Savvas and Secretary, Department of Social Services (Social services second review)
[2016] AATA 591
•11 August 2016
Savvas and Secretary, Department of Social Services (Social services second review) [2016] AATA 591 (11 August 2016)
Division
GENERAL DIVISION
File Number
2014/3365
Re
Dennis Savvas
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member R W Dunne
Date 11 August 2016 Place Adelaide The Tribunal varies the determined values of the applicant’s total assets, but otherwise affirms decision under review.
........................[Sgd]..........................................
Senior Member R W Dunne
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – claim for age pension – whether assets exceeded allowable assets limit at the date of claim – whether applicant's assets have been correctly assessed – decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth), ss 43, 55, 1064, 1118 and 1122
REASONS FOR DECISION
Senior Member R W Dunne
11 August 2016
INTRODUCTION
Dennis Savvas (“applicant”) lodged a claim for age pension with the Secretary (“respondent”) on 25 January 2012. The claim was rejected and an authorised review officer (“ARO”) decided to affirm the original decision. This was because the applicant failed to respond to the respondent’s requests for further information.
The ARO’s decision was appealed to the Social Security Appeals Tribunal (“SSAT”) which remitted the matter to the respondent for further consideration.
When the respondent wrote to the applicant requesting additional financial statements for re-assessment, the claim was again rejected. After that rejection and unsuccessful review by an ARO, the applicant again sought a further review by the SSAT. When the SSAT affirmed that ARO’s decision, albeit by arriving at a different maximum assets limit, the applicant applied to this Tribunal for review of the SSAT’s decision.
At the hearing before me, the applicant was represented by Mr M Shepley (from Welfare Rights Centre (SA) Inc). The respondent was represented by Mr A Hay (Program Litigation and Review Branch, Department of Human Services). I received into evidence the T documents[1] lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, together with the following exhibits:
·financial statements and extract from the income tax return of the D Savvas Family Trust for the year ended 30 June 2012.[2]
[1] Exhibit R1.
[2] Exhibit A1.
ISSUES FOR THE TRIBUNAL
The issues for the Tribunal are:
(a)Have the applicant’s assets been correctly assessed?
(b)Did the applicant’s assets exceed the allowable assets limit at the date of claim?
(c)Was the decision to reject the applicant’s claim for age pension correct?
LEGISLATION
The legislation that applies in this matter is contained in the Social Security Act 1991 (“Act”). The following provisions are relevant:
(a)Section 43 of the Act provides the qualifications for age pension and s 44 provides that age pension is not payable if the pension rate is nil.
(b)Section 55 of the Act provides that the pension calculator at the end of s 1064 is to be used to calculate pension rate.
(c)Section 1064 of the Act provides that the rate of age pension is calculated by using either the total value of a person’s assets or his/her total income, whichever produces the lower rate of pension. For persons who are married, their combined income is taken into account in age pension calculations.
(d)Section 1118 of the Act lists different assets which are not regarded as assets for social security purposes. These include the value of a person’s principal home and up to two hectares of surrounding land, or money held in superannuation funds prior to reaching pension age.
(e)Section 1122 provides that, if a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of the Act includes so much of that amount as remains unpaid, but does not include any amount payable by way of interest under the loan.
BACKGROUND
The material background in this case is largely not in dispute. After the applicant lodged his claim for age pension it was rejected. On 24 July 2012, an ARO decided to affirm the original decision because the applicant failed to respond to requests for further information. The ARO’s decision was appealed to the SSAT which remitted the matter to the respondent for further consideration. The respondent wrote to the applicant on 23 January 2013 and 26 April 2013 requesting additional financial statements to reassess his claim for age pension.
On 11 June 2013, the respondent reconsidered the applicant’s claim as directed by an earlier SSAT decision. The respondent again rejected the claim for age pension because the applicant’s assets exceeded the assets limit. On 25 June 2013, the applicant requested a review of that rejection, and on 25 September 2013 (on review) an ARO found that as at 25 January 2012 the applicant’s total assets were $1,375,756, which was above the $1,050,000 asset test limit for a home owning pensioner couple.
On 13 January 2014, the applicant again sought review by the SSAT. On 26 May 2014, the SSAT affirmed the decision, but in doing so found that the applicant’s total assets were $1,116,131.21. As this amount is above the asset cut-off limit for age pension purposes, the decision of the ARO to reject the age pension claim was found to be correct, even though the SSAT arrived at a different asset total.
The applicant then requested a review of the SSAT decision by this Tribunal.
EVIDENCE
In giving his evidence and as appearing in his statement of facts, issues and contentions (“SOFIC”) the applicant agreed with the respondent’s valuation of the assets held by Cabine Pty Ltd (“Cabine”), Rester Pty Ltd (“Rester”) and Pollalis Nominees Pty Ltd (“Pollalis”). The applicant also agreed with the respondent’s valuation of assets (per Annexure 1) listed in the D Savvas Family Trust (“Trust”) as at 30 June 2012, except in relation to the three properties that Richmich Holdings Pty Ltd (“Richmich”) owns or has an interest in. In doing so, the applicant contended (or questioned?) the valuation of Richmich, the owner of 7 Haddrick Court. The applicant’s issue is how the following assets should be valued, when taking into consideration their associated liabilities:
·7 Haddrick Court, Underdale;
·Lot 108(20) Samuel Lewis Drive, Underdale; and
·Lot 109 (18) Samuel Lewis Drive, Underdale.
It is the applicant’s contention (in clause 4.6 of his SOFIC) that the properties referred to in paragraph 11 above should be valued using the following formula:
Value of property
Less any mortgage owing
Less any loans owed to the Trust as they are also counted as assets in the Trust Balance Sheet
Less any other charges or encumbrances
Using the total, the percentage equal to the applicant’s share is then applied as his asset.
CONSIDERATION
Has the value of the applicant’s assets been correctly assessed?
SSAT Decision Under Review
The decision under review in this proceeding is that made by the SSAT on 26 May 2014 to affirm the decision of an ARO to reject the applicant’s claim for age pension lodged on 25 January 2012. This was because the applicant’s assets were found to be in excess of the relevant assets limit at the date of claim. When the ARO affirmed the decision to reject the applicant’s claim for age pension on 25 September 2013, he said that the respondent had included the following assets in rejecting the claim (and he described them as):[3]
[3] Exhibit R1, T3 p 13.
·House contents and personal effects $20000
·Combined ANZ accounts $1677
·Diahatsu Sirion $2000
·ANZ shares 490 @ $21.20 $10388
·Pollalis Nominees Pty Ltd $364,002
·Loan to the D Savvas Family Trust $193,289
·D Savvas Family Trust $624,562
·Richmich Holdings Pty Ltd $314,210
·Rester Pty Ltd $2
·Cabine Pty Ltd $126,876
·Total combined assets $1,657,006
The ARO’s Particulars
In giving details of the above assets, the ARO provided the following particulars:
(a)In relation to Pollalis Nominees Pty Ltd, the respondent obtained this figure by attributing the Trust as having 18.75% control of that company. The respondent has contacted the AVO who originally valued the property at Lot 1, Commercial Road, Maslin Beach as having a 25 January 2012 market value of $2,000,000. Subsequently the AVO has revalued this property downward to $500,000, effectively reducing the Trust’s net equity from $364,002 to $82,752. This has the overall impact of reducing the applicant’s combined assets from $1,657,006 to $1,375,756. The respondent has allowed a $64,288 loan owed to the Trust in calculating the company’s net equity. It has however not allowed additional loans from non-commercial debtors as it has not received formal loan agreements confirming the loans as being bona fide.
(b)In relation to the loan to the D Savvas Family Trust, the respondent has obtained the figure of $193,289 from the Trust’s 2009/2010 balance sheet which shows an outstanding loan of $193,289 owed to the applicant. The respondent maintains that this is a personal asset in calculating the applicant’s total assets.
(c)In relation to the D Savvas Family Trust, the respondent obtained the figure of $624,562 from the Trust’s 2009/2010 balance sheet. It has contacted the AVO who has valued the Haddrick Court property at $550,000 as at 25 January 2012.
(d)In relation to Cabine Pty Ltd, the amount of $126,876 was obtained by the respondent from that company’s 2009/2010 balance sheet which in part shows a $128,793 loan to Rester Pty Ltd. The respondent has included this as a Cabine Pty Ltd company asset and a Rester Pty Ltd liability.
The Applicant’s SOFIC
I note in reviewing his evidence, the following points have been made in the applicant’s SOFIC:
(a)In clause 2.1, the applicant agrees with the respondent’s valuation of the assets held by Cabine Pty Ltd, Rester Pty Ltd and Pollalis Nominees Pty Ltd.
(b)In clause 2.2, the applicant agrees with the respondent’s valuation of the assets listed in the Trust (as at 30 June 2012) which appear in Annexure 1 to the SOFIC, except for 7 Haddrick Court, Underdale and its associated liabilities.
(c)In clause 2.3, the applicant “contends” the valuation of Richmich Holdings Pty Ltd which also owns 7 Haddrick Court.
(d)In clause 2.4, the applicant’s issue is how the following assets should be valued when taking into consideration their associated liabilities:
(i)7 Haddrick Court, Underdale;
(ii)Lot 108 (20) Samuel Lewis Drive, Underdale; and
(iii)Lot 109 (18) Samuel Lewis Drive, Underdale.
Also in the applicant’s SOFIC, the following contentions were put:
(a)In clause 4.3, that Richmich owns 100% of 7 Haddrick Court, Underdale;
(b)In clause 4.4, that Richmich owns 50% of Lot 108 (20) Samuel Lewis Drive, Underdale in partnership with Lepcorp. The applicant does not have an interest in Lepcorp;
(c)In clause 4.5, that Richmich owns 50% of Lot 109 (18) Samuel Lewis Drive, Underdale in partnership with his partner, Voola Varvounis; and
(d)In clause 4.6, the applicant’s contention is that his properties should be valued using the formula appearing in paragraph 12 of these reasons.
The Applicant’s Submissions to the SSAT
When the SSAT reviewed the ARO’s decision, I note that the applicant’s submissions to it included the following:
(a)The applicant was not disputing that he is the attributable stakeholder of the Trust.
(b)The main assets in contention relate to the valuation of Pollalis, the loan to the Trust, the Trust itself, Richmich and the method of valuation used by the ARO in relation to Rester and Cabine.
(c)The Trust owns 100% of Lot 34 Haddrick Court, Underdale. The AVO valued this property at $550,000. However, there is a loan on the property of $400,000 which should be allowed as a deduction to reduce the value of the Trust. The loan is in the name of Richmich, which is the trustee of the Trust. The value of the Trust should be reduced from $624,562 by $400,000 to $224,562.
(d)Lot 108 (20) Samuel Lewis Drive, Underdale is only owned 50% by Richmich. The value of the property is about $600,000 and has a total debt of $600,000, of which Richmich owns 50%. As a result, the assessed value for this property should be $0.
(e)Lot 109 (18) Samuel Lewis Drive, Underdale is owned by Richmich and Voola Varvounis. The property cost $600,000 and $400,000 was borrowed against it and a further $200,000 was borrowed against the equity in the personal home. The SSAT says in its decision that this leaves an assessed value of only $222,000. (This does not appear to be correct.)
(f)The loan to the Trust of $193,289 should not be included, as it is a loan against the applicant’s home. If it is not exempted, then it should be reduced by 50% as it is half-owned by the applicant’s partner.
The SSAT’s Findings
The SSAT found, given the evidence before it, that the Trust is 100% attributable to the applicant. The balance sheet of the Trust as at 30 June 2012 shows net assets of the Trust as $819,525. The value for the previous financial year was $881,872. As the SSAT did not have exact figures for 25 January 2012, it used the asset values as at 30 June 2012.
For the applicant, Mr Shepley submitted that the value of the Trust should be determined according to the value of the companies and/or other assets it owns because it appears from documents supplied to the SSAT that the respondent is determining the value of each company or other asset individually and therefore losses in companies may not be counted. On the evidence before it, the SSAT agreed with Mr Shepley’s submission. In my view, I believe the submission lacks substance. I am not prepared to accept it.
In relation to the property owned by Pollalis at Maslin Beach, the AVO reduced the value of the property to $500,000 which means that, as the applicant owns 18.75%, the value attributable to him is $93,750. As the Trust listed in its 30 June 2012 balance sheet a loan payable by the company to the Trust of $64,288, the SSAT found it appropriate to add a further $29,453 ($93,750 less $64,288 less $9 share value) as an asset when calculating the applicant’s combined asset values for age pension purposes. I am prepared to accept these figures.
The Trust balance sheet for 30 June 2012 shows a negative liability listed as “Beneficiaries Unpaid Present Entitlements Account”. As at 30 June 2012, the amount of the Account was $228,086. When the SSAT sought further clarification from the applicant as to how this Account was tracked, it appears his accountant had advised that it was made up of various funds contributed and funds withdrawn by the applicant since the establishment of the Account on 24 February 1975.[4] As the Account shows the amount the Trust owes the beneficiaries, but the amount effectively reduces the asset totals, the SSAT found it appropriate to leave the amount as listed in the balance sheet. I agree with this approach. Moreover, under Division 7A of the Income Tax Assessment Act 1936, the release or treatment of unpaid present entitlements from a discretionary trust can have adverse income tax consequences for beneficiaries. Given the history of the Account in the Trust since 24 February 1975, the amount of the Account should remain as an asset of the applicant as at 25 January 2012 for age pension purposes.
[4] Exhibit R1, T 23 p 497.
As the SSAT also found, I note further that the 2012 balance sheet of the Trust lists a loan of $37,500 as a liability. As the applicant indicated that the loan was to his son, the SSAT found it appropriate to add the amount of $37,500 on to the asset total. I also agree with this approach.
Given the approach taken by the SSAT, it took the Trust net assets as at 30 June 2012 of $819,525 and added back $66,953 ($29,453 and $37,500), which totals $886,478.
The SSAT has reviewed the activities of Richmich. It notes that Richmich is the trustee of the Trust, but also trades in its own right. It also receives distributions from the partnership of Richmich and V Varvounis. Richmich does not need to complete its own financial statements. However, there are financial statements for the partnership and a tax return for 2011 for Richmich. The partnership purchased Lot 109 (18) Samuel Lewis Drive at Underdale and, according to the applicant, about $200,000 was borrowed against his principal home to use as equity for the partnership joint venture. The applicant requested that the borrowing reduce his assets by $200,000. However, the SSAT found it was not appropriate to do that. It noted that the assets listed in the Trust balance sheet as at 30 June 2012 included loans payable by the partnership of $114,948 and $9,228, totalling $124,176. On 30 June 2011, these totalled $111,986. I note the ARO valued the asset attributable to Richmich as $314,210 after adjusting the partnership equity of Richmich of $341,639 with the adjusted property value of $620,000. Based on the evidence, the SSAT found that it is appropriate to increase the value of the applicant’s assets by $229,653 (that is, $341,639 - $111,986).
On the basis of its findings, the SSAT found that the applicant’s total assets were $1,116,131.21. As this amount is above the asset cut off limit for age pension purposes, the SSAT found that the decision of the ARO to reject the applicant’s age pension claim lodged on 25 January 2012 was correct, even though it arrived at a different asset total.
This Tribunal’s Asset Values
Having regard to the various matters that are set out above, the following are the asset values that I have determined apply as at 25 January 2012 at the time of the applicant’s claim for age pension:
·House contents and personal effects $20,000
·Combined ANZ accounts $1,677
·Diahatsu Sirion $2,000
·ANZ shares 490 @ $21.20 $10,388
·Pollalis Nominees Pty Ltd $82,752
·Loan to the D Savvas Family Trust $193,289
·D Savvas Family Trust $886,478
·Richmich Holdings Pty Ltd $229,653
·Rester Pty Ltd $2
·Cabine Pty Ltd $126,876
·Total combined assets $1,553,115
Adopting these determined values, I am satisfied that the applicant’s assets have been correctly assessed as at 25 January 2012.
Have the applicant’s assets exceeded the allowable assets limit at the date of claim?
As I have found that the applicant’s assets have been correctly assessed, I am also satisfied that the assets still exceeded the allowable assets limit of $1,050,000 at the date of claim.
Was the decision to reject the applicant’s claim for age pension correct?
Having regard to what is said in paragraphs 27 and 28 of these reasons, I find the decision to reject the applicant’s claim for age pension was correct.
DECISION
The Tribunal varies the determined values of the applicant’s total assets, but otherwise affirms decision under review.
I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne .....................[Sgd]............................................
Administrative Assistant
Dated 11 August 2016
Date(s) of hearing 25 February 2016 Advocate for the Applicant Mr M Shepley Solicitors for the Applicant Welfare Rights Centre (SA) Inc Advocate for the Respondent Mr A Hay Solicitors for the Respondent Department of Human Services
Key Legal Topics
Areas of Law
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Administrative Law
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Statutory Interpretation
Legal Concepts
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Appeal
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Judicial Review
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Procedural Fairness
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Statutory Construction
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