PRLZ; Secretary, Department of Social Services and (Social security second review)
[2025] ARTA 2061
•15 October 2025
PRLZ; Secretary, Department of Social Services and (Social security second review) [2025] ARTA 2061 (15 October 2025)
Applicant/s: Secretary, Department of Social Services
Respondent: PRLZ; VJDP
Tribunal Number: 2025/1886; 2025/1887
Tribunal:Senior Member A Suthers (second review)
Place:Perth
Date:15 October 2025
Decision:The Tribunal varies the decision under review. The decision is now:
The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
(a) The value of the W Trust assets as of the date of claim are to be reassessed on the basis that the value of the loans owed to the Respondents ($25,590) by the W Trust should be deducted from the capital value of the assets of the W Trust ($25,445) pursuant to subsection 1208E(2) of the Social Security Act 1991 (Cth).
(b) The disposition of assets made by the Respondents to the S Trust between 30 June 2021 and 31 August 2023 is to be assessed as nil pursuant to section 1208K of the Social Security Act 1991 (Cth).
(c) The date of effect of any favourable determination arises under subsection 109(1) of the Social Security (Administration) Act 1999 (Cth).
Statement made on 14 October 2025 at 11:12am
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by ss 201(1A)-201(1B) of the Social Security (Administration) Act 1999 (Cth).
CATCHWORDS
SOCIAL SECURITY – Disability Support Pension – asset test and deprived assets – categorisation of transfer of funds to trust as a gift or as loan – respondents’ principal place of residence owned by the trust
LEGISLATION
Administrative Review Tribunal Act 2024 (Cth)
Social Security Act 1991 (Cth)Social Security (Administration) Act 1999 (Cth)
CASES
Bennett; Secretary, Department of Social Services and (Social service second review) [2019] AATA 5828
Boyd and Secretary, Department of Social Security [1994] AATA 580
Bell; Secretary, Department of Social Services and (Social services second review) [2023] AATA 190
Bysouth and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 59
Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Gorton and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 127
G v MIBP [2018] FCA 1229
Minister for Home Affairs v G and Another [2019] FCAFC 79
Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666
MZZZW v Minister for Immigration and Border Protection [2015] FCAFC 133
Re Boyd and SDSS (1994) 83 SSR 1221
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Lyons and Secretary, Department of Family and Community Services [2007] AATA 1095; (2007) 94 ALD 450
The Executor of the estate of the late Peter Sweeney; Secretary, Department of Social Services and (Social services second review) [2022] AATA 3152
Saunders and Secretary, Department of Family and Community Services [2002] AATA 1256Woolley and Repatriation Commission [2007] AATA 2059
SECONDARY MATERIALS
Australian Government, Guides to Social Policy Law, Social Security Guide
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth)
Statement of Reasons
SUMMARY
This is a second review of decisions made in two related applications for first review before this Tribunal. The applicants for first review were a married couple, PRLZ and VJDP (together ‘the Respondents’). The Secretary, Department of Social Services Chief Executive Centrelink (‘Applicant’) has sought further review of those decisions.
In large part, the decisions concern the Respondents’ choice to buy the house that they occupy as their principal place of residence (the ‘PPR property’) in a trust called the S Trust. The decisions also concern how the Respondents funded the PPR property, and how this affects their eligibility for the disability support pension (‘DSP’).
Had the PPR property been bought in the name of the Respondents, and using funds they contributed to that purchase, it would not have affected their eligibility for the DSP. Because it was purchased in a trust, a question arises as to how the monies they used to partially fund the refinance of the PPR property, which were their own monies (‘the transferred monies’) should then be treated. Were the transferred monies a gift to the trust, in which case they will be disregarded and have no effect on their eligibility for DSP, or a loan to the trust that would affect their rate of DSP?
The S Trust purchased the PPR property[1] in 2020. It was never included in the financial statements of the S Trust leading up to 30 June 2023. The PPR property should always have been included in the financial statements of the S Trust, but the Respondents didn’t think of it as an asset of the S Trust because it was their ‘home’. Nor did they show in the financial statements any indication that they had loaned the transferred monies to the S Trust, i.e. as a liability of the S Trust to them.
[1] Via its trustee.
In 2023, PRLZ was made redundant, and had health conditions. VJDP developed a serious medical condition. Neither was working. They made applications for Centrelink benefits (on 13 September 2023 and 18 October 2023, respectively) but due to the complicated way they had managed their finances, the process was delayed.
The Respondents sold a car and shares to fund their living expenses.[2]
[2] Conversation between PRLZ and the CAO 4 December 2023 at 26m:10s.
Eventually, on 4 December 2023, PRLZ was contacted by a Complex Assessment Officer (‘CAO’) from Centrelink, who was assigned to review the Respondents’ finances. PRLZ took that call as he was leaving a medical appointment. He did not have a pen and paper to take notes. The discussion lasted for over half an hour and covered wide ranging issues regarding the Respondents’ complex financial affairs.
Only after speaking to the CAO did the Respondents provide updated financial statements of the S Trust that showed its ownership of the PPR property. The Respondents also listed the transferred monies as loans from them to the S Trust. However, they say this was done in error. PRLZ, who spoke to the CAO on behalf of both Respondents, maintained that the CAO told him to make those amendments to the financial statements of the S Trust.
After the hearing, I obtained and have listened to the relevant conversation between PRLZ and the CAO, as well as other conversations between PRLZ and representatives of Centrelink at the relevant time. I am satisfied that PRLZ was not told to include the transferred monies as loans in the financial statements. I am also satisfied that PRLZ was not told anything by Centrelink officers in those conversations that should have led him to conclude he needed to show the transferred monies as loans to the S Trust.
However, I have concluded that PRLZ, and through him VJDP, believed that was what they needed to do to progress their claims for benefits, and that the inclusion of the loans in the financial statements of the S Trust was in error. I have, on that basis, concluded that the first review decision was correct, save that it did not recognise that there were much smaller beneficiary loans from the Respondents that were owed by the S Trust, unrelated to the transferred monies.
Background
Whilst I must conduct this review independently and consider afresh the question of what is the correct or preferable decision in respect of the applications, that does not mean that I must do so without regard for what has gone before.[3] In conducting the review, I may have specific regard to the record of the first review proceeding, including the record of any evidence taken in that proceeding. That includes any document or thing relating to the earlier proceeding given to the Tribunal and any order or recommendation the Tribunal made.[4]
[3] MZZZW v Minister for Immigration and Border Protection [2015] FCAFC 133 at [60].
[4] ART Act, s 131P.
In that respect, the Tribunal on first review carefully, and in a manner unchallenged by the parties, set out the history of the matter in its decision. In the following record of the background of the matter I have largely adopted that careful analysis.
PRLZ and VJDP were each granted the DSP.
On 21 December 2023, Services Australia (‘Centrelink’) made a decision about their respective rates of DSP.[5]
[5] PRLZ received notice of his decision on 21 December 2023 and VJDP received notice of her decision on 2 January 2024.
They each disagreed with the rate of payment as assessed by Centrelink. An authorised review officer affirmed the original decisions.
On 18 October 2024, PRLZ lodged his application seeking review of the decision. VJDP lodged her application on 8 January 2025. They disagreed with the treatment of the PPR property in the assessment of their pension entitlement. That assessment was complicated by the fact that the PPR property is owned by a private trust, and there are associated loans they have made to private trusts.
The rate of DSP is calculated in accordance with the Rate Calculator contained in s 1064 of the Social Security Act 1991 ( ‘Act’). This uses an income and assets test. The test which results in the lower rate is applied. Where a person is a member of a couple then the combined income and assets of the person and their partner are relevant. In this case PRLZ’s and VJDP’s rates had been determined by application of the assets test.
The assets test definitions are set out in s 11 of the Act. Section 11A of the Act defines the principal home for the purposes of the assets test. Asset is defined to include property or money. Excluded or disregarded assets are described in subsection 1118(1) of the Act.
At the date of their claims the partnered fortnightly rate for an adult was $755.70 (basic) and $826.70 (typical total rate). The basic rate for both PRLZ and VJDP was below the full adult rate for a member of a couple homeowner.
The assets test provided that for a person who was a homeowner and partnered, the asset free area was $451,500 and the asset limit was $1,003,000. For a person who is partnered and not a homeowner, the asset free area was $693,500 and the asset limit was $1,245,000. The assets test provided that for every $1,000 over the asset free area, the rate of payment is reduced by $3 until the asset limit is reached.6
PRLZ and VJDP agreed that they are correctly assessed as partnered. They confirmed that they are married and live together as a couple.
Centrelink assessed PRLZ’s and VJDP’s respective rates of DSP by applying the assets test.
PRLZ and VJDP are associated with five private companies and five private trusts:
(a)Private Companies
Name Corporate trustee for Directors Shareholders J Company B Trust The Respondents K Trust G Company G Trust VJDP K Trust W Company W Trust VJDP K Trust S Company S Trust VJDP K Trust K Company - PRLZ The Respondents (b)Private Trusts
Name Trustee Appointor Beneficiaries Shareholdings K Trust K Company K Company The Respondents W Company
S Company
G Company
J Company
G Trust G Company K Company The Respondents - W Trust W Company K Company The Respondents Amazon
Boam
Home Depot
Macqua
Rie
Walmart
S Trust S Company K Company (described as a ‘Principal’) The Respondents S Company B Trust J Company The Respondents The Respondents -
These entities were created between 2017 and 2020. The Respondents were originally the appointors of the K Trust, G Trust, W Trust, and S Trust until that role was transferred to K Company in 2022. The Respondents explained that they had attended seminars on developing an investment property portfolio. They established these various entities to hold and protect various investment properties. By the time they had made their claims for disability support pension, most of the entities were no longer holding any assets or income.
The Respondents explained that the S Trust purchased the PPR property in 2020 for $600,000. It was partly funded from proceeds from the sale of their previous principal place of residence (also owned by a trust) and a personal loan of $480,000 from VJDP’s sister. The loan between VJDP’s sister and the S Trust was in writing and included the payment of interest.
In 2022, VJDP inherited $500,000. $280,000[6] was transferred into the S Trust and the trust took out a $200,000 loan from ‘First Mac’ secured against the PPR property. These funds were then used to pay back the loan to VJDP’s sister.
[6] Many of the figures used in the ARO decision and the first review decision were rounded, and that rounding has no effect on the overall outcome.
As of the date of their claims, for the large part most of the entities did not hold any assets or generate any income. W Trust owned some public shares valued at $25,350. It listed two unsecured beneficiary loans as current liabilities to the Respondents of $12,795.70. PRLZ said that those shares had since been sold and he had provided Centrelink with updated information, and whilst there was a subsequent change in their rate, he noticed that the value of the unsecured loans has been retained as an asset.
B Trust owed unsecured beneficiary loans of $5,295 to PRLZ and $143 to VJDP.
The S Trust recorded that it owed unsecured beneficiary loans of $1,731 to PRLZ and $371 to VJDP. The existence of these loans appears to have been overlooked by the Tribunal on first review.
When PRLZ was first contacted by the CAO on 4 December 2023, the financial statements of the S Trust were not up to date. After that, the Respondents had the statements brought up to date by their accountant, and the S Trust’s financial position was substantially amended.
In particular, on 5 December 2023, PRLZ sent an email to the Respondents’ accountant seeking, relevantly:
…A copy of the [S Trust] document and the amendment document. An updated balance sheet for the [S Trust] adding in the [PPR property] at the purchase price and the loan from first mac balance as at the 31/08/23. See attached purchase document and loan document balance and all the legal fees attributed to getting this done…
After the updated financial statements were prepared for the S Trust, they showed that it owned the PPR property valued in total at $651,709. Its current liabilities then included two unsecured beneficiary loans (as at 30 June 2023), one to PRLZ of $231,442 and one to VJDP of $230,082, and a non-current financial liability of a secured bank loan of $193,841. Its liabilities in the 2024 financial year (i.e. to the date of production of the updated statements as at 31 August 2023) included two unsecured beneficiary loans, one to PRLZ of $232,578 and one to VJDP of $231,218. It also includes a non-current liability which is a secured bank loan of $192,593 owed to First Mac. The Respondents explained that the only function of S Trust is to hold the PPR property, which is their home, and it does not conduct any other business or hold other assets.
How were the assets assessed by Centrelink?
According to the authorised review officer’s record of decision, he affirmed the original decision to attribute the Respondents with 100% of the assets of the private companies and trusts and on that basis concluded that they were correctly assessed as homeowners. The decision also affirmed that the total assessable assets included the following:
(a)Loans $494,824
(b)Savings $12,522
(c)Shares $25,448
(d)Jayco Caravan $30,000
(e)Personal effects $20,000 (set to zero from 13 September 2023)
(f)Ford Ranger $35,000
(g)Ford Laser $3,000
(h)Toyota Corolla $4,000 (set to zero from 2 December 2023)
The loans included as assessable assets related to unsecured loans totalling $494,824, owed to them by the trusts; these are to be treated as assessable assets. These loans included:
(a)B Trust
oPRLZ $5,295
oVJDP $143
(b)S Trust
oPRLZ $232,578
oVJDP $231,218
(c)W Trust
oPRLZ $12,795
oVJDP $12,795
ISSUES
The Tribunal on first review then analysed the Respondents’ position by reference to part 3.18 of the Act, which provides for the attribution of assets and income of private companies and trusts to an individual, s 1207X of the Act, which sets out provisions which deal with attributable stakeholders, asset attribution percentages and income attribution percentages, the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 and the Social Security Guide. The Tribunal on first review was satisfied that:
(a)The Respondents each satisfy the control and source test in relation to the private companies, and they are both the source and controllers of the various entities, and that either in their individual capacity or through their association with the various trusts they exercise control over the private companies and the trusts;
(b)They are attributed stakeholders of the private companies and trusts; and
(c)They should be attributed with 100% of the assets and income of the private companies.
Having done so, the Tribunal on first review concluded that:
(a)The Respondents were homeowners pursuant to s 11(4) of the Act, because their principal place of residence, that is the PPR property was owned by the S Trust, which is controlled by K Company. Accordingly, the decision to disregard the PPR property as an assessable asset under ss 1118(1)(b) and 1208E(1)(c) of the Act was correct.
(b)That the value of the loans owed by the Respondents to the W Trust should be deducted from the capital value of the assets of the W Trust pursuant to s 1208E(2) of the Act.
(c)That funds transferred by the Respondents to the S Trust, recorded by the Tribunal on first review to be in the amounts of $232,578 and $231,218 respectively, represented gifts to the S Trust and not loans owed to them by the S Trust. In this regard, the amount of the gifts should have been recorded as $230,847.71 and $230,847.72 respectively, to take into account the unsecured beneficiary loans that pre-existed the treatment of the transferred monies.
Consequently, the Tribunal on first review made orders that set aside the authorised review officer’s decision and remitted the matter to the Applicant for reconsideration with the order that, essentially:
·The value of the W Trust assets as of the date of claim are to be reassessed in accordance with the Tribunal’s conclusion that the value of the loans owed by the Respondents to the W Trust, in the sum of $25,590, are to be deducted from the capital value of the assets of the W Trust, in the sum of $25,445, pursuant to s 1208E(2) of the Act; (the W Trust issue)
·The disposition of assets made by the Respondents to the S Trust is to be assessed as nil pursuant to s 1208K of the Act. This was based on the Tribunal’s satisfaction that the funds were contributed to the trust in the form of gifts, and not loans; (the S Trust issue)
·The date of effect of any favourable determination arises under subsection 109(1) of the Social Security (Administration) Act 1999 (Cth) (Administration Act); (the date of effect issue)
The parties agree that the resolution of the W Trust issue and the date of effect issue by the Tribunal on first review represents the outcome of an orthodox application of the relevant legislative provisions and that, to this extent, the decision is that which is correct or preferable.
Having reviewed the evidence and considered the Tribunal’s reasoning and conclusions in that respect, I agree, save that the loans referred to in the order are owed to the Respondents by the W Trust, and not the other way around as described in the order. The parties have clearly understood this as a minor typographical error, as those aspects of the decision have already been implemented by the Applicant, and I see no need to repeat the relevant consideration of those issues. I will simply correct the wording of the order in respect of the W Trust issue.
What remains in dispute between the parties, and that I still need to resolve, is the S Trust issue; that is whether the disposition of assets made by the Respondents to the SGT should be assessed as nil pursuant to s 1208K of the Act. That turns on how the transfers of those funds into the S Trust should be categorised. There is a stay on the implementation of that aspect of the first review decision.
The Applicant contends that the funds transferred by the Respondents to the S Trust, in the full amounts of $232,578.00 and $231,218.00 respectively represented loans, and not gifts. As a consequence, the Applicant contends that the loans advanced by the Respondents to the S Trust were their assets for the purpose of the Act. The Respondents maintain that the transferred monies were gifted to the Trust, and do not constitute their assets.
OVERVIEW OF LEGISLATIVE AND POLICY FRAMEWORK
The legislation relevant to this decision is contained in the Act. Unless otherwise stated, all legislative references in this Statement of Reasons are to the Act.
I have also taken into account the Social Security Guide (‘Guide’), which contains government guidelines as to how the legislation is to be applied. In conducting the review, I should apply the policy contained in the Guide where relevant, so long as what it contains is lawful, does not purport to control my decision, and there are no cogent reasons not to do so.[7]
[7] Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634; G v MIBP [2018] FCA 1229; Minister for Home Affairs v G and Another [2019] FCAFC 79.
The application for second review was filed within the prescribed time and I have jurisdiction and power to conduct this second review due to the combined effect of s 131D(1) of the Administrative Review Tribunal Act 2024 (Cth) (‘ART Act’), read with ss 12, 105 and 131C(g) of the ART Act.
I ‘stand in the shoes’[8] of the original decision-maker, in that I am to determine for myself, on the material before me, the decision which can, and which I consider should, be made in the exercise of the power or powers conferred on the original decision-maker for the purpose of making the original decision. The Tribunal is subject to the same constraints as the original decision-maker.[9] However, as s 9 of the ART Act makes clear, the Tribunal makes its decision independently of the parties.
CONSIDERATION
[8] Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666, 671 (Smithers J).
[9] Frugtniet v Australian Securities and Investments Commission [2019] HCA 16, [51] discussing relevantly indistinguishable provisions of the Administrative Appeals Tribunal Act 1975 (Cth).
The Applicant’s submissions
Section 117 states that the rate of DSP a person who has turned 21 and who is not permanently blind is entitled to receive is worked out using the Pension Rate Calculator A at the end of s 1064.
The Rate Calculator incorporates the income test and the assets test. The test providing the lowest rate prevails. In this case, the assets test applies.
Module G of the Rate Calculator sets out the assets test, which concerns what the effect of a person's assets is on their maximum payment rate.[10] This involves calculating the value of the person's assets and their assets value limit.
[10] Section 1064-G1 of the Act.
Section 11(1) defines the word ‘asset’ to mean ‘…property or money (including property or money outside Australia).’
The Guide at topic 1.1.A.290 also provides guidance as to what an asset is, stating that the Act definition uses the descriptive term ‘property’, and that ‘property’ includes: financial investments including ‘loans to family trusts, family members or organisations’.
Section 9(1) defines the term ‘financial asset’ as a ‘financial investment or a derived asset’. In turn, a ‘financial investment’ is defined in s 9(1) to include, relevantly, a loan that has not been repaid in full.
In this case, the issue concerns the application of s 1122, which states:
If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.
Section 1122 applies only to loans made on or after 27 October 1986 and requires the ‘face value’ of the loan to be used.[11]
[11] Gorton and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 127 at [36].
In Re Boyd and SDSS (1994) 83 SSR 1221 the Tribunal found at [38] that s 1122 established that the value of the loan is that amount that remains unpaid.
There is nothing in the legislation which requires or enables the Applicant (or the Tribunal standing in the shoes of the Applicant) to take account of the fact that the loans may be unrecoverable.[12]
[12] Woolley and Repatriation Commission [2007] AATA 2059 at [18].
The Applicant contends that any loans owing to the Respondents by the S Trust that have not been repaid in full are to be considered as assets for the purposes of the asset test contained within s 1064.
In the matter of Bennett; Secretary, Department of Social Services and (Social service second review) [2019] AATA 5828, then Deputy President Forgie of the former Administrative Appeals Tribunal provided the following guidance on how to understand and apply s 1122 when attempting to characterise a sum of funds that had been advanced to a company (footnote references omitted):
Section 1122 is a product of Parliament’s consideration. It is quite unambiguous in its terms and it does not introduce any element of discretion to permit a decision-maker to adjust the way in which it operates. It must be applied in its terms. Those terms do not permit regard to be had to whether an amount that a person has lent another may not be recoverable. The amount that the person has lent is reduced only by the amount that has been repaid.
It is not permissible to look at the consequences of the application of s 1122 and say that it produces an unfair outcome that is not consistent with the broad beneficial purpose of the Act. When legislation, such as the Act, can be said to be beneficial legislation, it must be given a liberal construction rather than a literal or technical interpretation. Having said that, it cannot be given a construction that is, having regard to the words chosen by Parliament, unreasonable or unnatural. The Applicant submits that it would be unnatural to read into the unambiguous words of s 1122 a qualification that the value of the assets includes so much of the money that a person has lent to another, that remains unpaid and that remains recoverable at the time the decision is made. Section 1122 specifically deals with the first two criteria and omits the third. Its omission must be taken as a deliberate choice by Parliament.
In the Australian Accounting Standards Board (‘AASB’) standard AASB 1371 Provisions, Contingent Liabilities and Contingent Assets, a liability is defined as ‘a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits’ (Conceptual Framework for Financial Reporting, repeated in AASB 137 para. 10). There are three elements to this definition as follows:
(a)the entity has an obligation;
(b)the obligation is to transfer an economic resource; and
(c)the obligation is a present obligation that exists as a result of past events.
The Applicant contends that a loan as it is commonly understood in its ordinary meaning satisfies the three above criteria to be considered as a liability of an entity in the context of financial reporting.
The Applicant refers to several cases where it was determined that financial statements, tax returns and balance sheets where loans are recorded are taken as prima facie evidence of the loans.[13] The Applicant submits that utilising balance sheets as evidence of the value of a loan to a corporation has been recognised as appropriate in many cases.[14]
[13] The Executor of the estate of the late Peter Sweeney; Secretary, Department of Social Services and (Social services second review) [2022] AATA 3152, Boyd and Secretary, Department of Social Security [1994] AATA 580, and Bell; Secretary, Department of Social Services and (Social services second review) [2023] AATA 190.
[14] See, for example, Saunders and Secretary, Department of Family and Community Services [2002]
The Respondents’ loans to the S Trust are recorded in the S Trust Financial Statements for the period from 1 July 2023 to 31 August 2023, signed by VJDP, as director of the trust on 7 October 2023, as follows:
(a)Non-current assets: Buildings – the PPR property valued in total as at 2024: $624,368.67;
(b)Financial Liabilities – Unsecured:
oBeneficiary loan: PRLZ: $232,578.90 (2024) and $231,442.14 (2023);
oBeneficiary loan: VJDP: $231,218.89 (2024) and $230,082.13 (2023);
oTotal: $ 463,797.79 (2024).
The Applicant submits that financial statements should, in the normal course of events, be relied upon, rather than ex post facto rationalisations of what was said to be the real commercial relationship of the parties: Re Lyons and Secretary, Department of Family and Community Services [2007] AATA 1095; (2007) 94 ALD 450 (Lyons). In Lyons, the Tribunal stated as follows, at [45]:
In the opinion of the Tribunal, the gift characterisation is an ex post facto (or retrospective) attempt to outflank the accounting treatment of the loans made beforehand. Having regard to the totality of the evidence before the Tribunal (and particularly the accounting records of the company in question), the Tribunal is not satisfied on the balance of probabilities that the Applicants intended to make a gift of cash injections to their company. Even the statement of the Applicants that they did not expect to recover their money which they injected does not necessarily mean that they were making a gift of that money. This statement goes more to the expectation of recovery than to the basal nature of the transaction.
In Bysouth and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 59, Senior Member Cunningham of the AAT said, at [34], that:
…[t]he authorities make it clear the issue of recoverability is not determinative of the characterisation of funds as a loan or gift... a reference in financial records to a sum as a loan represents a strong indication it was a loan and that such references suggest expectations of eventual repayment.
Based on the S Trust Financial Statements for the period from 1 July 2023 to 31 August 2023, the Applicant contends that the transferred monies are loans for the purpose of the assets test.
In respect of an allegation by the Respondents that the S Trust financial records were altered to include the sums as loans because they were told that was required by a CAO, the Applicant submitted that no record of that was made by the CAO who dealt with the matter.
The Applicant submits that topic 4.6.5.65 of the Guide provides for circumstances when a loan no longer exists – loans made to a company, trust, or individual. It does not appear that any of the circumstances which are provided for at topic 4.6.5.65 of the Guide apply in the present circumstances. There is no evidence that the Respondents have forgiven the loan or sought to wind up the trust. In fact, it was conceded by the Respondents that they have been advised by their accountant that if they forgave the loans this would trigger a capital gains event.
The Applicant accepts that, should I find that the transferred monies were gifts, then in accordance with s 1208K, and topic 4.12.10.20 of the Guide, the transferred monies would not be considered as deprived assets of the Respondents.
Topic 4.12.10.20 of the Guide states as follows:
This topic has effect to controlled private trusts and controlled private companies from 1 January 2002.
Disposal of assets to a private trust or private company by an attributable stakeholder If a person gives an asset (whether fixed or financial) to a private trust or private company on or after 1 January 2002, and the person is an attributable stakeholder or as a result of the transfer, is subsequently attributed with a percentage of the assets of the structure, the asset will NOT be a deprived asset of the person. (Subject to the percentage of the assets of the structure attributed to the person.)
Example: Bill gifts a holiday home worth $150,000 and financial investments of $30,000 to a private family trust on 5 June 2002. Bill is the appointor and trustee of the trust and is attributed with 100% of the assets and income of the trust. The deprivation rules do not apply to Bill as he is the SOLE attributable stakeholder and he cannot 'gift to himself'. Note: This would also be the case for members of a couple (1.1.M.120) who were the ONLY attributable stakeholders.
The Respondents’ submissions
The Respondents do not cavil with the Applicant’s submissions as to the law to be applied.
They say that the transferred monies did not represent loans. They never expected to receive any return by way of interest payments and no agreement was ever entered into between them and the S Trust.
The transferred monies were gifted to the S Trust with no expectation of it being repaid until such time as the property was sold and they could receive distributions as beneficiaries of the trust.
DETERMINATION
There are sound reasons why prior representations in financial statements of a company or trust should be taken as strong prima facie evidence that what they contain is correct. They are, of course, official documents. They are signed by trustees, or the directors of companies to represent their accuracy. They are also frequently prepared with accounting advice and relied upon to obtain taxation and other benefits, that should not later be easily resiled from.
However, that is not the history of this matter. Here, the Respondents, wrongly, did not include the PPR property as an asset of the S Trust in the years leading up to their interactions with Centrelink. Only after a long-delayed process did they engage in a hasty revision of the financial position of the S Trust that showed the PPR property as its asset and included the loans for the first time. I am satisfied that the retrospective consideration of the matter by the Respondents came at that point, and not when they later realised their mistake.
I am persuaded to that view by several factors, including that I found both of the Respondents to be credible in their evidence before me.
The starting point is that the Respondents did not represent to anyone that they had loaned the transferred monies to the S Trust until immediately after PRLZ’s conversation with the CAO on 4 December 2023. It was also apparent from their non-inclusion of the value of the PPR property, or of the loan from VJDP’s sister in the earlier financial statements, that they considered the PPR property to be apart from the trust, even though they were wrong in that view. If they thought of the PPR property as their own asset, then how could they believe that they had loaned themselves the transferred monies? In contrast, the W Trust financials did show loans to it by the Respondents prior to July 2023, as did the S Trust, albeit not in respect of the transferred monies.
I have then considered the difficult personal circumstances the Respondents were in, and the long delay they experienced in the processing of their claims for Centrelink benefits. I am satisfied from that situation, and from listening to not only the content but also the tone of PRLZ’s conversations with Centrelink officers in the relevant period, that there was a level of desperation he was experiencing in trying to ensure the Respondents’ claims for benefits were advanced. He also gave evidence before me that he had made representations to his local member about his concerns.
Whilst I have found that the CAO did not tell PRLZ to amend the financial statements of the S Trust to show the transferred monies as loans on 4 December 2023, the conversation was wide ranging, lengthy, and in several respects clear communication was impeded by PRLZ’s obvious impatience.
He was also told during the conversation that he would receive a letter setting out what would need to occur as a result of the conversation, which I am satisfied would contribute to him not paying absolute heed to what he was told.
I have examined the resultant letter. It did not detail all of the necessary steps that the Respondents needed to take, which led to PRLZ making further contact with Centrelink. I am satisfied that he was confused about what was required of him.
I recognise that, in a Centrelink ‘MODPC’ form signed on 29 July 2023, the Respondents answered ‘no’ to a question that included reference to whether any gifts had been made to the S Trust since 9 May 2000. However, as the Applicant properly conceded, the question was a compound question that may have led to confusion. Furthermore, in the same form, the Respondents did not include the transferred monies as loans to the trust either. The completed form does not assist me, given the inherent inconsistencies in the way it was completed.
Lastly, I do not accept that the financial statements of the S Trust were accurate, either before or after they were amended. In respect of the financial statements before they were amended, the PPR property and the loan from VJDP’s sister were both omitted in the financial year 2021/22 balance sheet.
It must be recalled that the unchallenged evidence is that the purchase price of the PPR property was approximately $600,000, funded by a documented loan from VJDP’s sister of $480,000 with the balance, which must have been about $120,000[15] coming from another trust controlled by the Respondents. In 2022, VJDP inherited $500,000. $280,000 was transferred into the S Trust and the trust took out a $200,000 loan from First Mac secured against the PPR property. These funds were then used to pay back the loan to VJDP’s sister.
[15] Plus statutory duties and expenses.
As a result, one would expect the corrected balance sheet to show a secured loan of approximately $200,000 to First Mac and beneficiary loans (if that is what they were) of approximately $140,000 to each of the Respondents.
However, after the financial statements were revised, they showed the S Trust as owning only the same in specie asset (being the PPR property) but its liabilities had increased to approximately $680,000. That is a secured loan from First Mac of about $200,000, and unsecured beneficiary loans of about $240,000 from each of the Respondents.
Whilst it is unnecessary for me to make such a finding to resolve the application, the only logical explanation seems to be that each of the beneficiary loan amounts were miscalculated by $100,000.
Ultimately, I am satisfied that it was PRLZ’s confusion, and hasty subsequent action, that led to the transferred monies being shown in the updated S Trust financial statements as beneficiary loans. That was wrong, as the transferred monies had been gifted to the S Trust.
As that was the conclusion reached by the Tribunal in the first review decision, it must generally be affirmed, but I will vary the decision to correct the errors I have identified. It is then necessary to craft orders that recognise that:
·there were beneficiary loans in the S Trust as at 30 June 2021 that must be taken into account as assets of the Respondents; but
·the beneficiary loan amounts shown in the 31 August 2023 balance of the S Trust must be inaccurate; and
·I must be careful to ensure that any actual beneficiary loans subsequently made are not inadvertently caught by my orders.
I therefore give liberty to the parties to apply if they feel that my order, insofar as it relates to the S Trust issue, does not accurately reflect the outcome of my decision as evidenced by my reasoning.
My order in each review will end the stay granted on 1 May 2025.
DECISION
The Tribunal varies the decision under review. The decision is now:
The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
(a)The value of the W Trust assets as of the date of claim are to be reassessed on the basis that the value of the loans owed to the Respondents ($25,590) by the W Trust should be deducted from the capital value of the assets of the W Trust ($25,445) pursuant to subsection 1208E(2) of the Social Security Act 1991 (Cth).
(b)The disposition of assets made by the Respondents to S Trust between 30 June 2021 and 31 August 2023 is to be assessed as nil pursuant to section 1208K of the Social Security Act 1991 (Cth).
(c)The date of effect of any favourable determination arises under subsection 109(1) of the Social Security (Administration) Act 1999 (Cth).
I certify that the preceding 91 (ninety-one) paragraphs are a true copy of the reasons for the decision herein of Senior Member Suthers
.........[SGD].........................
Associate
Dated: 14 October 2025
Datesofhearing: 29 July 2025 Representative for the Applicant:
Representative for the Respondents:
Mr M Gauci, Hunt & Hunt Lawyers
Self-represented
AATA 1256.
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