Randev; Secretary, Department of Families, Community Services and Indigenous Affairs
[2006] AATA 339
•10 April 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 339
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/1579
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS Applicant
And
GUR RANDEV
Respondent
DECISION
Tribunal Dr J D Campbell, Member Date10 April 2006
Place Sydney
Decision With respect to the decision under review:
(a) I affirm that Mr Randev is eligible for special benefits;
(b) I vary the decision as regards the rate of special benefit to be paid to Mr Randev in that the rate to be paid is to have regard to an amount of deemed income arising from his ownership of a financial asset; and
(c) The matter is remitted to the Applicant for the calculation of the fortnightly rate to be paid to Mr Randev from the date of his cancellation in accordance with these reasons for decision.
[SGD] Dr J D Campbell
Member
CATCHWORDS
Social Security – special benefit – departmental policy considerations – available funds test – qualifies for special benefit - rate of special benefit – financial asset – Indian National Housing Capital Bonds – deemed ordinary income – decision varied
Social Security Act 1991 - sections 8, 9, 23, 729, 746, 1076, 1081, 1082, 1084, 1129, 1130B, 1131
Re Drake and Minister for Immigration and Multicultural and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Myddleton and Department of Family and Community Services [2001] AATA 2
Re Secretary, Department of Family and Community Services and Singh (2002) 69 ALD 413
Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348
REASONS FOR DECISION
10 April 2006 Dr J D Campbell, Member Summary
1. Mr Gur Randev was born in India on 24 August 1924. Mr Randev worked as a lawyer in India until the mid-1990s, at which time he ceased work to care for his ailing wife. Mrs Randev died in June 1997. On 23 March 1998, Mr Randev became the registered owner of the property as sole beneficiary under his late wife’s will.
2. Because of his increasing frailty, Mr Randev returned to Australia on 31 October 2002 to live with his son and family, having previously resided in Australia with his son for almost a year from 21 March 1998. Mr Randev claimed and was granted special benefit from 1 November 2002.
3. On 27 October 2004, Mr Randev advised Centrelink that he was travelling to India on 7 November 2004 to see his critically ill brother. A decision was made by Centrelink on 28 October 2004 that he could continue to receive a special benefit payment during his absence up to 6 February 2005 (T11/63-64). On 3 December 2004 Centrelink cancelled Mr Randev’s payment of special benefit, because of a failure by Mr Randev to return a review form forwarded to him (T11/66). The last payment of special benefit was made on 26 November 2004, covering the fortnightly period ending 25 November 2004.
4. In February 2005 Mr Randev advised Centrelink that whilst in India and following discussions with his son (who accompanied him on the visit) a deed of sale for his former home (inherited from his wife) was executed on 20 January 2005, with the sale price declared at 2.3 million rupees (T29/108). Further Mr Randev advised that on 31 January 2005 he had purchased 228 units of National Housing Capital Gains Bonds 2002 from the National Housing Bank for a total purchase price of 2.28 million rupees (10,000 rupees per bond). Each bond pays 5.35 percent per annum (T29/113).
5. On 11 February 2005 a decision was made to cancel Mr Randev’s special benefit from 27 November 2004 as he did not meet the “conditions for a hardship payment” (T21/96). On 22 February 2005 Mr Randev requested a review of this decision. An authorised review officer affirmed the original decision on 22 August 2005, concluding that Mr Randev’s Housing Bonds were available funds, and as such he did not satisfy the long-term available funds test with special benefit not being paid when a claimant has $5,000 or more in available funds.
6. On 11 November 2005 the Social Security Appeals Tribunal accepted that regulations issued by the Indian Reserve Bank prevented the remittance of money arising from the sale of Mr Randev’s home to an account held outside of India. In essence the Tribunal held that the assets held by Mr Randev in India were blocked. Further the Tribunal concluded that the interest arising from such assets were similarly not able to be remitted until the maturity of such bonds in 2008. In the light of Mr Randev’s age and frailty, the Tribunal concluded that receipt of such interest funds by Mr Randev was so far in the future as to be considered remote, with such monies being properly assessed as not being derived. In the light of such findings the Tribunal concluded that Mr Randev was entitled to a special benefit with rate of payment being made with no reference to the interest earned on the bonds.
Issues
7. The relevant issues in this matter are:
(a)Is Mr Randev eligible for special benefit?; and
(b)What matters should be taken into consideration in determining the rate of payment of special benefit to Mr Randev?
Decision
8. For the reasons stated later in this decision, I find that:
(a)Mr Randev is eligible for special benefit from the date of cancellation (27 November 2004); and
(b)In determining the rate of payment of special benefit, an amount of deemed income arising from the sale proceeds while on deposit (20 January 2005 – 30 January 2005) and the National Housing Capital Gains Bond (31 January 2005 onwards) is to be deducted from the maximum rate of special benefit payable pursuant to the direct deductions income test.
Considerations and Findings
9. The basic facts in this matter are not in contest between the parties and are outlined in the introductory part of these reasons for decision.
10. I note the following extract from Master Circular No 4/2004-05 – Remittance facilities for Non-Resident Indians/Persons of Indian Origin/Foreign Nationals issued by the Reserve Bank of India dated 1 July 2004:
“…
2.Remittance of assets by NRI/PIO
2.1A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit an amount upto (sic) USD one million, per calendar year, out of the balances held in his Non-Resident (Ordinary) Rupee (NRO) account/sale proceeds of assets (inclusive of assets acquired by way of inheritance), for all bonafide (sic) purposes, to the satisfaction of the authorized dealer, on production of an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No. 10/2002 dated October 9, 2002.
2.2NRI/PIO may remit sale proceeds of immovable property purchased by him out of Rupee funds or as a person resident in India as indicated in para 2.1 above, provided such a property was held by him for a period not less than ten years. If such a property is sold after being held for less than ten years, remittance can be made, if the sale proceeds were held for the balance period in NRO account (Savings/Term Deposit) or in any other eligible investment, provided such investment is traced to the sale proceeds of the immovable property to the satisfaction of the authorized dealer.
2.3In respect of remittance of sale proceeds of assets acquired by way of inheritance or legacy for which there is no lock-in period, NRI/PIO may submit documentary evidence in support of inheritance or legacy of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No. 10/2002 dated October 9, 2002
2.4The remittance facility in respect of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.
…”
I also note the Master Circular No 09/2005-06 issued by the Reserve Bank of India dated 1 July 2005 which confirms the continuance of such remittance rules (T34).
11. It is evident from paragraph 2.3 of the quoted extract that there is no lock in period for the remittance of sale proceeds of assets acquired by way of inheritance and legacy. In short Mr Randev was able to remit to Australia the proceeds of the sale of his house sold on 20 January 2005. I note that Mr Randev did not so do, because both he and his son believed (a belief born of paragraph 2.2 of the same circular) that he had to hold the property for a period of 10 years before being able to remit the sale proceeds. As the property was first registered in his name on 23 March 1998, Mr Randev believed he was unable to remit such sale monies until a period of 10 years had elapsed (March 2008).
12. In furtherance of an apparently mistaken belief, Mr Randev invested the sale proceeds in 228 National Housing Capital Gains Bonds issued by the National Housing Bank with the date of allotment being 28 February 2005. I note from the terms and conditions attached to the bond certificate (Exhibit R1) that the interest on the bonds is payable from the date of realisation of the subscription amount, and where an election has been made to have the interest paid on a cumulative basis, the interest on the bonds is payable along with the redemption amount of the bond. I note Mr Randev made an election to have the interest paid on a cumulative basis, with an intention to exercise an available put option (available at the end of the 36 months), with such an option exercise date coinciding with the 10-year holding rules nominated in the extract from the Reserve Bank of India Circular of 1 July 2004 (paragraph 4.2). I note that the interest rate on the bonds is 5.35 percent per annum and that such bonds are not transferable, non-negotiable and cannot be offered as a security for any loan or advance.
13. In assessing the material I have just noted, I conclude that Mr Randev had an asset (house) in India which he sold in January 2005 and invested the sale proceeds in National Housing Capital Gains Bonds on 31 January 2005 for a period of five years with a put option to redeem the bonds and elected cumulative interest (5.35 percent per annum) at the expiration of three years (circa 24 February 2008). I find that such investments and elections were made because of an apparently mistaken belief by Mr Randev that he was unable to remit such sale monies to Australia until after a period of 10 years had elapsed.
14. In undertaking the investment program that he had done Mr Randev had locked in both his capital and interest payments until February 2008 at the earliest. I find no evidence to suggest the investment program undertaken by Mr Randev was done for the deliberate purpose of denying himself access to either capital and/or interest – indeed the evidence clearly evinces investment decisions being made on faulty appreciation of the remittance guidelines. Nevertheless, in final analysis I find that Mr Randev remains the owner of a financial asset (bonds) in India, with access to both capital and cumulative interest blocked until at least February 2008, and perhaps some months later depending on the pace of the redemption and remittal processes. In essence neither the capital nor the interest is available to Mr Randev to, at best 28 February 2008, with a more realistic date being some months later.
Qualification for Special Benefit
15. Section 729 of the Social Security Act 1991 (“the Act”) details the statutory requirements relating to qualifications for special benefit as follows:
“…
729(1)A person is qualified for a special benefit for a period if the Secretary determines, in accordance with subsection (2), that a special benefit should be granted to the person for the period.
Note:special benefit is a discretionary benefit and is available only to a person who is not able to get any other income support payment (see paragraphs (2)(a) and (b) below).
729(2)The Secretary may, in his or her discretion, determine that a special benefit should be granted to a person for a period if:
(a)no social security pension is payable to the person during the period; and
(b)no other social security benefit is payable to the person for the period; and
…
(c)[(c)-(d) deal with various ‘bars’ to payment]
(d)[refer (c) above]
(e)the Secretary is satisfied that the person is unable to earn a sufficient livelihood for the person and the person’s dependants (if any) because of age, physical or mental disability or domestic circumstances or for any other reason; and
(f)the person [is residentially qualified or]
(g)if the person [holds certain visas]
…
16. I note in this matter that both parties are satisfied that Mr Randev meets the statutory requirements as nominated and in particular section 729(2)(e) in that Mr Randev is unable to earn a sufficient livelihood for himself, because of age, physical frailty and the aging process. On the evidence before me I am satisfied that this is so and so find.
17. In exercising the discretion to grant special benefit, there exists a number of policy guidelines issued by the Department on a variety of issues. The policy matters in this matter relate to the short-term and long-term available funds test. It is clear that I have an obligation to consider the appropriateness and applicability of such policies (Re Drake and Minister for Immigration and Multicultural and Ethnic Affairs (No 2) (1979) 2 ALD 634; Re Myddleton and Department of Family and Community Services [2001] AATA 2; Re Secretary, Department of Family and Community Services and Singh (2002) 69 ALD 413).
18. In relation to short-term available funds, the evidence is clear that Mr Randev has no short-term available funds. As such I find that Mr Randev has no short-term available funds.
19. In relation to long-term available funds, I have earlier concluded that neither capital nor interest is available until at the earliest February 2008. Further, I have earlier concluded that access to such funds at that time was as a result of a voluntary act by Mr Randev, such an act being taken as a result of a misunderstanding by Mr Randev as to the Indian Reserve Bank’s policy on remittal of money from the sale of an inherited asset. In further analysis I conclude that while the financial assets exist (bonds) they are non-liquid, both as regards capital and interest. In making such a finding I note the comment of Sheppard J in Inguanti v Secretary, Department of Social Security (1988) 15 ALD 348 at 351:
“… If the prospect of the moneys ever being received is remote, or, if receipt of them, although certain, is likely to be so far in the future as to make entitlement to them of no relevant benefit at the time the matter is considered, it will be correct to say that the moneys are not being ’derived’…”
20. In this matter, a considered analysis would include the length of time before the funds would become liquid (minimum of three years from the date of investment), an assessment of whether it was an intention of Mr Randev to place himself in hardship (no evidence to support such a finding) and the relevance of entitlement to such funds in the future (involving considerations of his age, mental and physical disability). In making such an analysis as suggested, I am satisfied that a period of three-plus years in this matter before the availability of liquid funds can be considered too remote and of no relevant benefit at the time consideration for special benefit was being considered.
21. In the circumstances as noted I conclude that Mr Randev does not infringe the long-term available funds test for special benefit as detailed in the test (clause 1.1.L.90 of the Guide to Social Security Law (“the Guide”)) as there are in Mr Randev’s case no assets that can be reasonably realised.
22. In such circumstances as outlined, I conclude that Mr Randev qualifies for a special benefit, for I have determined in exercise of the discretion, that a special benefit should be granted for the period commencing from time of disqualification (27 November 2004).
Rate of Payment of Special Benefit
23. Section 746 of the Act provides for the rate of special benefit to be paid as follows:
“…
746(1)The rate of a person’s special benefit is the fortnightly rate determined by the Secretary in his or her discretion.
746(2)Subject to Part 2.24 (major disaster), the rate of a person’s special benefit is not to exceed the rate at which youth allowance, austudy payment or newstart allowance would be payable to the person if:
(a)the person were qualified for youth allowance, austudy payment or newstart allowance; and
(b)youth allowance, austudy payment or newstart allowance were payable to the person.
Note: for double payments in the case of a major disaster see Part 2.24.”
24. I note that the rate of a person’s special benefit is the fortnightly rate determined by the Secretary at his or her discretion. I further note the relevant guidelines regarding the exercise of that discretion issued by the Secretary and in particular clause 3.7.1.80 of the Guide which clearly states that the special benefit is subject to a direct deduction income test. I have earlier observed the obligation on me to consider such policy guidelines (Re Drake (supra)).
25. I further observe from clause 3.7.1.80 of the Guide that the direct deduction income test means that all personal income, whether earned or unearned, reduces the special benefit rate by that amount. There is no allowable income free area and no taper.
26. I further note the following statutory definitions contained within sections 8 and 9 of the Act as follows:
“8. Income Test definitions
8(1) In this Act, unless the contrary intention appears:
…
income, in relation to a person, means:
(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
…
8(2) A reference in this Act to an income amount earned, derived or received is a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).
…
9. Financial Assets and income streams definitions
9(1) In this Act, unless the contrary intention appears:
…
Financial Asset means:
(a)a financial investment; or
(b)a derived asset.
…
Financial Investment means:
(a)available money; or
(b)deposit money; or
(c)a managed investment; or [defined sections 9(1A) and 9(1B)]
…
(f)an unlisted public security.
…
27. In considering Mr Randev’s proceeds from the sale of the inherited property and his subsequent investment in National Housing Capital Gains Bonds it is evident that both are financial investments in terms of the Act, and that in turn by definition are considered financial assets.
28. Section 1076 of the Act determines that a person who has financial assets is taken for the purposes of the Act to receive ordinary income on those assets in accordance with this section.
29. The calculation of the deemed ordinary income is detailed in section 1076 of the Act and involves establishing a person’s deeming threshold ($37,200 – per section 1081 of the Act), with a percentage rate determined for the below threshold and also above threshold amounts pursuant to subsections 1082(1) and 1082(2) of the Act respectively. The two calculations are then used to give the deemed annual ordinary income arising from the financial asset with the amount divided by 52 to derive the weekly amount (section 1076(4) of the Act).
30. I further note section 1084(2) of the Act which states:
“If a financial investment is an unrealisable asset for the purposes of section 1129, 1130B or 1131, the financial asset is not to be regarded as a financial asset for the purposes of section 1076, 1077, or 1078.”
31. I note that section 1129 of the Act refers to the term ‘social security pension’ and the definition of that term within section 23(1) of the Act. I note that a social security pension is defined as to not include the Special Benefit Payment. As a consequence, I am satisfied that sections 1129, 1130B and 1131 of the Act do not apply in the circumstances of this matter, for in relation to section 1131 of the Act, Mr Randev is eligible to apply for and receive alternative Commonwealth income support (special benefit).
32. I conclude as the result of the prior analysis that the exclusion provisions as regards a financial asset contained within section 1084(2) of the Act are not available to Mr Randev and that the provisions of section 1076 of the Act (deemed income) do apply in this matter.
33. In comment I would conclude that although Mr Randev did voluntarily make his assets and income unavailable for reasons associated with his misunderstanding of the Indian Reserve Bank’s rules on remittal of monies, the assets and interest income are in existence, albeit in India. In such circumstances it would be appropriate to apply the deeming rules on the financial asset, with the proviso that such application would not create financial hardship for Mr Randev. In an analysis of this matter, it would not appear at this stage that such an application of deeming rules would create such a consequence.
34. In summary I conclude that Mr Randev:
(a)is eligible for special benefit; with
(b)the rate of payment of special benefit to be calculated with an amount of deemed income arising from the sale proceeds of the house while on deposit (20 January 2005 – 30 January 2005) and the National Housing Capital Gains Bonds (31 January 2005 onwards) to be deducted from the maximum rate of special benefit payment pursuant to the direct deduction income test.
35. In terms of the decision under review:
(a)I affirm that Mr Randev is eligible for special benefits;
(b)I vary the decision as regards the rate of special benefit to be paid to Mr Randev in that the rate to be paid is to have regard to an amount of deemed income arising from his ownership of a financial asset; and
(c)The matter is remitted to the Department (Applicant in this matter) for the calculation of the fortnightly rate to be paid to Mr Randev from the date of his cancellation in accordance with the findings nominated.
I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell, Member
Signed: A. Garcia
AssociateDate of Hearing 20 March 2006
Date of Decision 10 April 2006
Advocate for the Applicant Ms H. SchusterRepresentative of the Respondent Mr V. Randev
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