Small and Secretary, Department of Employment and Workplace Relations

[2005] AATA 1095

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1095

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  Q2004/788

GENERAL ADMINISTRATIVE DIVISION		)
Re		WARREN SMALL and COLLEEN SMALL

Applicants

And SECRETARY, DEPARTMENT
OF EMPLOYMENT AND
WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Senior Member B J McCabe

Date4 November 2005

PlaceBrisbane

Decision The decision under review is affirmed.

…...............[Sgd]............................

SENIOR MEMBER

CATCHWORDS

SOCIAL SECURITY – Benefits and entitlements - parenting payment (partnered) – Newstart allowance – overpayment – debt - loans to private company considered an assessable asset – special circumstances under 1237AAD.

Social Security Act 1991 (Cth) ss 500Q, 611, 1237A, 1237AAD

REASONS FOR DECISION

4 November 2005 Senior Member B J McCabe         

1.      Mr and Mrs Small seek review of the respondent’s decision to raise and recover two debts. The respondent claims Mr and Mrs Small were paid benefits to which they were not entitled because their assets exceeded the allowable asset limits in the relevant period. It seems the applicants fell foul of the assets test because of the way in which loans to a company controlled by Mr Small were treated. A debt of $25,671.68 was raised against Mr Small for the period 16 May 2001 to 20 April 2004 in respect of Newstart payments. A separate debt of $25,909.74 in respect of parenting payment (partnered) was raised against Mrs Small for the period 9 May 2001 to 20 April 2004. The applicants have asked the Tribunal to review the respondent’s decision to raise and recover these debts.

2.      For reasons I will explain, I am satisfied the applicants were not entitled to Newstart and parenting payment during the relevant periods. It follows the debts have been properly raised. I am also satisfied there is no basis for exercising the discretion not to recover the debt.

Material before the Tribunal

3. The Tribunal had before it the documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975. The following documents were also tendered in evidence:

·Annexure A – Centrelink letter to Mr Small dated 15 May 2001 (exhibit 2);

·Annexure B – Centrelink letter to Mrs Small dated 16 May 2001 (exhibit 3);

·Annexure C – Centrelink letter to Mrs Small dated 20 June 2002 (exhibit 4); and

·Annexure D – Centrelink letter to Mrs Small dated 22 April 2003 (exhibit 5).

4.      The hearing was held on 25 July 2005 at Coolangatta. Mr Small attended the hearing and represented both himself and his wife. Ms Oliver, a departmental advocate, appeared for the respondent.

Factual background

5.      Mr Small was the sole director and shareholder of President Security Services Pty Ltd (the company) which was formed on or about December 1991. The company originally provided security services. It evolved into a general labour hire business. Mr Small also had an interest in some thoroughbred race horses. The interest was held by the company. Their winnings and expenses associated with their upkeep were accounted for in the company’s books. At the hearing Mr Small told the Tribunal the horses made money prior to 2000.

6.      The company ceased trading in around May 2001 when its last client dispensed with the company’s services. Mr Small applied for Newstart on 15 May 2001 and was paid from 16 May 2001. Mrs Small claimed parenting payment (partnered) in May 2001 and was paid from 9 May 2001.

7.      On 14 May 2001 Mr Small completed a Private Company form provided by Centrelink about President Security Services Pty Ltd (T5, f 45). He stated in that form the company owed him $40,306 (T5, f 50).

8.      A review of the financial report’s of the company show the following liabilities owed to Mr Small:

30 June 2000           $40,306  (T5, f 50)
30 June 2001           $242,876                  (T27, f 173)
30 June 2002           $413,823                  (T27, f 174)

30 June 2003           $419,488                  (T27, f 175)

9.      Mr Small also told the Tribunal about the applicants’ various dealings in property. He explained a property at Dominique St, Cronulla was mortgaged to fund the purchase of a property at Admiralty Drive, Paradise Waters and other investments like racehorses. The loan was in the personal names of the applicants. The Admiralty Drive property was sold in August 2001. The Dominique St property was sold in September of 2001. The proceeds from the sale of the properties were used to pay out various loans the applicants held.  

10.     On 15 May 2002 Centrelink decided Mr and Mrs Small were not entitled to certain social security benefits already paid. Centrelink determined the applicants’ assets exceeded the allowable asset limit for the period from when the relevant benefits were granted until the time when the proceeds from the sale of the Admiralty Drive property where paid into the mortgage over the applicants principle home. Centrelink decided to raise and recover the overpayments accordingly (T14, f 98).

11.     At the hearing the respondent brought to my attention several answers the applicants’ had provided to questions in Centrelink forms. The respondent said the answers contributed significantly to the decision to raise debts. The applicants made the following statements:

Question	Answer	Date	Reference
Have you or your partner loaned money to anyone?	No	09/05/01	T3, f 28
Are you or your partner involved in a business or company?	No	09/05/01	T3, f 33
Do you (and/or your partner) have any bonds or debentures or have you lent money to anyone?	No	02/08/01	T15, f 102
Do you (and/or your partner) own shares in a private company, not listed on the stock exchange?	No	02/08/01	T15, f 104
Are you (and/or your partner) involved in a business or company?	No	02/08/01	T15, f 107
Do you (and/or your partner) have money on loan to anyone?	No	09/02/04	T20, f 121

12.     Centrelink received data-matching information from ASIC regarding Mr Small’s involvement in the company on 10 December 2003. The data matching indicated the company had total liabilities of $415,447 at the time (T16, f 113).

13.     On 9 February 2004, a Centrelink officer discussed the ASIC data-matching information with Mr Small. Mr Small told the officer that he had to inject money into the business over the years and thought such funds would total approximately $350,000. The officer expressed his concern that Mr Small may not have been entitled to social security payments he had received. The applicants’ benefits were subsequently suspended while the matter was investigated.

14.     On 29 April 2004 Centrelink decided to raise and recover debts in respect of overpayments of social security benefits. After taking into account the value of the loans to the company as assets of the applicants, Centrelink concluded Mr and Mrs Small’s assets exceeded the allowable limits during the relevant period.

The legislation and consideration

15.     The Social Security Act 1991 (the Act) governs the applicants’ entitlement to both Newstart allowance and parenting payment. The Act imposes an assets test on applicants for various benefits including Newstart and parenting payment. The statute sets a limit on the amount of income and value of assets that a couple may jointly possess. If an applicant exceeds the limit, they are ineligible for the relevant social security payment. If an applicant is a home-owner, the value of the home is disregarded in the course of calculating the value of the assets: see s 1118(b). The legislation allows non-home-owners to retain more assets than home-owners. The applicants were home-owners during the overpayment period.

16. Section 611(1) states:

611(1) A newstart allowance is not payable to a person if the value of the person's assets is more than the person's assets value limit.

17. Section 500Q similarly provides:

500Q(1) Parenting payment is not payable to a person if the value of the person's assets exceeds the person's assets value limit.

18. The assets of a married person are taken to be 50% of the combined total of their and their partner’s assets: see ss 500Q(5) and 612(2).

19.     The loans Mr Small made to the company must be taken into account as an assessable asset in calculating the applicant’s assets during the overpayment period. Section 1122 states:

If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.

20. The asset limits (referred to in ss 500Q(3) and 611(2)) and the applicant’s combined assets during the relevant period were as follows:

Date	Combined Assets limit	Applicants’ combined assets	Reference
9 May 2001 – 30 June 2001	$189,500	$242,876	T27, f 173
1 July 2001 – 30 June 2002	$200,500	$413,823	T27, f 174
1 July 2002 – 30 June 2003	$206,500	$419,488	T27, f 175
1 July 2003 – 30 June 2004	$212,500	-	N/A

21.     On 25 June 2004 Mr Small forgave $300,000 of the total loans he had made to the company.

22.     At the hearing Mr Small argued that the loans to be repaid to him by the company are not worth their book value. He stated that the loans are not a valuable asset because the company is not trading and is unlikely to be able to repay its liabilities.

23.     The treatment of loans in the calculation of assets for social security purposes changed after 27 October 1986. The “face value” of the loan as opposed to the “real value” of the loan was to be preferred in the interest of simplifying the asset assessment process: see Re Boyd and Secretary Department of Social Security(1994) 36 ALD 331. Re O’Brien and Secretary, Department of Family and Community Services (2002) 70 ALD 552, explains (at paragraph 14):

The reference to the “amount [that] remains unpaid” suggests one must look at how much the contract obliges the debtor to repay, rather than make an assessment of how much the debtor is likely to pay in reality. The tribunal explained in Re Boyd and Secretary, Department of Social Security (1994) 83 SSR 1221 that:

… the legislation, while capable of producing unjust results in some circumstances, nevertheless intended loans made after 27 October 1986 to be valued at face value.

24.     Mr Small told the Tribunal he borrowed funds in his personal capacity that he subsequently loaned to the company. He suggested the amount he borrowed from a financier should be offset against the amount owed to him by the company. This argument was considered in Unicomb v Secretary, Department of Social Security (1998) 50 ALD 405. Branson J held the wording of s 1122 of the Act suggested it was inappropriate to consider whether a person gains a net advantage from such transaction so far as his or her total assets are concerned (at 407). The decision in Unicomb means Mr Small cannot offset the monies due to him from the company against his obligation to pay the monies he borrowed elsewhere. Unicomb recognised circumstances may be different if the applicant arranged a loan on behalf of the company instead of borrowing the money in his personal capacity and then advancing it to the company. There is no evidence before me to suggest Mr Small borrowed the money as an agent for the company so that President Security Services Pty Ltd assumed responsibility for repaying the loan to the financier.

25.     The monies due to the applicant in the form of loans to President Security Services Pty Ltd must be assessed at their face value. I am satisfied the applicants’ assets exceeded the allowable limits at all relevant times. It necessarily follows the applicants have received payments to which they were not entitled. The amounts of the overpayments are therefore debts due to the Commonwealth.

Waiver of debt

26.     Mr and Mrs Small currently live with their two sons and Mr Small’s mother at Tallai on the Gold Coast. Mr Small is 57 years old. Mrs Small is a homemaker. The applicants’ youngest son attends The Southport School. Their eldest son is currently unemployed. The family now grow vegetables on their property for their own consumption. The applicants own their home and do not owe any money on it. Mr Small told the Tribunal that he and his wife have lived off credit cards since 2001. He said it was difficult to support his family in recent times.

27.     Mr Small said he applied for social security benefits as a last resort when he found himself stuck with 2 properties and no income when settlement fell through on the sale of one of the properties.

28. The Commonwealth has the discretion to waive debts in some circumstances. Sections 1237A and 1237AAD are relevant in this case. The respondent contends s 1237A cannot apply because the debts did not arise solely due to administrative error. I agree. The debts arose because of the information that came to light about the company’s finances. That information was provided at first instance by the applicants.

29. Debts may also be waived in cases where “special circumstances” are present: s 1237AAD. While the term “special circumstances” is not defined in the Act it is accepted that “special circumstance” are those unusual, out of the ordinary or markedly different from the usual run of cases: see Re Beadle and Director-General of Social Security(1984) 6 ALD 1 and Dranichnikov v Centrelink(2003) 75 ALD 134.

30.     The applicants have recently experienced difficult financial times - at least in comparison with times gone by. That is not unusual for recipients of welfare benefits. I am not aware of any other circumstances that would enable me to distinguish this case from the usual run of cases. I am satisfied there is no basis for exercising the discretion not to recover the debt.

Conclusion

31.     The decision under review is affirmed.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe.

Signed:         .....................................................................................
  Associate:     Sam J Appleton

Date of Hearing  25 July 2005
Date of Decision  4 November 2005
The applicant appeared in person.
The respondent was represented by Ms Oliver, departmental advocate.