Terral and Secretary, Department of Social Services Chief Executive Centrelink (Social security)
[2025] ARTA 315
•17 February 2025
Terral and Secretary, Department of Social Services Chief Executive Centrelink (Social security) [2025] ARTA 315 (17 February 2025)
Applicant/s: Mrs Terral
Mr Terral
Respondent: Secretary, Department of Social Services
Chief Executive Centrelink
Tribunal Number: 2024/S191123 and 2024/S191128
Tribunal: General Member A Ryding
Place:Sydney
Date:17 February 2025
Decision:The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
· Mrs and Mr Terral’s application for access to the home equity access scheme be considered on the basis that the company has given the Commonwealth a guarantee that it will pay any debt that may become payable to the Commonwealth by Mrs and Mr Terral under Part 3.12, Division 4 of the Social Security Act 1991.
CATCHWORDS
SOCIAL SECURITY – home equity access scheme – company title apartment – any debt reasonably recoverable – company’s enforceable guarantee to be secured by caveat on title deed – other issues for consideration – decision under review set aside and sent back with directions
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.
Statement of Reasons
BACKGROUND
On 14 October 2024, the Administrative Appeals Tribunal (the AAT) became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), proceedings in the AAT that were not finalised before 14 October 2024 are to be continued and finalised by the Tribunal. Anything done in relation to the proceeding before 14 October 2024 is taken to have been done by the Tribunal.
This is an application for review of two linked decisions by Services Australia – Centrelink (Centrelink) to reject applications made by Mrs Terral and her husband, Mr Terral, to access the home equity access scheme.
Mr and Mrs Terral made a joint application for access to the home equity access scheme on 7 February 2023. The residential property owned by Mrs and Mr Terral that is the subject of the application is a company title apartment.
The application was initially rejected, and then accepted by an authorised review officer on formal review on 3 June 2024 (folio 81).[1] However, on 27 June 2024, a Centrelink complex assessment officer determined to reject their application because Centrelink was not satisfied that the amount of any debt that may become payable to the Commonwealth by Mrs and Mr Terral in respect of the home equity access scheme is readily recoverable. Mrs and Mr Terral were informed of this decision by letter dated 27 June 2024 (folio 78).
[1] Given the significant overlap in hearing papers, the Tribunal refers primarily to the hearing papers in Mrs Terral’s application.
Mrs Terral applied to the Tribunal for a review of Centrelink’s decision on 22 September 2024 and Mr Terral applied on 23 September 2024. Their applications for review stated:
[The company], which owns our apartment block, has provided an enforceable guarantee to the Commonwealth to be secured by a caveat on its Title Deed, duly executed with the Company Seal affixed and countersigned by two directors as required by its Articles of Association. The resolution by the company has been duly approved and signed by 5 (out of 6) company directors.
This should have met all Centrelink's requirements for our participation in the HEAS.
There have been conflicting decisions by Centrelink officers on this matter. Our original application was submitted on 7 February 2023. After an initial rejection a formal review by an Authorised Review Officer approved our application on 3 June 2024. A Complex Assessment Officer then rejected this decision on 27 June 2024. We have subsequently addressed any possible risks to which the Commonwealth may be exposed by providing a legally enforceable guarantee from the company, including formal agreement for a caveat or charge to be placed on the Title Deed.
On 29 January 2025, the Tribunal conducted a hearing in this matter in person in the Sydney Registry. Before the Tribunal were hearing papers supplied by Centrelink in Mrs Terral’s application numbered 1 to 304 and in Mr Terral’s application which the Tribunal will refer to as T1 to T186, further documents provided by Centrelink in both applications, marked C1 to C60, and documents provided by Mrs and Mr Terral marked A1 to A9 (together, the hearing papers). Mrs and Mr Terral each gave evidence on oath at the hearing.
After the hearing, the Tribunal deferred its decision for a week (from the required 14‑day period in which to deliver the Tribunal’s decision) to enable consideration of the complex and unusual issues raised by the matter. The Tribunal has had careful regard to all of the documents provided to it and the evidence provided by Mrs and Mr Terral. Reference below is made only to the documents and evidence relevant to this decision.
ISSUES
The home equity access scheme (formerly known as the pension loans scheme, and still referred to as such in the legislation) gives older Australians the ability to draw down on their real estate assets to support a higher standard of living in retirement. It comprises a voluntary reverse mortgage-type loan, and both pensioners and non‑pensioners may be eligible.
The legislation relevant to the home equity access scheme, and therefore this application, is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).
The issue for consideration in this application is whether Mrs and Mr Terral’s application should have been rejected, which in turn requires consideration of the adequacy of the security provided.
CONSIDERATION
The legal framework
The requirements to qualify for the home equity access scheme are set out in section 1133 of the Act. Subsection 1133(2) provides that a person who is (as here) a member of a couple is qualified to participate in the home equity access scheme if:
·They are receiving or are qualified for age pension, disability support payment or a carer payment, and they or their partner have reached pension age.
·They are neither bankrupt nor subject to a personal insolvency agreement.
·The Secretary is satisfied that there is adequate and appropriate insurance in relation to the couple's real assets; and
·Either the Secretary is satisfied that the value of the couple's real assets (after deduction of any nominated amount) is sufficient to secure the payment of any debt that may become payable to the Commonwealth under this Division or, if the person is an “attributable stakeholder” of a company or trust, certain requirements apply as set out in subsection 1133(3) of the Act (and apply in respect of both members of the couple).
Whether a person is an attributable stakeholder of a company within the meaning of Part 3.18 of the Act is determined by reference to section 1207X of the Act and the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (the Principles).
The additional requirements in subsection 1133(3) of the Act that must all be satisfied where either a person or the other member of a couple are an attributable stakeholder of a company are:
·The company has given the Commonwealth a guarantee that the company or trustee will pay any debt that may become payable to the Commonwealth by the person under this Division.
·The company's liability under the guarantee is secured by a charge against specified real property of the company in Australia.
·The Secretary is satisfied that the value of the specified real property is sufficient to secure the payment of any amount that may become payable by the company under the guarantee.
·The Secretary has, by writing, approved the guarantee and the charge.
Section 1134 of the Act deals with the rate of payment payable to a person who qualifies for access to the home equity access scheme. It is a requirement under subsection 1134(1A) for Centrelink to proceed to determine the rate payable under the home equity access scheme. Section 1134 also contains a qualifying requirement, in paragraph 1134(1)(c),that the Secretary must be “satisfied that the amount of any debt that becomes payable by the person to the Commonwealth under this Division is readily recoverable.” It is this section that Centrelink relies upon in the complex assessment officer’s decision.
The present matter
Mrs and Mr Terral sought access to the home equity access scheme in relation to their apartment at [Address] in New South Wales (the Apartment). The Apartment is owned by Mrs Terral through the New South Wales company title system by a private [company].
Company title is a scheme of land ownership in existence before strata title was established and still used in older apartment buildings in certain states, including New South Wales. The company owns the title to the land and purchasers of apartments are shareholders in the company who purchase shares in the company that give them the entitlement to exclusive occupation of a flat in a building on the land. They do not own the land or any part of it.
A company search dated 14 March 2023 shows that shares in the Company are owned by eight individuals, one of whom is Mrs Terral, and that Mrs Terral owns 5,250 of the 31,000 issued shares (folio 118). That means that Mrs Terral owns around 16.9% of the shares. There are six directors, including Mrs Terral. Mrs and Mr Terral told the Tribunal that neither the shareholders nor the directors had changed since the date of the company search.
Attributable stakeholder
As a threshold issue, the Tribunal needs to determine whether Mrs Terral is an attributable stakeholder in the Company having regard to the level of her shareholding, section 1207X of the Act and the Principles. Section 1207X states that a shareholder in a controlled private company is an attributable shareholder unless the Secretary determines otherwise. .A company is a controlled private company in relation to an individual if (relevantly for this matter) the individual passes the “control test”, meaning that they satisfy criteria, including if they have 15% or more direct control interests in the company.[2]
[2] Section 1207Q of the Act.
In circumstances where Mrs Terral owns 15.9% of the shares in the Company, the Tribunal finds that she owns more than 15% of the direct control interests in the Company, and it is therefore a controlled private company. Pursuant to section 1207X, Mrs Terral is an attributable shareholder of the Company unless the Secretary determines otherwise.
After careful review of the Principles (and in particular, Part 2 which sets out the decision-making principles with which the Secretary must comply in determining that a person is not an attributable stakeholder of a company), the Tribunal can see no grounds for departing from the position that Mrs Terral is an attributable stakeholder of the Company. The Tribunal therefore finds that Mrs Terral is an attributable stakeholder of the Company.
The guarantee
The Tribunal must next consider the requirements in section 1133 of the Act. The first requirement is that the Company must provide a guarantee.
Company title companies are regulated by the Corporations Act 2001 (the Corps Act).
As regards execution of documents, section 127 of the Corps Act relevantly states:
Execution of documents (including deeds) by the company itself
Executing a document without a common seal
(1) A company may execute a document without using a common seal if the document is signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director--that director, if:
(i) the director is also the sole company secretary; or
(ii) the company does not have a company secretary.
Note 1: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.
....
Executing a document with a common seal
(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director--that director, if:
(i) the director is also the sole company secretary; or
(ii) the company does not have a company secretary.
Note 1: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.
The assumptions in subsection 129(6) of the Corps Act, if a document has been executed in accordance with section 127, are relevantly that the company’s constitution and replaceable rules have been complied with, that the people who have signed as directors are directors and, in the case of an agreement with the common seal affixed, the fixing of the seal has been witnessed by directors of the company.
The Tribunal has carefully considered the guarantee provided by the Company dated 23 July 2024 (date taken from the date the company seal was affixed) (folio 239) (the Guarantee). The Guarantee contains a standard Centrelink form declaration, that the company guarantees to pay debt(s) that may become payable to the Commonwealth under the home equity access scheme and agreement for the placement of a charge over real property of the company with ensuring debts payable to the Commonwealth.
The Guarantee has been executed by the following directors: Mrs Terral, [Ms A], [Ms B], [Mr C], and [Mr D]. The only director who has not signed is [Ms E]. In respect of each director’s signature, the Company’s seal has been affixed, witnessed by Mrs Terral and [Mr C].
Each of the directors are also shareholders in the Company (refer the company search, folio 118). [Mr C] owns his shares jointly with [Ms F], and [Mr D] owns his shares jointly with [Ms G].
In all the circumstances, the Tribunal finds that the Guarantee has been properly executed in accordance with section 127 of the Corps Act.
Centrelink raised concerns about the directors’ understanding of the guarantee in circumstances where it may be adverse to their interests (as shareholders) to provide the guarantee. That is not relevant to consideration required under subsection 1133(3) of the Act. That requires consideration of whether the company has given the Commonwealth a guarantee that the company will pay any debt that may become payable to the Commonwealth by the person under this Division. The Tribunal finds that such a guarantee has been given.
Subsection 1133(3) requires the Secretary to approve the guarantee in writing. On the material before the Tribunal there is nothing to suggest that the guarantee is not valid or enforceable. However, the Tribunal considers that the decision whether to approve the guarantee is a matter that should be referred back to the Secretary for consideration, as it may require consideration of factors other than the validity and enforceability of the guarantee.
The other issues for consideration are whether
The Company's liability under the guarantee is secured by a charge against specified real property of the Company in Australia.
The Secretary is satisfied that the value of the specified real property is sufficient to secure the payment of any amount that may become payable by the company under the guarantee.
The Secretary has, by writing, approved the guarantee (addressed above) and the charge.
The Secretary is satisfied that the amount of any debt that becomes payable by the person to the Commonwealth is readily recoverable.
These are not matters that the Tribunal is able to consider in this application. Central to the consideration of these issues is the charge to be offered by the Company securing the Company’s liability. In circumstances where Centrelink’s consideration of Mrs and Mr Terral’s application halted at the point of considering the validity or otherwise of the guarantee, no charge has been prepared for consideration by Centrelink.
In the circumstances, the appropriate course is for the Tribunal to refer the matter back to Centrelink with the order that Mrs and Mr Terral’s application for access to the home equity access scheme be considered on the basis that the Company has given the Commonwealth a guarantee that it will pay any debt that may become payable to the Commonwealth by Mrs and Mr Terral under Part 3.12, Division 4 of the Act (the part of the Act that deals with the home equity access scheme).
If Centrelink makes an adverse decision on their application, Mrs and Mr Terral are able to seek a review by an authorised review officer and, if unhappy with that decision, to make a further application to the Tribunal.
DECISION
The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
· Mrs and Mr Terral’s application for access to the home equity access scheme be considered on the basis that the company has given the Commonwealth a guarantee that it will pay any debt that may become payable to the Commonwealth by Mrs and Mr Terral under Part 3.12, Division 4 of the Social Security Act 1991.
| Date of hearing: | Wednesday, 29 January 2025 |
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