Secretary, Department of Social Services and Lizel Swale
[2014] AATA 554
[2014] AATA 554
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/6171
Re
Secretary, Department of Social Services
APPLICANT
And
Lizel Swale
RESPONDENT
DECISION
Tribunal Ms A F Cunningham, Senior Member
Date 1 August 2014 Place Perth The Tribunal sets aside the decision of the Social Security Appeals Tribunal and in substitution, therefore, affirms the decision made by the Authorised Review Officer on 30 August 2013.
....(Sgs) A F Cunningham..............
Ms A F Cunningham, Senior Member
CATCHWORDS
SOCIAL SECURITY - Claim for Parenting Payment (Partnered) - whether Assessable Income exceeds the Personal Income Cut-Off Limit - whether Trust Income should be included - whether Applicant is an Attributable Stakeholder of the Trust - whether Trust Distributions were made in accordance with Validly Executed Resolutions under the Trust Deed
LEGISLATION
Administrative Appeals Tribunal Act 1975
Social Security Act 1991
Social Security (Administration) Act 1991
CASES
Croucher and Secretary, Department of Eduction Employment and Workplace Relations (2009)
AATA 431
Re Christensen and Secretary, Department of Social Security (1995) 37 ALD 795Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Ms A F Cunningham, Senior Member
1 August 2014
The Secretary seeks the review of a decision of the Social Security Appeals Tribunal (SSAT) made on 28 October 2013 which set aside the decision of a Centrelink Authorised Review Officer (ARO) made on 30 August 2013. The Secretary contends that the decision of the ARO which affirmed Centrelink’s decision to reject Ms Swales claim for Parenting Payment (partnered) because her assessable income at the time of her claim was above the allowable personal income cut-off limit, should be reinstated.
The hearing was conducted by video link to the Perth Registry Western Australia. Mr Swale, the respondent’s husband appeared on her behalf. The respondent did not attend the hearing. Mr Swale gave oral evidence and was cross-examined by Ms Yik-long who appeared on behalf of the Secretary. The T documents were tendered in evidence pursuant to section 35 of the Administrative Appeals Tribunal Act 1975. Also tendered in evidence was the respondent’s Statement of Facts Issues and Contentions which included a number of annexures and in particular, a copy of the Discretionary Trust Deed which established the L &P Family Trust, copies of bank accounts of both the Family Trust and personal account of Lizel Swale and a typed summary of relevant trust deposits and withdrawals.
BACKGROUND
Mr Swale operated a transport business and on advice he and his wife, the respondent in these proceedings, engaged an accountant to set up a family trust which was known as the L and P Transport Family Trust (the Trust). A Discretionary Trust Deed was entered into on 20 December 2010 establishing Lizel Swale as the trustee and appointing both Lizel Swale and her husband Peter Swale as beneficiaries.
The Trust Deed includes a number of provisions relevant to distributions with the trustee having absolute discretion to distribute any part of the income of the trust fund for a financial year in any proportion the trustee decides and to any of the named beneficiaries. Of particular relevance is paragraph 17 which requires the decisions of the trustee to be in writing and states as follows:
“A decision by the trustee concerning distributions under the trust is to be evidenced in writing. The trustee must keep the evidence to decision with the papers relating to the trust, and must record its effect in the trust’s books.”
The practice during the relevant period, was that all distributions of income earned by the Trust were made to Lizel Swale. This is supported by the bank statements tendered in evidence.
In a Centrelink Private Trust Mod PT form lodged by Ms Swale on 23 March 2012 she stated that she was the sole beneficiary and trustee of the Trust. It was Mr Swale’s evidence that he was not aware that he was also a beneficiary under the Trust until he re-read the Trust Deed. The Trust tax return for the year ending 2011 stated income of $39,480 with no expenses which income was distributed to Lizel Swale and included in her personal tax return.
It is recorded in Centrelink’s decision of 30 August 2013 that Ms Swale’s individual tax return for the 2011/2012 financial year indicated a distribution income of $60,416 from the family trust which had an assessable income of $66,982. Centrelink attributed Ms Swale with 100% of the trusts assessed income. Following the conclusion of the hearing the respondent sought to adduce further evidence concerning the discrepancy between the above income accounts. The applicant objected to the receipt of further evidence on the basis that the hearing had concluded and that there was no opportunity to test the evidence. As no leave had been granted, the Tribunal refuses the application to submit further evidence.
Ms Swale’s application for Parenting Payment was actioned electronically following a phone call from Mr Swale to Centrelink on 22 July 2013. On 13 August 2013 a Centrelink employee made a decision to reject Ms Swale’s claim for Parenting Payment on the basis that she had excess income after attributing the trust profit of $66,982 to Ms Swale.
The decision to reject Ms Swale’s claim was affirmed by an ARO on 30 August 2013. Ms Swale applied to the SSAT for review of the ARO decision which set aside the decision and directed that Centrelink reconsider Ms Swales claim for Parenting Payment in accordance with the SSAT’s directions.
ISSUES AND CONTENTIONS
The Secretary contends that the distribution received by Ms Swale from the Trust in relation to the 2011/2012 financial year of $66,982 is to be treated as income that is assessed under section 1073 of the Social Security Act 1991 (the Act). The Secretary maintains that Lizel Swale is the attributable stakeholder of the Trust pursuant to section 1207 X (2) of the Act and that her asset attribution percentage is 100%.
Mr Swale on behalf of the respondent, did not dispute that his wife received 100% of the trust distributions as income but contended that they were made pursuant to regular resolutions under the Trust Deed and should therefore be assessed as income as at the time of receipt.
The issue for the Tribunal to determine is whether Ms Swale’s assessible income exceeded the allowable personal income cut-off limit for Parenting Payment (partnered). This necessarily involves a consideration of the nature of the Trust and whether:
(1) the Trust is a designated private trust;
(2) the Trust is a controlled private trust;
(3) Ms Swale’s income attribution percentage is 100% of the value of the income
derived from the trust; and
(4) whether the trust distributions were made to Ms Swale in accordance with
validly executed resolutions under the Trust Deed.
LEGISLATION
The relevant legislation is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).
The provisions relating to the rate of Parenting Payment are contained in Chapter 2 Part 2 .10 Division 4 of the Act. Section 503 provides that a person’s Parenting Payment is to be worked out using the Benefit PP (Partnered) Rate Calculator at the end of section 1068 B of the Act which contains the Module setting out how ordinary income of the person and their partner affects the rate of Parenting Payment. Module G contains the method for working out the effect of a person’s ordinary income and that of their partner on the person’s maximum payment rate. The rate of payment is reduced according to the income of the person.
The general provisions relating to the ordinary income test are contained in Part 3.10 of the Act. Section 1072 provides that a reference to a person’s ordinary income is a reference to the persons gross ordinary income from all sources for the period calculated without any reduction. This section provides that ordinary income is as defined in subsection 8 (1) being income that is earned, derived or received and that is not maintenance income or an exempt lump sum.
Section 1073 of the Act relevantly states:
(1) Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the person; or
(iii) an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
(2) Subsection (1) applies to a person who has claimed one of the following allowances:
(a) newstart allowance;
(b) sickness allowance;
(c) youth allowance;
(d) widow allowance;
(e) partner allowance;
(f) mature age allowance under Part 2.12B;
even if the person:
(g) has to serve an ordinary waiting period or a liquid assets test waiting period in respect of the allowance claimed; or
(h) is subject to an income maintenance period in respect of the allowance claimed; or
(i) is subject to a seasonal work preclusion period;
during the period of 12 months referred to in subsection (1).
Division 6 contains the provisions relevant to private trusts and income attribution. Section 1207X relevantly provides:
(2) For the purposes of this Part, if:
(a) a trust is a controlled private trust in relation to an individual; and
(b) the trust is not a concessional primary production trust in relation to the individual (see section 1208U);
then:
(c) the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and
(d) if the individual is an attributable stakeholder of the trust--the individual's asset attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust--that lower percentage; and
(e) if the individual is an attributable stakeholder of the trust--the individual's income attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust--that lower percentage.
(2A) The only attributable stakeholder of a special disability trust is the principal beneficiary of the trust.
Determinations
(3) A determination under this section is to be in writing.
(4) A determination under this section has effect accordingly.
(5) In making a determination under this section, the Secretary must comply with any relevant decision-making principles.
Section 1208D relevantly provides with respect to attribution periods:
(1) The Secretary may, by writing, determine that, in the event that a specified individual is an attributable stakeholder of a specified company or trust at a specified time (the start time ):
(a) a period beginning at the start time and ending at whichever is the earlier of the following times:
(i) the later time specified in the determination;
ii) the time when the individual ceases to be an attributable stakeholder of the company or trust;
is an attribution period for the purposes of the application of this Part to the individual and the company or trust; and
(b) that attribution period relates to a specified derivation period of the company or trust.
The Guide to the Social Security law contains provisions with respect to derivation and attribution periods and states, at 4.12.2.20, as follows:
Summary
When deciding for which period of time to attribute the assets and income of a trust or company to an individual, the assessor first needs to establish the derivation period, and the attribution period to which the derivation period relates.
Derivation periods
A derivation period generally refers to a tax year (section 23(1)) and can be of any length up to a 12-month period. Generally, each tax year that a trust or company is in existence will be a derivation period for the trust or company. If a trust or company has only been in existence for a part of a tax year, that part of the tax year will generally be a derivation period for that trust or company. In most circumstances, a derivation period will be the last financial year for which the tax return is available.
With reference to a derivation period, the ordinary income (section 8(1)-'income') generated by a trust or company in a derivation period is used to determine the amount of income to attribute to an attributable stakeholder of that trust or company.
However, if the delegate is of the view that it is appropriate, in a particular case, to use a derivation period, other than a tax year, that may reasonably be regarded as a typical earning period for that trust or company, then that period may be used as the derivation period. In situations when a reassessment of an income support recipient's circumstances is sought, the derivation period may be the preceding 3 months, if that gives a more accurate reflection of the attributable stakeholder's income than the previous financial year.
In making such a determination, the delegate must have regard to the factors set out in the Social Security (Attribution of Income) Principles 2002.
Attribution periods
An attribution period is the period for which ordinary income is to be attributed to an attributable stakeholder. An attribution period MUST relate to a derivation period, which may or may not overlap.
An attribution period can be shorter or longer than the derivation period to which it relates. An attribution period would generally be a period of 12 months and start at the earliest possible time after the tax return in regard to the most current tax year is available. However, in some situations an attribution period could be determined by the delegate to be a period less than 12 months, for example, where an income support recipient requests a reassessment of his/her circumstances.
An attribution period must end when the specified period expires or when the person ceases to be an attributable stakeholder, whichever is the earlier.
In determining an attribution period, the delegate must have regard to the factors set out in the Social Security (Attribution of Income) Principles 2002.
CONSIDERATION AND FINDINGS
It was Mr Swale’s contention that each of the distributions from the Trust into his wife’s bank account were made pursuant to a resolution. In support he produced a written Schedule which recorded the date the money was received in the Trust bank account and distributed to Ms Swale in the form of wages. The Schedule was annexed to the respondent’s Statement of Facts Issues and Contentions and contained the following headings “L and P Trustee; Record book of Resolution Distributions, Number, Date in Bank, Money In, Money Out wages, Hours, Rate”. It was Mr Swale’s evidence that the entries had been made on a regular basis and that this document had been printed from his computer.
Also produced and tendered was another copy of the same document that did not contain the headings “Trustee Record book of Resolution Distributions”. Ms Yik long informed the Ttribunal that this document had been forwarded to Centrelink by Mr Swale. Mr Swale agreed that it was the same document that recorded the entries of monies received into the Trust account in distributions made to Ms Swale and that he had added the headings at a subsequent date.
The Secretary contended that there is no evidence that any resolutions were made in accordance with the provisions of the Trust Deed and consequently the following provision in the Guide should apply:
“An attribution period would generally be for a period of 12 months and start at the earliest possible time after the tax return in regard to the most current tax year is available.”
As Ms Swale was determined to have a 100% income attribution percentage, she received a distribution from the Trust of $66,982. In the absence of any evidence of resolutions made to distribute the Trust income, the income must be assessed under section 1073 of the Act and in accordance with the Guide from the date of the lodgement of her tax return. Accordingly, Ms Swale is taken to have received 1/52 of that income amount as ordinary income during each week in the 12 months commencing on the day on which she became entitled to receive that amount, being from 1 August 2012. It was submitted that this date was the attribution period as it was the earliest possible date after the tax return was lodged.
It was submitted by the Secretary that the SSAT erred in deciding that Ms Swale was entitled to receive the payments on the various dates that they were made because such an interpretation is not consistent with the Guide.
The Trust Deed at paragraph 17 provides that a decision by the trustee concerning distributions under the Trust is to be evidenced in writing. Further that the trustee must keep the evidence of decisions with the papers relating to the Trust and record its effect in the Trust’s books. Mr Swale maintained that the Schedule submitted detailing the dates when money was received into the Trust bank account and paid out as wages is evidence of the distributions and the resolutions made by the trustee, Ms Swale. He maintained that the decision of the SSAT which found that Ms Swale was entitled to receive the payments on the various dates that they were made was correct and should be affirmed.
In Croucher and Secretary, Department of Education Employment and Workplace Relations (2009) AATA 431 the evidence was that resolutions were passed by the trustees to distribute payments to the applicant on 30 June 2008. The Tribunal found that the applicant became legally entitled to the distributions on that date and in accordance with section 1073 (1) of the act, this income was taken to have been received over a 12 month period commencing 30 June 2008.
Similarly in Re Christensen and Secretary, Department of Social Security (1995) 37 ALD 795 there was evidence that a resolution had been made by the trustee in accordance with the trust instrument to distribute. The Tribunal said at paragraph 17:
“The Tribunal finds that the crediting in the Trust books, consequent upon a resolution of the trustee in accordance with the trust instrument, of income to a beneficiary is a distribution of income by a trust at the end of a financial year. As such it is an amount earned by the beneficiary and must be taken into account as income for the purpose of s1074 (1) of the Act. There is no discretion to allow the respondent, and therefore this Tribunal, to depart from this mandatory requirement to maintain income for the 52 weeks beginning 28 June 1993 (unless the distribution falls within one of the exclusions outlined in s1074 (1) of the Act).”
In the present case I am not satisfied that any resolutions were made by the trustee in accordance with the Trust Deed. The only written documentation tendered in evidence was the computer-generated Schedule which simply recorded the dates that monies were paid into the Trust account and periodically paid out to Ms Swale on roughly, a fortnightly basis. This Schedule indicates that on four occasions the sum of money paid out differed from the sum received. Mr Swale was unable to offer any explanation for this and the total of the monies paid out in wages exceeds the total of the monies received by almost $220. The same document included with the respondents Statement of Facts Issues and Contentions differs from the one forwarded to Centrelink in that it includes the headings “Trustee Record book of Resolution Distributions.” Mr Swale agreed that these headings were added following the decision under review. The Tribunal does not accept Mr Swales contention that the Schedule comprises resolutions of the trustee under the Trust deed.
In the absence of any resolutions as to the payment of distributions, there is no evidence as to the date at when payments under the Trust were to be made to the beneficiary, Ms Swale. The Guide provides that a derivation period generally refers to a tax year and can be of any length up to a 12 month period. Further, that the ordinary income generated by a trust in a derivation period is used to determine the amount of income attributed to an attributable stakeholder of that trust. In such circumstances the attribution period starts at the earliest possible time after the tax return in regard to the most current tax year is available.
It is well established that the Tribunal, whilst not bound to apply policy guidelines, will usually do so unless there are cogent regions in a particular case not to do so. (Re-Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634).
In accordance with the provisions of the Guide the earliest possible date after Ms Swale’s tax return was lodged is 1 August 2012. Pursuant to section 1073 of the Act Ms Swale was determined to have a 100% income attribution percentage and is taken to have received 1/52 of the income received by the Trust namely $66,982 for the financial year 2011/2012. This sum equates to $2576.23 per fortnight which exceeds the personal income cut-off limit for a recipient of Parenting Payment (Partnered) of $853.84 per fortnight. Ms Swale’s income was above the allowable limit for eligibility of Parenting Payment.
In absence of any evidence of a resolution as to distributions in accordance with the Trust Deed and based on the current information available, the legislation does not permit any other interpretation that would enable a finding that Ms Swale received the payments prior to the attribution period.
For all of these reasons the Tribunal determines to set aside the decision of the SSAT and in substitution therefore affirm the decision made by the ARO on 30 August 2014.
I certify that the preceding 33 (thirty-three) paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham, Senior Member
...(Sgd) T Freeman.............
Associate
Dated 1 August 2014
Date of hearing 12 May 2014 Representative for the Applicant Ms S Yik Long Solicitors for the Applicant Australian Government Solicitor Respondent In person Advocate for the Respondent Mr P Swale
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