Schultz and Secretary, Department of Social Services (Social services second review)

[2016] AATA 837

Schultz and Secretary, Department of Social Services (Social services second review) [2016] AATA 837 (25 October 2016)

Division	GENERAL DIVISION
File Numbers	2016/2056
Re	Kenneth Schultz
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	D. J. Morris, Member
Date	25 October 2016
Place	Perth

The Tribunal affirms the decision under review.

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D. J. Morris, Member

CATCHWORDS

SOCIAL SECURITY – Pension Bonus – Calculation of correct amount – principal home – whether proceeds of sale of house properly regarded in assets test – contentions about advice from Department officer – reviewable decision affirmed

LEGISLATION

Residential Tenancies Act 1987 (WA)

Social Security Act 1991 – s 11A(9)(a) – s 55 – s 93D – s 93E – s 93F – s 93G – s 93J –
s 93K – s 1064 – s 1118(1)(a)

CASES

Hafza v Director-General of Social Security (1985) 60 ALR 674

Herbert v Byrne [1964] 1 All ER 882

Re MacNamara and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 40

Re Samek and Department of Social Security (1988) 16 ALD 295

SECONDARY MATERIALS

Guide to Social Security Law – 4.6.3.30

REASONS FOR DECISION

D. J. Morris, Member

25 October 2016

BACKGROUND

1. The Applicant Mr Kenneth Schultz seeks a review of a decision of the Social Services and Child Support Division of the Tribunal of 23 March 2016 (AAT1) to confirm an original decision by the Department of Social Services (the Department) to pay him a pension bonus of $4,223.50 on 31 July 2015.

2. The issue before the Tribunal is whether the Applicant was paid the correct amount of pension bonus.  This requires consideration of whether the proceeds of the sale of a property the Applicant owned in Cleaver Terrace, Riverdale (the Riverdale property) were properly regarded for the purpose of the assets test applicable under the Social Security Act 1991 (the Act).

3. The hearing was held on 29 September 2016. The Applicant represented himself, gave sworn evidence and was cross-examined by counsel for the Respondent, Ms Bernadette Rayment.

4. Documents lodged under section 37 of the Administrative Appeals Tribunal Act 1975 (T-documents) were admitted into evidence.

5. The Applicant submitted the following documents, which were admitted into evidence:

   ·Applicant’s Statement of Facts, Issues and Contentions, dated 9 September 2016 (Exhibit A1); and

   ·An attachment to that Statement headed ‘Furniture and Chattels Inventory’ for the Riverdale property (Exhibit A2).

   How is a person’s pension bonus calculated?

6. The Act provides, at sections 93D to 93J, how a person’s pension bonus is calculated. Section 93K of the Act provides that the Department may determine that a person’s pension bonus is to be increased (“topped-up”) if the person’s rate of age pension is increased (due to assets or income changes) within 13 weeks of the start day for the person’s pension bonus.

7. The calculation of the pension bonus payable to a person takes into account several things, including the annual rate of age pension payable to the person at the time of the claim for the pension bonus.

8. Section 55 of the Act sets out that a person’s pension bonus is worked out using the Pension Rate Calculator, which is at section 1064 of the Act. Section 1064, relevantly for Mr Schultz, requires that the combined income and assets of a person must be taken into account in calculating the rate of age pension that is payable. Age pension payable may be reduced if a person’s combined income or assets are above the statutory thresholds.

   Background to Applicant’s claim

9. On 6 March 2014 the Applicant registered for the Pension Bonus Scheme (T4, page 45).

10. The Department wrote to him on 3 April 2014 (T8, page 56) accepting him as a member of the Pension Bonus Scheme.

11. On 5 May 2015, the Applicant filled in a claim with the Department for age pension and pension bonus. In that form there is, at question 47, the following: Do you (and/or your partner) own a home but live elsewhere?  The Applicant ticked the box marked ‘No’ (T 13, page 83).

12. Accordingly, the Department assessed him as a “single non-home owner”.

13. On that date the assets limit for payment of the maximum age pension rate to a single non-home owner was $348,500.

14. On 31 July 2015, the Department sent Mr Schultz a letter advising that his fortnightly payments were calculated at a part rate of $1,797.25 and, based on this rate at his start date, he received a Pension Bonus payment in the amount of $4,223.50.

15. The Applicant requested a review of this decision by an Authorised Review Officer (ARO) and on 24 November 2015 the ARO affirmed the decision.  The ARO also found that a top-up was not payable to the Applicant as there was no increase in his age pension rate due to a decrease in the assessable value of his assets within 13 weeks from the start date of his pension.

16. Mr Schultz stated in a Centrelink Review of a Decision form of 13 October 2015 (T16, page 143) as follows:

    On 13/3/14 I attended the Innaloo Centrelink Office for an interview regarding my application for a Pension Bonus.  The interviewing officer advised me that when I made my claim I would receive an amount of around $45,000.  At no time did she mention the amount would be dependent upon the amount of my pension.  I was not given any further information.

17. He added, in an attachment (T16 page 144):

    At the time of my pension application in May 2015, I had just sold a property and the proceeds of the sale, some $560,000 were in my bank account, thus adding considerably to my asset position.

    At the time of application, I was sharing a house, pending the purchase of a new property.  I was aware that this would affect the amount of pension in the short term, but I was totally unaware that it would also affect the amount of pension bonus.

    …..

    It is quite clear that if I had been correctly advised at my interview on 13/3/2104 (sic), I would have delayed my retirement and my pension application until the purchase of my residence was finalised, in which case the pension bonus amount would be much closer to the original estimated amount.

    Hence I ask for the pension bonus decision to be reviewed to enable payment of the amount I should rightly have received if not for incorrect advice received from your department.

18. In Exhibit A1 the Applicant also cites section 4.6.3.80 of the Department’s Guide to Social Security Law generally defining the principal home of a person as the home in which the single income support recipient or couple lives for the greatest amount of time each year.

    Was the Riverdale property the Applicant’s principal home at the time of claim and, as such, should have been disregarded for the assets test?

19. At the hearing, the Applicant gave evidence that he moved out of the Riverdale property sometime early in May 2013. He arranged some small refurbishments which took place later in May and he leased the property from 1 June 2013 for $520 per week. The tenants had a 12 month lease and were then given an extension. 

20. Mr Schultz moved into a property at Elvire Street, Watermans Bay (the Watermans Bay property) in May 2013. The property is owned by a friend.  He did not pay rent but helped the owner with household costs.  He told the Tribunal part of the reason for moving was that this property was better suited and located when he occasionally received work clients at home.  This was always to be a temporary arrangement, as the Applicant planned to buy a new house elsewhere.

21. The Applicant returned to the Riverdale property from time to time to do some gardening, because the tenants were not attentive to the garden. He told the Tribunal that, once it was rented out, he did not ever return there to sleep. When he placed the property on the market, he made an arrangement with the tenants for prospective buyers to be shown through the house.

22. On 17 March 2015, the Riverdale property was sold.  Mr Schultz gave evidence that he had originally purchased it in 1999 and it was his principal home for 13 of the 15 years he owned it. 

23. He submitted a list of chattels to prove his connection with the Riverdale property. He gave evidence and provided bank statements showing costs of maintenance at the property, such as lawn mowing and the like.  He also gave evidence that he purchased a wine cabinet and placed it in the property, and that all this supported his continuing connection with the house.

24. On 29 September 2015, he purchased a new house at Halls Head, which he then moved into as his home.

25. In response, the Secretary gave evidence that Mr Schultz provided his permanent address at the Watermans Bay property in his Registration for the Pension Bonus Scheme in March 2014 (T4, page 46).

26. He also recorded the Watermans Bay property as his address in his Claim for Age Pension and Pension Bonus dated 5 May 2015 (T13, page 73)

27. The Respondent contended that at all relevant times in relation to his claim, the Applicant’s principal place of residence was the house at Watermans Bay and that he did not reside at the Riverdale property within the 12 month period prior to the date of his claim.

28. The case of ReMacNamara and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 40 hinged on what is the meaning of “principal home”. In that case, Deputy President Groom referred to Hafza v Director-General of Social Security (1985) 60 ALR 674 wherein Wilcox J at pg 680 stated that in considering the definition of “residence”, the test is:

    Whether the person has retained a continuity of association with the place … together with an intention to return to that place and an attitude that that place remains “home”.

29. In MacNamara, where the Department had disputed the Applicant’s contentions regarding her principal home, Deputy President Groom applied a number of tests to gauge whether the Applicant in that case had maintained a continued association with her home at St Helens.

30. While the Tribunal is mindful to exercise caution, because each case turns on its individual merits, these are useful tests and I will apply them, mutatis mutandis, in relation to Mr Schultz’s association with the Riverdale property.

31. Did the Applicant’s proprietary interest in his home remain unchanged throughout the relevant period? The Applicant owned the Riverdale property at the time he registered for the pension bonus in March 2014 but had sold it some two months before his May 2015 claim.

32. Did the Applicant continue to own the Riverdale property and also remain legally in occupation of it? He continued to own it but did not occupy it after moving out prior to refurbishing it and then renting it out.  He did not re-occupy it before it was sold.

33. Did the Applicant keep furniture, a motor car, and other household goods at the Riverdale property? Yes; the Riverdale property was rented fully furnished; the Applicant did not say that he kept a motor car there.

34. Did the Applicant lease the Riverdale property to another person? Yes, unlike the case in MacNamara, Mr Schultz on his own evidence organised a residential lease, and let the Riverdale property commercially. 

35. Did the Applicant maintain a strong emotional attachment to the Riverdale property and consider it to be his home? Evidence was not advanced on this point, except that the Applicant said he had lived there for 13 of the 15 years he had owned it.

36. Did the Applicant make regular visits to the Riverdale property? Mr Schultz said that he did visit to tend to the garden or for other purposes in relation to property maintenance and minor improvements (he bought a new shade cloth), but he could not say for certain how regular those visits were – sometimes twice a month, other months less frequently.

37. Were all the expenses of ownership and maintenance of the Riverdale property paid by the Applicant, as well as the necessary rates, electricity or other outgoings? The Tribunal did not have evidence before it on this point, except Mr Schultz advising he downloaded a conventional WA standard-form lease. That standard-form lease, under the Residential Tenancies Act 1987 (WA) contains usual clauses about quiet enjoyment by the tenant and obligations for the lessor to pay council rates and similar costs and the tenant, if the property is separately metered, to pay utility costs.

38. Another key point which was not explicitly raised in MacNamara but has been in other Tribunal and court examinations of what is a person’s “principal residence”, is whether the Applicant slept at the Riverdale property. Mr Schultz gave evidence that he did not.

39. What distinguishes MacNamara from Mr Schultz’s situation is that, in Mrs MacNamara’s case, she did not rent the St Helens property out. She moved to Launceston so her children could attend school there; she placed her St Helens property on the market but told the agent she would re-occupy it in 12 months if it had not sold. She continued to pay all the costs of the property and left not only furnishings but also personal effects in it. Her family regularly returned to St Helens to sleep at and use the house, and in the event did take it off the market after a year and re-occupied it. Those facts are quite different from the facts before the Tribunal in this case.

40. In regard to the purchase of the wine cabinet, Mr Schultz cited this as evidence of his continuing association with the property. I asked him whether he had retained this piece of furniture and he said that he had included it, along with all the other chattels listed in Exhibit A2, in the sale when he sold the Riverdale property fully-furnished.

41. The fact that he made irregular visits to the Riverdale property to tend the garden or do other things connected with household maintenance does not indicate a ‘continuing association’ in the sense used in MacNamara. The visits do illustrate proprietary interest and the chores Mr Schultz did are those that any good landlord would do. The purchase of the wine cabinet and placement in the property is not sufficient to support a continuing association, especially when that piece of furniture was sold with the property. The lawn mowing and gardening equally shows care for a commercial asset, but not necessarily a continuing association as a residence. The chattels are in a similar category, because the Applicant gave evidence that he advertised the Riverdale property for lease as “fully furnished” on the Gumtree website.

42. There may be, and are, circumstances where a person can have more than one principal place of residence. And a person may be absent for extended periods from a place without it ceasing to be his or her principal home. As Lord Denning MR said in the well-known case of Herbert v Byrne [1964] 1 All ER 884 in considering whether a tenant was in “personal occupation” of a house:

    A sea captain may be away from his house for months at a time but it is nonetheless his home.

43. But when the captain is away he is on his ship, his place of work. In Re Samek and Department of Social Security (1988) 16 ALD 295, it was held that living away from home in other premises causes the family home to longer be the principal home.

44. In this case I must not only look at the Applicant’s intentions, but also the wording of the Act.

45. Section 11A(9) of the Act provides that a residence of a person is to be taken to continue to be the person’s “principal home”, at subsection 11A(9)(a), during:

    any period (not exceeding 12 months or any longer period determined under subsection (9A), during which the person is temporarily absent from the residence.

46. The Applicant told the Tribunal that he moved out of the Riverdale property in May 2013.  The property was sold on 17 March 2015. Mr Schultz gave evidence that it was initially rented with a 12 month lease from 1 June 2013, and then that lease was extended.

47. The Applicant cited the house at Watermans Bay as his residence on the printed letterhead of his letter to the Department dated 27 March 2014 (T6, page 54). He also gave the Watermans Bay property as his “home address” on his tax return 2014 (T14, page 115). The Watermans Bay property was given by the Applicant in his pension claim form lodged in May 2015 in answer to the part on the form headed “Your permanent address”. In the same form he declared that he was sharing the Watermans Bay property with someone to share expenses.

48. It is clear to me that Mr Schultz did not intend to return to the Riverdale property.  His absence was not intended to be a temporary one.  He moved out with the intention of leasing, and then selling it. By his own actions, he cited the Watermans Bay property as his residence from at least March 2014.  He was being quite correct when he answered question 47 in his May 2015 claim for age pension that he was not a home-owner at that time.

49. I find that the Riverdale Property was not the Applicant’s principal home at the date of the claim, and had not been for more than 12 months before that date. Consistent with that finding, the proceeds from the sale of the residence cannot be disregarded under section 1118(1)(a) of the Act and so Mr Schultz’s assets were correctly calculated by the Department in terms of his claim as $838,888.

50. I note that Mr Schultz himself said he knew that the proceeds from the sale of the Riverdale property being in his bank account would affect his age pension entitlement until he had purchased his new home.

51. In regard to the Applicant’s quoting of the Guide to Social Security Law, that document is an internal guide and is not relevant when it conflicts with the Act or any other legislative instrument. In any event, the general statement at paragraph 4.6.3.30 does not assist Mr Schultz because, whilst the Riverdale property may historically have been his home, he had ceased to live there in May 2013 and never lived there again.

52. Sections 93D to 93J of the Act set out the process and formula for calculating the amount of a person’s pension bonus and that must be based on the correct annual pension rate, taking into account the person’s income and assets.

    Was the applicant given wrong advice by the Department?

53. The Applicant said that the Departmental Financial Information Services officer (the FIS officer) gave him incorrect advice when he registered for the pension bonus scheme on 13 March 2014. He said that he could have delayed his retirement had he been given the right advice (T18, page 150) because, owning his own company, he chose his retirement age at his discretion. 

54. Mr Schultz maintained to the ARO, to AAT1 and to this hearing, that the FIS officer had told him he would be paid an amount of “approximately $45,000”.

55. The notes from the Department interview do not cite this figure. They say that the FIS officer made clear that a bonus is payable at the same percentage as a partial age pension rate reduced by the effect of income or assets.

56. I do note, in the ARO’s undated letter at T19 to AAT1, it is said “I noted Mr Schultz referred to the sale of “a property”, and not the sale of his home.” Mr Schultz said to the hearing that as he has spent his career as a professional valuer, he has a habit of calling all improved real estate “property”, and nothing should have been read into that. I agree with the Applicant. Had the Applicant said words to the effect of “I sold the family home I used to live in”, that might have triggered more discussion with the FIS officer, but it would not have changed the fact that the Riverdale property had not been his home since May 2013 (two years before the claim for age pension and pension bonus) and so could not be regarded as his “principal home” for the purposes of section 11A(9)(a) of the Act.

57. At AAT1, the Applicant acknowledged that, at the interview in March 2014 he had been given a Pension Bonus booklet, however he said he relied on the advice of the FIS officer and “he only found the booklet recently” (T2, page 11). The booklet does explain how the formula for calculating the bonus is applied.

1. I do not know whether the FIS officer did in fact cite a figure to the Applicant, because while I do not dispute that Mr Schultz believes he was told that, there is no detailed record of that meeting which shows that before the Tribunal.

2. In any event, the FIS officer in March 2014 could not reliably predict what the income and assets of the Applicant would be when he retired more than a year later, other than the cited figure of $390,000 (T4, page 50) in his registration form. This figure excluded the Riverdale property.  So even if I accept a figure of that nature was quoted, it could at best have only have been a hypothetical figure, for illustrative purposes.

3. I note that Mr Schultz gave evidence that his accountant advised him when he should sell the Riverdale home for reasons connected with his own superannuation payments before he turned 75 years of age in June 2015.

4. I am afraid that the timing of decisions taken by persons in relation to their own finances and which may have an effect on their entitlements to Social Security benefits are not something that can be within the control of the Department or expected to be known to them. It is certainly not the Department’s function to advise people on how they can arrange their affairs to maximise their potential claims. While I appreciate the timing of the sale has had a fiscal impact on Mr Schultz, it is not something the Tribunal can take into account in examining whether the original decision was the correct and preferable one.

   CONCLUSION

5. I found Mr Schultz a frank and open witness. He is to be commended as someone who continued to work productively and contribute to the national economy well past retirement age. I understand his frustration that he thought he might receive a greater pension bonus and that he felt that the money from the sale of his former residence should not be taken into account. 

6. But the Parliament has linked the amount of the payment to an income and assets test in the legislation. The fact remains that the Riverdale property was not the Applicant’s principal home at the time of the claim.  He was not temporarily absent from the property and he had not lived there for well over 12 months. The funds he received from the sale of that house were correctly taken into account when the Department calculated his income and assets in terms of his entitlement to age pension and pension bonus. The pension bonus amount was correct.

   DECISION

7. The Tribunal affirms the decision under review.

65.     I certify that the preceding 64 (sixty-four) paragraphs are a true copy of the reasons for the decision herein of D.J. Morris, Member

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Administrative Assistant

Dated 25 October 2016

Date of hearing	29 September 2016
Applicant	In person
Representative for the Respondent	Ms B Rayment
Solicitors for the Respondent	Mills Oakley Lawyers