant also stated that when her son was younger, he had helped her when she worked and so she owed him the Cooper Ave property and the money from the Watanobbi property. The Tribunal understands the applicant’s submission is that her son had a financial interest in the Cooper Ave property and the Watanobbi property through his compensation payment and work as a child and consequently, the amount she paid him is not a gift but rather a repayment of his financial interest.
The Tribunal is not persuaded by the applicant’s submission. There is no evidence that the applicant received the compensation payment in 2000 and invested this in her mortgage or any other property. The applicant’s evidence to the Tribunal was inconsistent, incomplete and unsubstantiated. Neither she nor her son was able to provide the Tribunal with any clear details about the expenditure of the compensation payment or timeframes when he undertook work for his mother.
Based on the evidence, the Tribunal is satisfied the Cooper Ave property was valued at $380,000 and sold to the applicant’s son for $100 on 5 May 2014. This means the applicant gifted the Cooper Ave property to her son in the amount of $379,900 ($380,000 - $100). The Tribunal is also satisfied the applicant gifted her son an amount of $103,355 after she sold her Watanobbi property on 4 June 2014.
Pursuant to section 1123 of the Act, the Tribunal finds the applicant gifted assets to her son in the total amount of $483,255 ($379,900 + $103,355). Taking into account the disposal free limit, the Tribunal finds the amount of $473,255 ($483,255 - $10,000) is the asset amount for the purpose of calculating the applicant’s rate of pension.
Issue 2 – Does the applicant have a debt for the period 5 May 2014 to 20 June 2016?
Subsection 1223(1) of the Act provides:
Debts arising from lack of qualification, overpayment etc.
(1)Subject to this section, if:
(a)a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
As set out in paragraph 23, the Tribunal is satisfied the applicant gifted assets to her son in the total amount of $483,255. Taking into account the disposal free limit, the Tribunal finds the amount of $473,255 ($483,255 - $10,000) is the asset amount for the purpose of calculating the applicant’s rate of pension. Based on this asset amount, the Secretary contends that the applicant was paid a total of $36,326.59 and was only entitled to receive $10,473.34.
The Tribunal finds that the applicant was overpaid the disability support pension and so incurred a debt in the amount of $25,853.25 for the period 5 May 2014 to 20 June 2016.
Are there any grounds for writing off or waiving all or part of the debt?
Should the debt be written off?
Section 1236 of the Act provides, in part:
Secretary may write off debt
(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law; or
(a)the debtor has no capacity to repay the debt; or
(b)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(c)it is not cost effective for the Commonwealth to take action to recover the debt.
There is no evidence to suggest that any of the conditions set out in subsection 1236(1A) are met. The Tribunal is not satisfied that the debt should be written off.
Should the debt be waived by reason of ‘administrative error’?
Pursuant to section 1237A of the Act, a debt arising from error may be waived:
Waiver of debt arising from error
Administrative error
(1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt. [emphasis added]
The applicant’s debt arose because she gifted or disposed of assets to her son.
There is no evidence that the applicant’s debt was attributable to administrative error. The Tribunal is not satisfied the debt should be waived due to administrative error.
Should the debt be waived by reason of ‘special circumstances’?
Subsection 1237AAD of the Act provides:
Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)The debt did not result wholly or partly from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c)it is more appropriate to waive than to write off the debt or part of the debt.
In Groth v Secretary Department of Social Security, the Federal Court said:
… The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss… it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied... [emphasis added] [1]
[1] [1995] FCA 1708.
At the Tribunal hearing, the applicant said she is struggling financially because her disability support pension was cancelled on 1 January 2017 (due to the value of her assets) and she needs money for her living expenses, medications and to care for her grandchild who lives with her.
The applicant also told the Tribunal she owns another property unencumbered in Queensland, which was valued on 8 March 2017 at $144,000. The applicant said she did not want to sell this property because the value has recently decreased.
Unfortunately for the applicant, there is nothing which takes her situation out of the ‘usual or ordinary case’ and no occurrence that is ‘unfair, unintended or unjust’ that would support her experiencing ‘special circumstances’. She owns an unencumbered property valued at $144,000, which she can sell to pay her debt and live off the proceeds. Consequently, the Tribunal is not satisfied that any or all of the applicant’s debt should be waived.
DECISION
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 Dr L Bygrave, Member.

............[sgd]............................................................
Associate
Dated: 9 June 2017

Date of hearing: 19 May 2017

Advocate for the Applicant: Mr C Paisa

Solicitors for the Respondent: Mr L Dennis, Department of Human Services

[2017] AATA 843

9 June 2017

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Statutory Construction

Remedies

Jurisdiction

Date of hearing:	19 May 2017
Advocate for the Applicant:	Mr C Paisa
Solicitors for the Respondent:	Mr L Dennis, Department of Human Services