Presser and Secretary, Department of Employment and Workplace Relations
[2007] AATA 1780
•19 September 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1780
ADMINISTRATIVE APPEALS TRIBUNAL )
) N° 2007/0466
GENERAL ADMINISTRATIVE DIVISION ) Re
DOUGLAS JOHN PRESSER
Applicant
And
SECRETARY,
DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Mr C. Ermert, Member Date19 September 2007
PlaceMelbourne
Decision The Tribunal affirms the decision under review.
(sgd) Mr C. Ermert
Member
SOCIAL SECURITY – disability support pension (DSP) - calculation of rate of DSP – income test - value of assets – income from assets - deprived assets – disposal of assets – assets of a person - disposal of asset for inadequate consideration - sale of property – distribution of proceeds to children – decision affirmed
Administrative Appeals Tribunal Act 1975
Social Security Act 1991
Re Tokolyi and Secretary, Department of Social Security (1992) 26 ALD 97
REASONS FOR DECISION
19 September 2007 Mr C. Ermert, Member
INTRODUCTION
1. Mr Douglas John Presser, the applicant in this case, married Veronica Joy Presser around 1987 or 1988. At that time Mr Presser had one child and Mrs Presser had five children. In 1992 Mr Presser and his wife purchased a house at 1 Weerona Way, Mornington (the property). They were registered as joint proprietors in 1993. Mr Presser contributed $50,000 for the block of land. They jointly took out a loan for the house amounting to $117,000 which was secured by a mortgage. When Mr Presser ceased employment, Mrs Presser, who remained in part-time employment, maintained the payments of the mortgage.
2. On 6 July 2000 Mr and Mrs Presser made essentially identical wills. The wills provided, amongst other things, that their executrix, Mrs Tracy Leanne Godfrey, one of Mrs Presser’s daughters, held their estates in trust, to transfer to the other their interest in the property, but in the event that the other predeceased them, to divide the property between those of the six children that survived their parents.
3. Mrs Veronica Presser died on 11 July 2000. On 5 July 2001 Mr Presser lodged a survivorship application in respect of the property and his resulting sole proprietorship was registered on 1 March 2002. On 8 March 2002, in an attempt to prevent Mr Presser selling the property or using it as collateral for a loan, Mrs Godfrey lodged a caveat over the title. On 8 July 2002 Mrs Godfrey lodged a writ in the Supreme Court of Victoria seeking a declaration that Mr Presser held his legal estate in the property upon an implied and/or constructive trust for himself for life, and in remainder for the six children. This action was subsequently dismissed without adjudication on its merits.
4. Mr Presser entered into another relationship in May 2004 and vacated the property. His daughter, Melinda, continued to reside there and paid rent sufficient to meet the mortgage and other outgoings. In June 2004 Mr Presser, who had been receiving newstart allowance was transferred to a disability support pension (DSP) by Centrelink, the service delivery agency for the Department of Employment and Workplace Relations. Centrelink regarded Mr Presser’s interest in the property and the rent received as assets and income when applying the income test for Mr Presser’s DSP.
5. Melinda left the property in September 2005. Mrs Godfrey then gave instructions for a Deed of Family Arrangement to be prepared. The Deed stated that Mr Presser wished to sell the property and it was agreed that, after the deduction of sale costs and loan repayments, the proceeds would be distributed equally between Mr Presser and each of the six children. On 7 December 2005 Mr Presser notified Centrelink that the property was to be sold and the proceeds divided up between him and the children.
6. The property was sold for $320,000. Settlement took place on 9 February 2006. After the deduction of costs and loan repayments, the sale realised $230,001, which was distributed between Mr Presser and the six children. They received $32,857.30 each.
7. As a consequence of the sale, Mr Presser’s DSP and his partner’s parenting payment partnered (PPP) payments were reviewed. Centrelink decided that Mr Presser had disposed of an asset valued at $197,143 (calculated as $32,857.30 multiplied by six) without receiving consideration in money or money’s worth. Centrelink determined that the value of the disposed asset was $187,143 (being the asset value minus the allowable gifting amount of $10,000 a year); and that the value of $187,143 should be maintained as an asset in the assessment of Mr Presser’s DSP and his partner’s PPP for five years. This resulted in reduced payments under the deemed income provisions of the Social Security Act 1991 (the Act).
8. Mr Presser was advised of the Centrelink decision to reduce his DSP payment. This decision was subsequently affirmed by an Authorised Review Officer and the Social Security Appeals Tribunal (SSAT). This hearing is a review of the SSAT decision made on 29 January 2007.
THE HEARING
9. At the hearing Mr Presser represented himself. I heard evidence from Mrs Gwendolen Elizabeth Van't Padje-Presser, his partner since 2004, and Mrs Godfrey. The respondent was represented by Mr David Perdon, a Centrelink advocate. I had before me the documents lodged by the respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T-documents). Mr Perdon lodged an addendum to the T-documents comprising three additional pages of Mr Presser’s will, numbered T19, pages 48a, 48b and 48c.
THE ISSUES
10. There was no dispute between the parties over the basic facts of the case: regarding the original purchase of the property, Mr Presser’s registration as sole proprietor after his first wife’s death, the subsequent sale of the property, the sale price and costs, and the distribution of the proceeds between Mr Presser and the six children. The matter in dispute is the determination by Centrelink that, by selling the property and distributing the proceeds to the children, Mr Presser disposed of an asset without receiving adequate consideration. Centrelink then maintained an amount of the disposed asset in the assessment of the benefits payable to Mr Presser and his wife.
11. The issue to be determined is whether the deemed income provisions of the Act have been correctly applied to the determination of the payments of DSP to Mr Presser.
12. The applicant in this case is Mr Presser and the issue is in relation to the rate of payment of his DSP. Therefore, in these reasons for decision I will confine my reasoning to the issue of Mr Presser’s DSP. However, the provisions in the Act for determining the rate of PPP for his wife are subject to similar provisions regarding the inclusion of deemed income from financial assets. Thus the decision in regard to Mr Presser’s DSP will also have application to the payment of his wife’s PPP.
The applicable legislation
13. Section 117 of the Act provides that the rate of a person’s DSP is worked out by use of the Pension Rate Calculator at the end of section 1064. The Method Statement in section 1064A(1) requires the application of the ordinary income test to work out the income reduction. Section 1064-E1 prescribes the method of working out the effect of a person’s ordinary income on the person’s maximum payment rate. Note 2 provides that the application of the ordinary income test is affected by provisions concerning the deemed income from financial assets (sections 1076 to 1084). Section 1077 covers the deemed income from the financial assets of members of pensioner couples. Section 1077(2) relevantly provides:
If one or both of the members of a couple have financial assets, the members of the couple are taken, for the purposes of this Act, to receive together ordinary income on those assets in accordance with this section.
14. Financial assets are defined in section 9(1) of the Act and include deprived assets. Section 9(4) of the Act defines an asset as a deprived asset if:
(a)a person has disposed of the asset; and
(b)the value of the asset is included in the value of the person’s assets by section … 1126AC …
15. Section 1126AC of the Act applies to the disposal of assets in the income year for members of couples; and in section 1126AC(2) provides for the determination of the value of assets to be the amount by which the value of the disposed asset exceeds $10,000.
16. Disposal of an asset is provided for in section 1123 of the Act. Section 1123 (1) relevantly provides:
For the purposes of this Act, a person disposes of assets of the person if:
(a)the person engages in a course of conduct that directly or indirectly:
(i)…
(ii)disposes of all or some of the person’s assets;
(iii)… and
(b)one of the following subparagraphs is satisfied:
(i)the person received no consideration in money or money’s worth for the … disposal ;
(ii)the person received inadequate consideration in money or money’s worth for the … disposal…
17. This section raises two elements for determination: was the property an asset of the person and did Mr Presser dispose of that asset for no or inadequate consideration in money or money’s worth.
Was the Property an asset of Mr Presser
18. Mr Presser’s evidence was that in the early 1990’s he and Mrs Veronica Presser jointly purchased the property. He said that he bought the block of land for $50,000 and they borrowed $117,000 to build the house. Mr Presser stated that he and his wife had free title over the Property. As there was a mortgage on the property I take this statement to mean that, apart from the mortgagor, no person other than Mr Presser and his wife had a financial interest in the Property. His evidence was that none of the children contributed money to the house or the land. He said that while his daughter lived in the house she paid rent equivalent to the cost of the electricity, gas and rates. Mr Presser said that, after his wife died and following advice, he lodged a survivorship application to have the property transferred to his name. Mr Presser’s sole proprietorship was registered on 1 March 2002 (T documents, page 123).
19. The evidence of both Mr Presser and Mrs Godfrey was that, on 8 March 2002, Mrs Godfrey lodged a caveat over the title claiming an equitable reversionary interest in the property on behalf of the six children. Their evidence was that the caveat was intended to stop Mr Presser selling the property or using it as collateral for a loan. Mr Presser’s evidence was that, at that time, he was trying to raise a loan to buy a four-wheeled drive vehicle. Mrs Godfrey gave evidence that in July 2002, on the advice of solicitors, she lodged a writ in the Supreme Court of Victoria. She said that she took out the writ because she thought that Mr Presser was challenging the caveat. In February 2004 the Supreme Court action was dismissed without adjudication on its merits (T documents, page 144).
20. Mrs Godfrey’s evidence was that in September 2005 she went to a local solicitor, told her that the family was looking to sell the Property and sought advice. Mrs Godfrey said that she was advised to draw up a deed, for everyone’s agreement, to sell the house and divide the proceeds into seven shares. Mrs Godfrey remembered “… specifically asking her, “Will this be classed as gift tax, or anything, affecting, like, Doug because we don’t anything, you know, to affect him?” and she said, “No.” (Transcript page 27). The evidence of both Mr Presser and Mrs Godfrey was that, as a result of the solicitor’s advice, a Family Deed was drawn up, agreed to by all seven parties and the property subsequently sold. Mr Presser said that the caveat was removed when the Property was sold.
21. The will of the late Veronica Presser included the following provision relevant to the property:
“5. My Executrix holds my estate on trust:-
…
(d) To transfer all of my right title and interest in my home property at 1 Weerona Way Mornington in the said State to my husband the said Douglas John Presser but in the event of him predeceasing me to divide my said house property between such of them my children …”
The remainder of the paragraph is immaterial as Mr Presser did not predecease Mrs Presser. The provision is clear regarding the transfer of Mrs Presser’s interest to Mr Presser. Mr Presser’s will, made at the same time as Mrs Presser’s will, contains equivalent provisions. However, they are not in force as Mr Presser is still alive.
22. On the issue of ownership of the property Mr Perdon submitted:
Now, in this application it is clear that Mr Presser and the late Mrs Presser were joint proprietors of that property at Weerona Way, and what that means is under the laws of property, leaving the will totally to one side, Mr Presser is entitled to be registered as the sole proprietor under what is called the survivorship application rules and, indeed, that is what happened in this application. He went from being a joint owner to being the sole owner and that was by force of the property law, not by anything that happened under the will.
He was the legal owner of the property because his name was on the title. The only way that it could not be his asset, if there was what is called a trust between him as the legal owner and other persons who are called in law the beneficial owners who claimed some sort of right to that property. Now, in order for there to be some sort of trust arrangement, which would somehow affect his legal ownership, there must be a common intention between the legal owner, which is Mr Presser, and the beneficiary, which are the children, regarding the beneficiary’s beneficial ownership of the property.
There must be a common intention which can be inferred from their words or conduct, and the beneficiary must be able to show that they acted to their detriment on the basis of the common intention as to that beneficial ownership, that the beneficiaries must have done something to harm themselves on reliance of the common intention.
The final test for a trust is that it must be a fraud on the beneficiary for the legal owner to deny their interest. Now in the present matter the respondent submits that a trust situation simply doesn’t arise because as pointed out by the Social Security Appeals Tribunal, the property passed to Mr Presser by survivorship not by the will.
…
23. From the evidence it is clear that the ownership of the property passed to Mr Presser as the surviving proprietor on the death of Mrs Veronica Presser. Mr Presser’s sole proprietorship was registered on 1 March 2002. The caveat placed on the property by Mrs Godfrey had the effect of preventing Mr Presser from selling the property or raising a loan against the property without the consent of the children. However, it did not affect the ownership of the property, which remained with Mr Presser. This state of ownership was also not affected by the will of the late Mrs Presser which clearly transferred her title and interest to Mr Presser on her death. The action in the Supreme Court of Victoria was dismissed without adjudication on its merits and therefore does not affect the ownership of the property.
24. In further considering this issue I had regard to the Tribunal’s findings in the matter of Re Tokolyi and Secretary, Department of Social Security [1992] 26 ALD 97. Mr Tokolyi had left a will under which two properties were to be left in trust to Mrs Tokolyi for life and thereafter to be divided between her two sons, a very similar situation to the matter under consideration. Subsequently, Mrs Tokolyi sold the two properties and gave the proceeds to her two sons. The Tribunal found that a disposal had indeed taken place. In answer to a submission, put on behalf of MrsTokolyi, that there existed some sort of trust arrangement, the Tribunal said that that scenario was unnecessary. The Tribunal continued at paragraph 26:
“… what the evidence establishes is that it was the wish of Mr and Mrs Tokolyi that the properties which they owned jointly should be sold and the proceeds divided in the manner set out. For that wish to be carried into effect, no agreement or action by the sons was required. Mr and Mrs Tokolyi, as joint owners of the properties, could deal with them as they wished. It must be assumed that they were aware that on the death of her husband, Mrs Tokolyi would become the sole owner by right of survivorship of all three properties, and able to carry out their intentions alone. In any case, that is what occurred, and that being so, Mrs Tokolyi became sole registered proprietor … The properties were then hers to deal with and she was free, if she so desired, to dispose of the … properties and distribute the proceeds of the sale as she and her husband had agreed should be done.
25. That is a similar situation to the present that a property is in the sole ownership of a party, it is then sold and the proceeds are dispersed. That is the owners prerogative, even though it may have consequences under the deemed income provisions of the Act.
26.In Tokolyi the Tribunal continued:
27. The … properties were not affected by the will. They went directly to Mrs Tokolyi by operation of the law. Thus the will did not confer on Mrs Tokolyi any life interest in the properties which she could surrender; nor did it confer any interest in remainder in the properties on the sons which they could surrender. …
28. … I cannot find that there was any consideration passing from the sons. They had no rights under the will in respect of any of the land, and accordingly could not surrender any such rights …”
27. After considering the evidence, and applying the same reasoning as the Tribunal in Tokolyi, I find that at the time of its sale Mr Presser remained the sole proprietor of the property and that the property was an asset of the person, that person being Mr Presser.
Did Mr Presser dispose of the Property for inadequate consideration?
28. All parties agree that Mr Presser agreed to the sale of the property and was a party to the Deed of Family Arrangement – Property at 1 Weerona Way, Mornington (T document 41, pages 109 to 113). This Deed recorded the agreement of all parties that the property was to be placed on the market and upon sale, the proceeds, after costs, were to be distributed in seven equal shares to Mr Presser and each of the six children. There is also agreement that the property was sold in February 2006; and that after costs and repayment of the loan the sale realised $230,001; which was divided between Mr Presser and the six children in shares of $32,857.30 each. In his evidence Mr Presser agreed that prior to the sale he owned the property and after the sale he finished up with one-seventh of its worth. That is, the consideration received by Mr Presser from the sale of the asset was only $32,857.30. This is to be compared with the value of Mr Presser’s asset prior to the sale of $230,001.
29. Mr Presser denied that he received advice from Centrelink, before the sale, regarding the affects of the sale on his DSP. He accepted that he had attended Centrelink on 7 December 2005 to advise them of his intention to put the property on the market for sale and that the proceeds would be divided between the children. However, he disagreed with the record of interview (T28, page 79) which stated that the Centrelink officer … explained the deprive provisions of the SSA 1991 … I advised he that BEFORE THIS HAPPENS HE SHOULD HAVE AN APPT WITH CENTRELINK FISO, who will explain the implications of this gifting. I emphasised that this deprivation in excess of $10,000 will be maintained for 5 years. Mr Presser stated in his evidence that this advice was not given to him until after the sale occurred.
30. Mr Presser did state that he had sought other advice regarding the effects of the sale. His evidence, and that of Mrs Godfrey, was that they had sought advice from solicitors on this issue. However, when questioned they agreed that their enquiries had been directed towards the effects of gifting under the provisions of the Income Tax assessment Act and not the effects of disposing of the property on his DSP. Unfortunately, Mr Presser’s lack of understanding of the effects of the sale on his DSP does not help in this case.
31. Again, I considered the Tribunal’s decision in Tokolyi. In that case the Tribunal found that Mrs Tokolyi, by selling the properties and paying the money to the sons, disposed of the properties for no consideration in money’s worth and the relevant amount was to be included in the consideration of Mrs Tokolyi’s assets in accordance with the Act.
32. After considering the evidence, and adopting the same reasoning as in Tokolyi, I find that Mr Presser did dispose of the property by engaging in a course of conduct, being the sale of the property with his agreement. That sale disposed of some of his assets and Mr Presser received inadequate consideration in money’s worth for the disposal of the property. I have already found that the property was the asset of Mr Presser and accordingly I find that Mr Presser disposed of an asset under the provisions of section 1123(1) of the Act.
Conclusion
33. I have found that Mr Presser disposed of the property without receiving adequate consideration and the amount of the disposal is the net sale proceeds ($230,001) less the amount received by Mr Presser from the sale ($32,857.30), being an amount of $197,143. This means that an amount of $187,143, being the value of the disposed asset less the allowable limit of $10,000, is a deprived asset under section 9(4) of the Act and is therefore a financial asset in the terms of section 9(1) of the Act. Section 1078 of the Act provides that a person who has financial assets is taken to receive ordinary income on those assets. My finding means that the deemed income from the deprived asset is to be maintained in calculating the rate of Mr Presser’s DSP. In turn, this means that Mr Presser’s entitlement to DSP has been properly assessed by Centrelink and Mr Presser’s application in this matter is not successful.
DECISION
34.The Tribunal affirms the decision under review.
I certify that the thirty four [34] preceding paragraphs are a true copy of the reasons for the decision herein of:
Mr C. Ermert, Member
(sgd) Lauren Spragg
ClerkDate of Hearing: 20 July 2007
Date of Decision: 19 September 2007
Advocate for the applicant: Self-represented
Advocate for the respondent: Mr David Perdon, Centrelink Legal Services
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