Rudkin and Secretary, Department of Family and Community Services

[2003] AATA 338

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 338

ADMINISTRATIVE APPEALS TRIBUNAL      )

) Nos. T2002/43  and T2002/44

GENERAL ADMINISTRATIVE  DIVISION		)
Re		PETER RUDKIN and MARGARET RUDKIN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms A F Cunningham (Part-time Member)

Date11 April 2003

PlaceHobart

Decision The decision under review is affirmed.

[Sgd A F Cunningham]

Part-Time Member

CATCHWORDS

Social Security – age pension – overseas pension – meaning of ordinary income – managed investment – deemed income – decision under review affirmed.

Social Security Act 1991 – s9

REASONS FOR DECISION

11 April 2003 Ms A F Cunningham (Part-time Member)          

1.      The applicants have sought the review of decisions made by a Centrelink officer on 26 October 2001 which included the value of the applicants registered retirement savings plans when calculating the their rate of age pensions. The decisions were subsequently affirmed by the of the Social Security Appeals (SSAT) on 21 February 2002.

2.      As the applicants reside in Canada and were unable to attend a hearing, both parties agreed to a decision being made on the basis of the written material before the Tribunal.

3. This comprises the “T” documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975  and the applicants ground of appeal dated 5 April 2002.

4.      It was the applicants contention that the original decision-maker had failed to understand –

“…the workings of our RRSP system in Canada and the basic concept of being able allowed to maximise the value of RRSP up to age of 69.

We asked for our RRSP to be treated as inaccessible income because that is precisely what it is and what the system intends, i.e. it is not intended to be accessed until the age of 69, at which time it has to be converted either to an RRIF or to an annuity with mandated minimum annual withdrawals.

The withdrawal of any income before the age of 69 would have the opposite effect to that intended by the RRSP system in that the value of the RRSP would be prematurely reduced thus reducing the after age 69 pension available from the annuity."

5. It was contended that the decision of the SSAT did not provide adequate reasoning as to why the applicants Registered Retirement Savings Plan (RRSP) benefit could not be assessed under the “inaccessible income” provisions of the Act. The applicants stated that their appeal is against the decision to include the value of their RRSP fund in the assessment of income.

6.      The applicants had previously informed the SSAT by letter dated 15 November 2001 (T27) that the RRSP is “a scheme that allows an individual to contribute before tax employment income to various forms of federal government approved investments.   The contributions are subjected to a government imposed annual limit and come entirely from the employee’s income, unlike a superannuation fund, there are no parallel contributions from the employer”.

7.      When an individual attains the age of 69 years, the RRSP can be converted into either a registered retirement income fund (RRIF) or an annuity from which income must be withdrawn at not less than the government mandated minimum rate set for each year up to the age of 94 years.   The rates are calculated on the basis that the fund would be exhausted  by the time the individual attained the aged of 94 years.

8.      The principle behind the RRSP scheme as claimed by the applicants, is to allow an individual to maximise the value of their investments up to the age of 69 years which is considered “pension age”.  Up until that age the applicants have derived their from a combination of Australian, Canadian and UK pension.

9.      The applicants contended until their RRSP investment is converted to either a RRIF or an annuity in the year 2003, it should be classified as an inaccessible investment and not treated as income.

10.     Both applicants were granted an Australian age pension on 4 February 1999 under the International Agreement with Canada.   The history of this appeal is set out in the decision of the SSAT dated 4 March 2002.

11.     There is no issue that the applicants meet the qualifying provisions for payment of an age pension, both having reached pension age and having been granted deemed residence under the provisions of the Reciprocal International Social Security Agreement between Australia and Canada.   The agreement provides that payment of age pension is made pursuant to the provisions of the Australian Social Security Act 1991 (“the Act’).

12. The rate of age pension is calculated in accordance with the pension rate calculator A set out in s1064 of the Act.

13.     The payment of age pension is subject to an ordinary income test and an assets test.   In other words, a reduced rate of pension is payable if the pensioner exceeds a specified limit for income and/or assets.

14.     The ordinary income test is set out in Module E of the pension rate calculator A which provides for a six step method for working out the effect of a person’s ordinary income on his/her maximum payment rate.

15. The provisions of Division 1 concerning deemed income from financial assets contained in ss1076 to 1084 of the Act are applicable in the application of the ordinary income test.

16. Section 9 of the Act defines a financial asset as (a) financial investment or (b) a deprived asset. A financial investment includes a managed investment and the section provides that managed investment has the meaning given by sub-sections (1A), (1B) and (1C).

17.     Subsection (1C) provides that an investment in a superannuation fund where the investor has not yet reached pension age is not a managed investment for the purposes of this Act.

18. Both parties have reached pension age in accordance with the provisions of s 23 of the Act. Mr Rudkin being 65 years of age at the time he was granted age pension, and Mrs Rudkin was 64 years of age at the time she was granted age pension.

19.     The provisions of Division 1B provide that the total value of a person’s financial assets are added together and the deemed amount of income is calculated by applying the “below the threshold” rate (s1082(1)) and the “above the threshold” rate to the financial assets.   The thresholds are indexed to the CPI on 1 July each year and the rates are determined by the Minister from time to time.   The provision provides for varying calculation rates depending on whether the pensioner is or is not a member of a couple.

20.     Whilst it is the applicants contention that for the purposes of their RRIP pension, retirement age is considered to be 69 years and until that time the investment does not generate income, this is the situation under the Canadian legislation.   Payment of Australian age pension however, is pursuant to the provisions of the Australian Social Security Act 1991.

21. The only provision in the Act exempting the inclusion of managed superannuation investments from the deeming and income provisions of the Act is by virtue of s9(1)(C) as outlined above. There being no other provisions under the Act under which a discretion could be exercised in this case to waive the deemed income provisions, the Tribunal accordingly affirms the decision under review.

I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Part-time Member)

Signed: K.L. Miller (Administrative Assistant)   

Date/s of Hearing  Matter decided on the papers.
Date of Decision  11 April 2003