STILLHARD AND SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2010] AATA 252
•12 April 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 252
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/5097
GENERAL ADMINISTRATIVE DIVISION ) Re ENID STILLHARD Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr R G Kenny, Senior Member Date12 April 2010
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
..................[Sgd].................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Pensions, Benefits and Entitlements – Applicant in receipt of family tax benefit including component of rent allowance - Applicant an ineligible homeowner - Cancellation of rent allowance - Decision affirmed.
A New Tax System (Family Assistance) Act 1999 (Cth) ss 3, 38C of Part 5 Division 2B of Schedule 1
Administrative Appeals Tribunal Act 1975 (Cth) s 34J
Real Property Act 1900 (NSW) s 82
Superannuation Industry (Supervision) Act 1993Social Security Act 1991 ss 11, 13
Veterans Entitlement Act 1975 (Cth)
Dart and Secretary, Department of Family and Community Services [2002] AATA 1289
Dart and Secretary, Department of Family and Community Services MB 114 of 2003
Delos Reyes and Secretary, Department of Social Security (1993) 32 ALD 287
Koch and Secretary, Department of Family and Community Services [2002] AATA 407; (2002) 68 ALD 651
Re Johnston and Repatriation Commission (1994) AATA 9508
Re Schultz and Secretary, Department of Family and Community Services [2003] AATA 770; (2003) 76 ALD 247
Re Secretary of Social Security and Williams (1998) 52 ALD 418Schultz and Repatriation Commission [2004] FCA 718
Secretary, Department of Workplace Relations v Vanderpluym [2007] FCA 876Wheatley and Repatriation Commission (1996) 41 ALD 191
REASONS FOR DECISION
12 April 2010 Mr R G Kenny, Senior Member BACKGROUND
1. Enid Stillhard has received, under ANew Tax System (Family Assistance) Act 1999 (Cth) (the FA Act), the family tax benefit (FTB). From 1998, this included a rent allowance component. On 6 May 2009, a Centrelink officer determined that the rent allowance should be cancelled. This decision was affirmed by an authorised review officer on 29 June 2009 and, in turn, by the Social Security Appeals Tribunal (SSAT) on 25 September 2009. With the consent of each party and in accordance with the terms of s 34J of the Administrative Appeals Tribunal Act 1975 (Cth), the matter comes before the Tribunal without a formal hearing.
EVIDENCE and SUBMISSIONS
2. The material factual aspects of this matter are not in dispute. Mr and Mrs Stillhard are trustees of the Stillhard Superannuation Fund (the Fund), a self-managed superannuation fund established in accordance with the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1993 (Cth). The Fund commenced on 1 July 1998[1]. Mrs Stillhard first received rent allowance in 1998 after she advised Centrelink of a change of address at that time to 29 Beachside Way, Yamba, in New South Wales (the property) where she and her husband, Urs Stillhard, still reside. The property was purchased in the names of Mr and Mrs Stillhard as trustees for the Fund. Title to the property was registered in their names on the basis of legal advice, not disputed by the respondent, that a trust could not be registered on the title.[2] On taking up residence in the property, Mr and Mrs Stillhard signed a residential tenancy agreement with the Fund which nominates the Fund as landlord and Mr and Mr Stillhard as tenants[3]. This agreement has been extended to the present time. From 1998 and 2009, Mr and Mrs Stillhard paid rent on the property. Mrs Stillhard supplied Centrelink with rent certificates relating to the property and rent allowance continued to be paid to her until May 2009.
[1] See Article 1 and Schedule 1 of the Trust Deed.
[2] See s 82 of the Real Property Act 1900 (NSW).
[3] See T4/42
3. In evidence was documentation from the Australian Taxation Office relating to Self Managed Superannuation Funds (SMSFs). These set out details relating to the role and responsibilities of trustees, compliance obligations and penalties for non-compliance. These were provided by Mrs Stillhard and, in her evidence to the SSAT, she relied upon them and referred to the “serious penalties of fines and jail and the discontinuance of the Fund if [she and Mr Stillhard] don’t comply with superannuation law requirements”. She also said that she and Mr Stillhard would face eviction from the property if they failed to meet their rental obligations; that, as trustees of the Fund, she and Mr Stillhard have an obligation to pay rent, which they pay directly into the Fund’s bank account; and that they have an obligation to have the rent arrangements reviewed regularly which is done on their behalf by a local real state agent.
4. Mrs Stillhard provided a copy of an independent auditor’s report, dated 18 March 2010, from Stephenson Marks Chartered Accountants. This declares that the trustees of the Fund have complied, in all material respects, with their obligations under the relevant superannuation legislation[4]. This is not disputed by the respondent.
[4] The Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1993 (Cth).
5. A copy of the Trust Deed (the Deed) was in evidence. Under the Deed, assets of the Fund are held by the trustees on trust to be applied in accordance with the provisions of the Articles in the Deed[5]. It is open to the Trustees to purchase real property[6]. The Deed bestows full power on the Trustees to vary, replace and otherwise deal with such investments as fully and effectively and with the same unrestricted powers in all respects as a person absolutely and beneficially entitled dealing with his own property may do[7]. The primary purpose of the Fund is to make payment of old age pensions to its members[8].
[5] Article 7.2 of the Deed.
[6] Articles 7.10(a)(iii) and 9.20(a) of the Deed.
[7] Article 7.10(b) of the Deed.
[8] Article 6.1 of the Deed and see Article 5 which provides for the payment of retirement and death benefits.
6. Mrs Stillhard submitted that, because of her independence from the Fund, she is not an ineligible home owner and has no more right or interest or security of tenure in the property than does any other lease holder of a rental property. Mrs Stillhard noted the respondent’s reliance on decisions of the Federal Court, the Federal Magistrates Court and the Tribunal. She submitted that these cases were not relevant to her circumstances because they were not concerned with the operations of a superannuation fund.
7. For the respondent, Robert Hamilton submitted that the effect of the arrangements between Mr and Mrs Stillhard, on the one hand, and the Fund, on the other hand, is that, as trustees of the Fund which owns the property, Mr and Mrs Stillhard executed a lease of the property to themselves as tenants. Mr Hamilton submitted that, in accordance with the relevant provisions of the FA Act and the Social Security Act 1991 (Cth) (the SS Act), the Federal Court decision Secretary, Department of Employment and Workplace Relations and Vanderpluym[9] and the Tribunal and Federal Magistrates Court decisions in Dart and Secretary, Department of Family and Community Services[10], Mrs Stillhard was an ineligible homeowner because the property is her principal home and she a right or interest in the property which gives her reasonable security of tenure in it.
[9] [2007] FCA 876.
[10] [2002] AATA 1289 and MB 114 of 2003.
LEGISLATION and ISSUES
8. The FTB rate calculator is set out in Schedule 1 of the FA Act. Eligibility for rent assistance is provided for in Part 5 Division 2B thereof and s 38C precludes payment to a person who is an ineligible homeowner. That term is defined in s 3 of the FA Act to have the same meaning as it does in s 13(1) of the SS Act. There, an ineligible homeowner is, with some exceptions that do not apply to Mrs Stillhard, a homeowner. That term is variously defined in s 11 of the SS Act and, relevant to Mrs Stillhard who is a member of a couple with Mr Stillhard, this includes, in s 11(4)(b) of the SS Act, a person if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(A) ......
(B) .......
(C) the principal home of both of them; and
(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home.
9. The issue for determination is whether Mrs Stillhard’s circumstances fall within that provision.
CONSIDERATION
10. It is common ground that the property is the principal home of Mr and Mrs Stillhard and that the Fund is the legal owner of the property. The concept of homeowner in s 11(4)(b) of the SS Act is not limited to the person who has indefeasible title to the land on which the principal residence is built[11]. It includes the tenant of a principal home which, through the device of a discretionary trust of which the tenant is the principal beneficiary, is owned by a trustee company of which the tenant is also sole director and shareholder[12]. Also, absent a trust arrangement, it includes the tenant of a principal home that is owned by a company of which the tenant is sole director and shareholder as arose in Secretary, Department of Workplace Relations v Vanderpluym[13]. There, Greenwood J, noting that s 11(4)(b) of the SS Act did not provide a definition of right or interest, said:
49. ...........a right or interest in the principal home is synonymous with a right or interest in real property (Delos Reyes and Secretary, Department of Social Security (1993) 32 ALD 287 p 290; Re Schultz and Secretary, Department of Family and Community Services [2003] AATA 770; [2003] 76 ALD 247); an interest in property is a right of a proprietary nature not a mere personal right (Delos, p 291); a person occupying a property even under a tenancy at will with no written agreement is to be regarded as having an interest in real property and not simply as having rights under a contract and such an interest is a ‘right or interest in a residence’ for the purpose of the section (Re Johnston and Repatriation Commission (31 May 1994, AAT, Full Tribunal, unreported No. 9508); a tenancy at will is enforceable at equity and confers an interest in real property which represents a right or interest under the section (Koch and Secretary, Department of Family and Community Services [2002] AATA 407; (2002) 68 ALD 651 at p 655 [18]); lessees under a written lease for three years with two 5 year options from a company controlled by the lessees enjoyed a right of interest under the Act (Re Secretary of Social Security and Williams (1998) 52 ALD 418); established legal relationships put in place by an applicant should be given their real legal effect in determining whether an unpaid loan to a trustee of a discretionary trust should be brought to account as an asset of a claimant (Re Schultz).
......
[11] See Secretary, Department of Workplace Relations v Vanderpluym [2007] FCA 876 at para 51.
[12] See Re Johnston and Repatriation Commission (1994) AATA 9508; Dart and Secretary, Department of Family and Community Services [2002] AATA 1289 affirmed in the Federal Magistrates Court: see MB 114 of 2003; Re Schultz and Secretary, Department of Family and Community Services (2003) 76 ALD 247; and Schultz and Repatriation Commission [2004] FCA 718.
[13] [2007] FCA 876
11. His honour continued:
58. Section 11(4)(b) of the Social Security Act contemplates a point on a continuum of possible rights or interests. An applicant may be a registered proprietor; a beneficiary under a unit or discretionary trust; a party with the benefit of an agreement for lease for three years or more; a lessee under a registered lease pursuant to such an agreement; a lessee occupying premises pursuant to such arrangements where the lease has not been registered by the lessor; a lessee under an unregistered short term lease for a period of less than three years; a tenant under a written tenancy agreement for a fixed term; a weekly tenant under a written agreement or a weekly tenant under oral arrangements with no fixed term and no terms other than those implied by law. In the last case, the measure of the right or interest enjoyed by the applicant tenant might simply be a right to remedial relief in aid of occupation of the premises to restrain a breach of an obligation implied by law and in that sense the tenant might enjoy an equitable interest. Of course, vesting property (land and a residence) in a company or, for example, a corporate trustee of a discretionary trust coupled with a tenancy agreement conferring occupation in favour of a pension applicant related to the shareholders or directors of the entity has the apparent structural advantage of placing ownership of the home at arms-length yet retaining security of tenure in the home so as to enable a pension applicant to say that he or she is not, in orthodox terms, a homeowner and therefore entitled to a higher assets value limit for the calculation of the relevant pension entitlement. The social policy of the Social Security Act is to adopt a broad notion of ‘homeowner’ by s 11(4)(b) so as to ensure that those applicants (or their partners) who have a right or interest in a residence which gives reasonable security of tenure in the home are to be treated as homeowners for the purposes of calculating assets value limits and thus pension entitlements.
12. In that case, Mr Vanderpluym was sole director and shareholder of the company which owned the principal home in which he and his wife enjoyed exclusive occupancy on a weekly basis pursuant to oral agreement only. Greenwood J held that the weekly tenancy arrangement coupled with occupation and payment of rent gave rise to an equitable interest in the residence[14]. This was sufficient for Mr Vanderpluym to have a right or interest in the principal home for the purposes of s 11(4)(b) of the SS Act. Because of the control of the tenancy arrangement exercisable by Mr Vanderpluym as sole director and shareholder of the company which owned the principal home, Greenwood J also held that the interest they had in the home gave them reasonable security of tenure in the home, saying: .
61. ........in this case, Mr and Mrs Vanderpluym enjoyed an equitable interest in the residence in circumstances where they could hold no doubt as to the assured continuity of occupation of the home. The symmetrical relationship between the landlord and the tenant in the sense that either Mr Vanderpluym or Mrs and Mrs Vanderpluym by consensus controlled both the occupation of the premises and the conduct of the landlord makes it clear that Mrs Vanderpluym enjoyed a very high threshold of security of tenure in the residence as principal home.
[14] Vanderpluym [2007] FCA 876 at [59].
13. Mr Vanderpluym was held to be a homeowner for the purposes of s 11(4)(b) of the SS Act[15].
[15] See also Wheatley and Repatriation Commission (1996) 41 ALD 191 at [192] where the operative provision in the Veterans Entitlement Act 1975 (Cth) was equivalent to s 11(4) of the SS Act.
14. While Mr Hamilton sought to rely on the authorities referred to above, Mrs Stillhard sought to distinguish them because they were related to trust and company considerations rather than a superannuation fund. I do not accept her submission in that regard. While I accept that the entity of ownership is different, the principle inherent in those cases remains relevant to the arrangement that Mr and Mrs Stillhard have with the Fund and the property. The Deed makes it clear that they, as trustees, have discretion to deal with the investments of the Fund. It is not disputed that this includes the property. I have noted Mrs Stillhard’s concern about breaching any obligations under the relevant superannuation legislation[16]. However, there is no evidence before me which points to any such breach and this is confirmed by the auditor’s report[17]. Any change to the current exclusive occupancy arrangement that Mr and Mrs Stillhard enjoy will arise by their own actions either as tenants or as trustees of the Fund. This is the same “symmetrical relationship between the landlord and the tenant” described by Greenwood J above. I am satisfied that it leads to the same result that the interest Mr and Mrs Stillhard have in the property enables them to enjoy a reasonable, at the very least, threshold of security of tenure in the property.
[16] See note 4 (above).
[17] See para 4 (above).
15. Mrs Stillhard has a right or interest in the property which is her and Mr Stillhard’s principal home and, as that right or interest gives her reasonable security of tenure in the property, I am satisfied that Mrs Stillhard is a homeowner for the purposes of s 11(4)(b) of the SS Act and s 38C of Part 5 Division 2B of Schedule 1 of the FA Act. This means that she is an ineligible homeowner under s 13 of the SS Act and s 3 of the FA Act. Accordingly, Mrs Stillhard is ineligible to receive the rent allowance component of her FTB.
DECISION
16.The decision under review is affirmed.
I certify that the 16 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member
Signed: .......................[Sgd]....................................................
Kate Slack, Research AssociateHearing on the papers 6 April 2010
Date of Decision 12 April 2010
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