Rosemary Wiese and Secretary, Department of Social Services

[2014] AATA 678

[2014] AATA 678  

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2014/1168
Re	Rosemary Wiese
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Dr M Denovan, Member
Date	17 September 2014
Place	Brisbane

The Tribunal affirms the decision under review.

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Dr M Denovan, Member

CATCHWORDS

SOCIAL SECURITY – pension bonus – assets of company – family trust – administrative error – overpayment received in good faith – Decision under review affirmed.

LEGISLATION

Social Security Act 1991 (Cth) ss 93H, 93J, 1207N, 1207V, 1207X

Social Security (Administration) Act 1999 (Cth)

REASONS FOR DECISION

Dr M Denovan, Member

17 September 2014

1. Mrs Rosemary Wiese (“the applicant”) is the applicant in these proceedings. She registered for the pension bonus scheme in 2006, and on 22 December 2011 she applied for age pension and pension bonus.

2. On 25 January 2012, Centrelink granted Mrs Wiese age pension from

   
   

   13 December 2011.

3. The pension bonus scheme (“PBS”) provides an incentive for older Australians to remain in the workforce and defer age pension. If they meet all eligibility criteria, a one-off lump sum amount is payable. The scheme is no longer open to new applicants, and is in the process of being phased out.

4. After a number of adjustments resulting from updated information provided by
   Mrs Weise, Centrelink determined that Mrs Wiese was entitled to $29,719.04 of pension bonus. Mrs Wiese believes the calculation of the amount of pension bonus is incorrect. She believes she should have been paid about $3000 to $3500 more than she received. She sought review of the decision, which was affirmed by an Authorised Review Officer (“ARO”) and also by the Social Security Appeals Tribunal “SSAT”).

5. It is not in dispute that Mrs Wiese qualified for pension bonus. It is also accepted by the respondent that Mrs Wiese has accrued the maximum five-year full year qualifying bonus periods. I must decide the correct amount of pension bonus Mrs Wiese is entitled to.

   BACKGOUND AND LEGISLATION

6. The legislation relevant to this decision is the Social Security Act 1991 (Cth) (“the Act”), and the Social Security Administration Act 1999 (Cth). Subsection 93J(1) of the Act outlines how the pension bonus is calculated.

7. The formula for calculating the amount of pension bonus that a person is entitled to is as follows:

   Annual pension rate [1]   x   Pension Multiple   x   No. of years in the person’s

   overall qualifying period

   [1] The annual pension rate does not include all the components of the age pension rate. To take into account additional payments such as rent allowance and other supplements, the annual pension rate is worked out by adding the person’s base annual pension rate to an amount relevant to the person under the table included in subsection 93H(4).The additional amount is $543.40 in this case, and covers these additional payments and supplements.

8. The pension multiple is set by the legislation, and in this case is 0.47.

9. As provided by the above formula, the amount of pension bonus paid is dependent on the amount of fortnightly pension a person is entitled to.  The amount of fortnightly pension is subject to a means test. The rate of age pension is reduced by $1.50 per fortnight for each $1000 that the value of the person’s assets exceeds $186,750.00.

10. The assessment of Mrs Wiese’s assets was not a simple or straightforward matter for Centrelink. Before she retired, she had been running two businesses, and using two companies to administer those businesses. A family trust owned the commercial property (Elder Street) that both businesses were operating from. In addition to her family home (Day Street), Mrs Wiese also owned two townhouses located at Tenant Creek. Two bank loans existed, and all the assets detailed above were held as security by the bank.

11. Mrs Wiese gave evidence at the hearing. She told me that she had run two businesses, she was a bookkeeper, and she also provided telecommunications services. Income and expenses form the telecommunication business were administered through XLcom (Aust) Pty Ltd (“XLcom”), and income and expenses associated with the bookkeeping were administered through Blackjack Enterprises Pty Ltd (“Blackjack Enterprises”).

    
    

    Mrs Wiese was the sole director and shareholder of both companies. XLcom has been wound up, is no longer is registered and does not trade. Mrs Weise remains the director of Blackjack Enterprises.

12. Both businesses operated at a commercial property, which was owned by a family trust. The businesses paid rent to Blackjack Enterprises, which distributes the profits to the Rosemary Wiese family trust. She is the sole administer of the family trust.  When

    
    

    Mrs Wiese retired, the property owned by the family trust was no longer needed by the businesses she was operating, and it was leased to an external tenant for two years. At the end of the lease, the tenant vacated and Mrs Wiese currently has a new tenant. By

    
    

    9 March 2012 the previous loans had been consolidated into one loan, the amount is approximately $600,000. That loan is now solely for the commercial property owned by the family trust. The family home is not burdened by a mortgage, however it is held as security for the family trust loan.

13. Blackjack Enterprises administers the income and expenses relating to the family trust commercial property, and also the small amount of income Mrs Wiese continues to make. Currently Mrs Wiese continues book keeping for a small number of clients only. She also hires location divisors to hikers.

14. On the information initially available to Centrelink, Mrs Weise’s total assets were assessed as $529,849.00.

15. On 27 January 2012 Mrs Wiese sought a review of the rate of pension. On the same date the total value of her assets was amended to $466,510.00. The reason was that Centrelink determined that the apportioning of the loans had been incorrect. The loan amount on the home was increased from $42,322.00 to $105,661.00. Mrs Wiese’s annual rate of pension was increased to $7,003.75. Using this amount as the annual base pension, Centrelink determined on 31 January 2012 that Mrs Wiese was entitled to $17,735.80 pension bonus.

16. On 9 March 2012, Mrs Wiese sold her town house located at Leichhardt Street, Tenant Creek. The effect of this was that her total assets were varied from $466,510.00 to $424,909.00. Her base rate of age pension was increased to $8,795.80 from the date of sale.  Using this new rate of annual pension, on 3 April 2012 Centrelink determined that Mrs Wiese was entitled to a top up pension bonus of $3,826.40.

17. On 24 May 2012, Mrs Wiese provided Centrelink with updated financials for

    
    

    Blackjack Enterprises. The financial information showed that the loan from Mrs Wiese to Blackjack Enterprises had been forgiven on 15 December 2011. Centrelink reduced the assets in Mrs Wiese’s name by the amount of loan, and adjusted Blackjack Enterprises balance sheet accordingly. Prior to the loan being forgiven, Blackjack Enterprises had a negative balance sheet, and had net liabilities of $35,416. After the debt was forgiven the total assets were $69,122. Centrelink further adjusted the total assets of Blackjack Enterprises by deducting the value of good will ($5,000) because the company was no longer trading. The net result was that Blackjack Enterprises had total assets of $59,815.

18. The result was that Mrs Wiese’s total assets were reduced from $424,909.00 to $335,773. The calculation used by Centrelink is set out on folios 49-50 of Exhibit 1.

19. Initially Centrelink decided that this new asset valuation would affect Mrs Wiese’s rate of pension only as from the date the information was provided, on 24 May 2012.

    
    

    Mrs Wiese requested a review of the decision, and an ARO decided that the further information provided by Mrs Wiese could be treated as a request to review the decision of 26 March 2012, as it was received within 13 weeks. The reduced rate of assets was therefore used to calculate the rate of pension with effect from 9 March 2012.  The annual base rate of pension was increased to $12,646.40 from 9 March 2012.

20. When determining the amount of pension bonus, the annual pension rate used is the highest amount which was payable to the applicant within 13 weeks of the start day of the pension. As 9 March 2012 is within the 13 weeks of the date of grant of age pension, the amended rate could be used to calculate the rate of pension bonus.  Centrelink used the new annual rate of pension and determined that Mrs Wiese was entitled to a total of $29,719.04. She was paid a top up pension bonus of $8,156.80.

21. On 29 November 2012 Centrelink paid Mrs Wiese an additional $1,099.76 top up pension bonus. Centrelink subsequently realised that this final top up payment was made in error. The SSAT determined that the additional $1,099.76 was a debt due to the Commonwealth, however decided that the debt should be waived due to sole administrative error.

22. On 3 March 2014 Mrs Wiese applied to this Tribunal for review.

    CONSIDERATION

23. It became apparent at the hearing that Mrs Wiese believes the calculation of pension bonus is incorrect for the following reasons:

    (a)After she applied for age pension and pension bonus, she was given an extension of time to provide information relevant to the assessment of rate of pension. That extension of time extended beyond the 13 week period used to calculate the rate of pension payable. She believed that she was entitled to have her pension bonus assessed with reference to the maximum annual rate of age pension she received during the period commencing on the date of grant of pension, and ending at the end of the extension period given to provide further information. She therefore expected that her pension bonus could be assessed based on the total assets she had in July 2013.

    (b)When she forgave the loan to the company Blackjack Enterprises, she did not expect that the assets of that company would increase, or that any increase in the assets of that company would be included in the calculation of her total assets. She claims that the assets of that company are nowhere near as high as the balance sheets suggests.

24. Part 3.18 of the Act sets out that the assets and income of a private company or trust is attributable to a person when certain conditions are satisfied.

25. Sections 1207N and 1207V of the Act set out when a company and trust respectively are considered a designated private company or trust. Section 1207X of the Act says that a person who is a controller of a company or trust is attributed with 100% of the income and assets or loss.

26. Although Mrs Wiese claims that Blackjack Enterprises owned nothing of any value at the time of assessment of her pension, the evidence suggests otherwise. The balance sheet for the 2012 financial year shows that Blackjack Enterprises has Plant and Equipment valued at $55,280. That value is very similar to that which Centrelink attributed to

    
    

    Blackjack Enterprises when assessing Mrs Wiese’s total assets. Mrs Wiese claims that the true value of the Plant and Equipment was much less. Referring to the assets listed in the depreciation schedule attached to the financial statements for 2012, Mrs Wiese said that the only items of any use owned by Blackjack Enterprises were a few computers, printers and her old car. Mrs Wiese claims she bought the telecommunication business from a friend, and it transpired that the business, including the plant and equipment, was not worth what she had paid for it, and was certainly not worth the value reflected in the profit and loss statements.

27. Unfortunately, other than the financial statements for 2012, the Tribunal had no other evidence which could be used to assess the value of the assets owned by

    
    

    Blackjack Enterprises during the relevant period of time. Mrs Wiese indicated she understood this. She also indicated she now understood that the assets of

    
    

    Blackjack Enterprises were used to calculate her total assets when calculating the amount of pension bonus she was entitled to, and that the assessment of her total assets was as at the time she applied for pension, or within the immediate 13 weeks following. She now understands that although she was given an extension of time to provide evidence, she was not given an extension of time to maximise the amount of pension she qualified for, that thereby maximise the amount of pension bonus she was entitled to.

28. I find that the respondent correctly assessed the value of Mrs Wiese’s assets, and correctly calculated the amount of pension bonus she was to receive. I agree with SSAT, that the overpayment of $1,099.80 was solely due to administrative error and received in good faith, and therefore the debt due to the Commonwealth that results from that overpayment should be waived.

    DECISION

29. The Tribunal affirms the decision of the SSAT dated 31 January 2014.

I certify that the preceding 29 (twenty-nine) paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member

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Associate

Dated 17 September 2014

Date of hearing	2 September 2014
Applicant	In person
Advocate for the Respondent	Department of Human Services