Tarzia and Secretary, Department of Social Services (Social services second review)
[2016] AATA 120
•2 March 2016
Tarzia and Secretary, Department of Social Services (Social services second review) [2016] AATA 120 (2 March 2016)
Division
GENERAL DIVISION
File Number(s)
2015/3025
Re
Antonio Tarzia
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member CR Walsh
Date 2 March 2016 Place Perth The Tribunal affirms the decision under review.
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Senior Member CR Walsh
CATCHWORDS
SOCIAL SECURITY – age pension – applicant and his two brothers have remainder or reversionary interest in property with as tenants in common in equal shares – property an assessable “asset” for the purposes of the “assets test” – applicant’s remainder or reversionary interest in property not an exempt asset – decision under review affirmed
LEGISLATION
Social Security Act 1991 – s 11 – s 11(1) – s 11(2) – s 1118 - s 1118(1)(h) – s 1064 – Part 3.2 – Chapter 3
REASONS FOR DECISION
Senior Member CR Walsh
2 March 2016
INTRODUCTION
The Applicant, Mr Antonio Tarzia (Applicant), seeks a review of a decision of the Social Security Appeals Tribunal (SSAT), dated 28 May 2015, to include the value of Mr Tarzia’s one-third interest, as a tenant in common in equal shares, in the property at 45A Gresham Street, Victoria Park (Gresham Street Property) as an assessable “asset” for the purpose of calculating the rate of his age pension under the Social Security Act 1991 (SSA).
BACKGROUND
The Applicant’s father, Mr Giuseppe Tarzia (Giuseppe Tarzia), died on 31 July 1986.
On 20 October 1986, Giuseppe Tarzia’s will, dated 26 June 1971 (Will), was proved and registered in the Supreme Court of Western Australia.
In summary, the Will:
· provided the Applicant’s mother, Mrs Maria Tarzia (Maria Tarzia), with a life interest in a property located at 61 Teague Street, Victoria Park (Teague Street Property) and in the “furniture and furnishings and articles of domestic use in the house” at the Teague Street Property;
· provided Maria Tarzia with the sum of $1,000;
· provided the “rest and residue of his real and personal estate” to the Applicant and his two brothers, Mr Luigi Tarzia (Luigi Tarzia) and Mr Michele Tarzia (Michele Tarzia), as tenants in common in equal shares; and
· appointed Luigi Tarzia (who then resided and continues to reside in Italy) as the executor and trustee of the Will.
Luigi Tarzia attempted to sell the Teague Street Property and a dispute ensued between the Applicant and his two brothers.
The dispute was subsequently settled by Maria Tarzia, the Applicant, Michele Tarzia and Luigi Tarzia entering into a “Deed of Family Arrangement” on 1 October 1994 (First Deed). The First Deed provided for a variation of the trusts set out in the Will.
The Teague Street Property was subsequently sold.
On 19 October 1995, the Gresham Street Property was purchased from the proceeds of sale of the Teague Street Property. The Record of Certificate of Title for the Gresham Street Property records the following information:
Registered Proprietor:
(First Schedule)
Maria Tarzia of [address omitted]
An Estate for Life
Michele Tarzia of [address omitted]
Antonio Tarzia of [address omitted]
Luigi Tarzia of [address omitted]
As Tenants in Common in Equal Shares
An Estate in Fee Simple in Remainder Expectant Upon the Death of Maria Tarzia
In 1995, a “Deed of Variation of Family Arrangement” was entered into between Maria Tarzia, the Applicant, Michele Tarzia and Luigi Tarzia to vary the “varied trusts as set out in the First Deed” (Second Deed). Clause 1 of the Second Deed states:
1. Clause 1(c) of the First Deed shall be deleted and replaced with the following:-
“The remainder (after deduction of the costs of an (sic.) incidental to this Deed as set out in Clause 6 hereof) be paid to the Residuary Beneficiaries [being Antonio Tarzia, Michele Tarzia and Luigi Tarzia] as tenants and common in equal shares.”
In 2005, Maria Tarzia returned to Italy and has not lived at the Gresham Street Property since, albeit briefly. After Maria Tarzia’s return to Italy, the Gresham Street Property was rented out. Maria Tarzia, the Applicant, Michele Tarzia and Luigi Tarzia each received and continue to receive 25% of the rental proceeds.[1]
[1] In evidence, the Applicant said that the Gresham Street Property is not currently rented. However, this fact does not impact upon the decision in this case.
On 5 February 2013, the Applicant lodged a claim with Centrelink for age pension. The Applicant’s claim form recorded that he held an interest in the Gresham Street Property and that he owned a 25% interest in the Gresham Street Property “when [his] mother passe[d] away”.
On 15 February 2013, the Applicant was granted the age pension.
On 2 April 2014, Centrelink wrote to the Applicant requesting details of his interest in the Gresham Street Property and requesting copies of his 2012 and 2013 income tax returns and a copy of the Will.
On 30 June 2014, Centrelink wrote to the Applicant informing him that his age pension had been reduced because the value of his assets had increased (Original Decision).
On 20 August 2014, the Applicant requested a review of the Original Decision by a Centrelink Authorised Review Officer (ARO).
On 7 October 2014, an ARO affirmed the Original Decision (ARO Decision). The ARO Decision states:
Any real estate apart from a person’s principal home or house and curtilage, is an assessable asset under the Assets Test.
Any person who owns real estate as ‘tenants in common’ will have their share assessed based on the agreed ownership percentage.
Records indicate that you own a 25% share of the property at 45A Gresham Street, Victoria Park as tenants and common with your mother and two other parties.
……….
Based on the available information the decision to attribute you with a 25% ownership of the property at 45A Gresham Street, Victoria Park was correct.
On 3 December 2014, Centrelink decided that the Applicant has been overpaid age pension in the amount of $6,032.18, for the period 23 January 2013 to 18 June 2014, as a result of the ARO Decision.
On 15 December 2014, the Applicant applied to the SSAT for a review of the ARO Decision. The Applicant did not seek review of the Centrelink’s debt decision.
On 28 May 2015, the SSAT varied the ARO Decision by finding that the Applicant should be attributed with a one-third share (i.e. a 33% remainder interest) in the Gresham Street Property for the purpose of calculating the rate of his age pension (i.e. rather than a 25% interest, as found by the ARO in the ARO Decision) (SSAT Decision). The SSAT Decision states:
12.It is clear from the evidence that Centrelink have determined that Mr Tarzia, his brothers and their mother are tenants in common each holding a 25% share of the property. It is also apparent from the evidence that the conduct of the parties appears to reflect this conclusion in that the property appears to be dealt with [as] an investment property with any income being divided four ways.
13.A reading of the first schedule to the certificate of title however, suggests that the family have provided Maria Tarzia with an estate for life in the property and that the three brothers hold as tenants in common the estate in fee simple in the remainder, which will vest upon their mother’s death. This would provide the brothers each a third share of the property upon their mother’s death.
…………
19.……Mr Tarzia holds a one third remainder interest in the property however because this interest was created by him and his brothers [i.e. through the settlement reached as a result of the dispute] the value of that interest is not exempt pursuant to section 1118(1)(h) of the [SSA].
20.…….the tribunal has determined that Mr Tarzia has a non-exempt one third remainder interest in the property which must be taken into account in applying the assets test.
On 30 March 2015, an ARO reduced the amount of debt payable by the Applicant from $6,032.18 to $2,563.82.
On 22 June 2015, the Applicant applied to the Tribunal for a review of the SSAT Decision. The Applicant’s stated “Reasons for Application” are as follows:
I now have proof from Landgate that I do not have a 1/3 share in the property 45 Gresham St Vic Pk. My mother is the sole owner until she passes away. Since the decision Centrelink is asking to pay $3,400.63, when the debt has already been finalized. On the 3rd March 2015 an Authorised Review Officer deemed that the money for the payment has been waivered. Because of an error by Centrelink. I have this confirmation letter from review officer.
ISSUES
Since the Applicant did not seek a review of Centrelink’s debt decision the Tribunal has no jurisdiction to review the debt decision as part of this review application.
The Tribunal is limited to a consideration of whether the Applicant has an interest in the Gresham Street Property and whether that interest is an assessable “asset” for the purpose of calculating the rate of his age pension under the SSA.
ANALYSIS
The regime for calculation of the age pension is contained in Part 3.2 of Chapter 3 of the SSA. Section 1064 of Part 3.2 of Chapter 3 of the SSA provides that the rate of age pension is to be calculated in accordance with the Pension Rate Calculator A at the end of that section.
Module G of Pension Rate Calculator A contains an “assets test” which requires a person’s rate of age pension to be calculated based on the person’s “assets”.
Section 11 of the SSA contains definitions relevant to the “assets test”.
The term “asset” is defined in s 11(1) of the SSA as follows:
asset means property or money (including property or money outside Australia).
Section 11(2) of the SSA provides:
(2) A reference in this Act to the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset.
Broadly, an “estate for life” (or life estate) is the ownership of land for the duration of the life tenant’s life. Upon the death of the life tenant, ownership of the property reverts to the original owner (or “grantor”) or it passes to another person or persons (called the “remainderman” or “remaindermen”). The life tenant has the right to enjoy certain benefits of the property during his or her lifetime (or “possession”), such as the right of occupation or the income or other uses made of the property. However, because a life estate ceases to exist upon the death of the life tenant, the life tenant cannot transfer the underlying reversionary interest (i.e. as the life tenant never has this). The life tenant’s interest in the property is unalienable.
As stated above (in paragraph 8), the Certificate of Title for the Gresham Street Property shows that Maria Tarzia has a “estate for life” (or life estate) in the Gresham Street Property. This life estate provides Maria Tarzia the right to enjoy certain benefits of the Gresham Street Property during her lifetime such as the right of occupy the Gresham Street Property and to derive rental income from the Gresham Street Property. Maria Tarzia’s right to live at the Gresham Street Property exists for the duration of her life. The fact that she has not in fact resided at the Gresham Street Property, albeit it briefly, since her departure to Italy in 2005 is irrelevant. However, as a life tenant, Maria Tarzia has no right to sell the Gresham Street Property.
The Certificate of Title for the Gresham Street Property also shows that the Applicant, Michele Tarzia and Luigi Tarzia have an “Estate in fee simple in remainder expectant upon the death of Maria Tarzia” as tenants in common in equal shares: refer to paragraph 8 above. Broadly, what this means as a matter of property law is that the Applicant and his two brothers each have a present right to future enjoyment of the Gresham Street Property. Their interests are future ones only in the sense that the right to possession of the Gresham Street Property will arise in the future when Maria Tarzia dies. However, their right is vested in interest immediately and exists as an estate during Maria Tarzia’s life. In other words, the Applicant and his two brothers each have a currently existing interest in the Gresham Street Property, as tenants in common in equal shares (33% each) that they can alienate inter vivos (during their lives) or dispose of by will. This is the case even though their right to possession of the property is postponed until the death of Maria Tarzia, the life tenant. Consequently, the Applicant has an interest in a 33% in an “asset” (being the Gresham Street Property) within the meaning of s 11(1) of the SSA and for the purposes of the “assets test”. It follows that the value of the Applicant’s interest in the Gresham Street Property is prima facie to be taken into account in calculating his rate of age pension.
The value of all “assets” of a person must be taken into account for the purposes of the “assets test” and calculating a person’s rate of age pension, unless the particular “asset” is exempted under the SSA.
Section 1118 of the SSA provides that certain “assets” are to be disregarded in calculating the value of a person’s assets for the purposes of the SSA and the “assets test”. Of particular relevance to this application, is s 1118(1)(h) of the SSA which exempts:
(h)the value of any contingent, remainder or reversionary interest of the person (other than an interest created by the person, by the person’s partner or by both of them);
The Applicant’s interest in the Teague Street Property was created by the Will. However, the Teague Street Property was subsequently sold and the proceeds of sale used to purchase the Gresham Street Property. Maria Tarzia, the Applicant and his two brothers subsequently entered the First Deed and then the Second Deed. As set out above, the Second Deed provided that the Applicant and his two brothers, Michele Tarzia and Luigi Tarzia, would be “Residuary Beneficiaries as tenants and common in equal shares”. By entering into the Second Deed the Applicant and his two brothers created their respective 33% remainder interests in the Gresham Street Property. The result of this is that the Applicant’s interest in the Gresham Street Property is not an exempt “asset” under s 1118(1)(h) of the SSA.
Consequently, the Applicant’s interest in the Gresham Street Property cannot be disregarded and must be included in the value of his “assets” for the purpose of calculating his rate of age pension under the SSA.
DECISION
For the above reasons, the Tribunal affirms the SSAT Decision.
I certify that the preceding 36 (thirty -six) paragraphs are a true copy of the reasons for the decision herein of Senior Member CR Walsh .............[Sgd]...........................................................
Administrative Assistant
Dated 2 March 2016
Date of hearing 24 February 2016 Applicant In person Representative for the
RespondentMs S Sangha Solicitor for the Respondent
Mills Oakley Lawyers
Key Legal Topics
Areas of Law
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Social Security Law
Legal Concepts
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Assessable Assets
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Remainder Interest
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Tenants in Common
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