Thomas Fischer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2012] AATA 633
•21 September 2012
[2012] AATA 633
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2012/1939
Re
Thomas Fischer
APPLICANT
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Senior Member J F Toohey
Date 21 September 2012 Place Sydney The Tribunal affirms the decision under review.
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Senior Member J F Toohey
CATCHWORDS
SOCIAL SECURITY – age pension – income test – deemed income – calculation of value of applicant’s assets – whether gift to daughter a deprived asset – whether applicant disposed of asset – whether disposition can be disregarded – whether applicant could reasonably have been expected to qualify for age pension within five years of disposition – whether value of disposal correctly calculated – decision under review affirmed
LEGISLATION
Social Security Act 1991 ss 1123, 1126AA, 1126AB and 1127
CASES
Re Copley and Secretary, Department of Social Security (1992) 25 ALD 351
Re D’Souza and Secretary, Department of Social Security [1998] AATA 224
Re Secretary, Department of Social Security and Tripolino (1998) 51 ALD 748
REASONS FOR DECISION
Senior Member J F Toohey
21 September 2012
BACKGROUND
In April 2007, Mr Thomas Fischer gave his daughter a gift of $100,000. In September 2011, he applied for an age pension. In November 2011, he was granted a pension. Centrelink took the gift into account when calculating the value of his assets and decided he should be paid a reduced rate of pension. In April 2012, the Social Security Appeals Tribunal affirmed that decision.
Mr Fischer turned 65 on 21 November 2011 and qualified for an age pension from that date. The question is what rate of pension he is entitled to be paid.
RELEVANT LEGISLATION
The age pension is payable at rates determined by applying the calculator in s 1064 of the Social Security Act1991 (the Act). Calculations are made of a person’s income and assets, and whichever results in the lower rate of reduced pension is applied: s 1064-A1. In Mr Fischer’s case, the income test was applied.
The income test involves working out a person’s ordinary income on a yearly basis: s 1064-E1. Ordinary income is defined in s 8. It includes deemed income from financial assets. A person who has financial assets is deemed to receive ordinary income from them: s 1076. Deemed income is calculated as set out in ss 1076 to 1084A.
The Act contains provisions the effect of which is to prevent a person from diminishing the value of, or disposing of, assets so as to come within the relevant assets or income test for a social security payment.
A person’s financial assets include deprived assets: s 9(1). An asset is a deprived asset if a person has disposed of it, and its value is included in the value of the person’s assets by reason of specified provisions: s 9(4).
Section 1123 sets out the circumstances in which a person is taken to have disposed of an asset. Depending on when they were made, certain dispositions are disregarded: s 1127. As well, the Act allows for dispositions up to $10,000 in a single year, and $30,000 over five years, to be made without a person’s rate of pension being affected: see ss 1126AA, AB, AC and AD.
These provisions are considered in more detail below.
THE ISSUES
I have to determine:
(i)whether, in making the gift to his daughter, Mr Fischer disposed of an asset within the meaning of s 1123;
(ii)if so, whether s 1127 allows the disposition to be disregarded;
(iii)if it was a disposition, and it cannot be disregarded, whether the amount of the deprived asset has been correctly calculated.
Did Mr Fischer dispose of an asset: s 1123?
Section 1123 provides:
1For the purposes of this Act, a person disposes of assets of the person if:
(a)the person engages in a course of conduct that directly or indirectly:
(i) destroys all or some of the person's assets; or
(ii) disposes of all or some of the person's assets; or
(iii) diminishes the value of all or some of the person's assets; and
(b)one of the following subparagraphs is satisfied:
(i) the person receives no consideration in money or money's worth for the destruction, disposal or diminution;
(ii) the person receives inadequate consideration in money or money's worth for the destruction, disposal or diminution;
(iii) the Secretary is satisfied that the person's purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage.
Mr Fischer does not dispute that he gave his daughter $100,000 in April 2007, although he cannot recall the precise date. Both parties have settled on 28 April 2007 as the closest probable date. As he engaged in a course of conduct that disposed of some of his assets, s 1123(1)(a)(ii) is satisfied. (It may be that he also diminished the value of some or all of his assets but it is not necessary to decide whether this is so.)
The Secretary says Mr Fischer received no consideration in money or money's worth for the disposal (or diminution) of his assets, and that s 1123(1)(b)(i) is satisfied. Mr Fischer does not claim to have received money from his daughter in return for the gift. However, he says, she have him something “priceless” in return, being her love, and he questions the meaning of “money’s worth” in s 1123(1)(b)(i).
“Money’s worth” is an ordinary expression which should be given its plain and ordinary meaning. The Australian Oxford Dictionary defines it as “good value for one’s money”, and the Macquarie Dictionary as “full value”. It is plain, from the context in which it appears in s 1123, that “money’s worth” means something to which a monetary value can be attached. The very fact that Mr Fischer regards his daughter’s love as “priceless” is why it is not “consideration in money’s worth”. That is not to say it is without value; clearly it is.
I am satisfied that, in giving his daughter the gift of $100,000 in 2007, Mr Fischer disposed of an asset within the meaning of s 1123.
Can the disposition be disregarded?
Section 1127 provides:
This Division [concerning disposal of assets] does not apply to a disposition of an asset that took place:
(a)more than 5 years before the time when:
(i) the person who disposed of the asset; or
(ii) if that person was, at the time when the disposition took place, a member of a couple--the person's partner; or
(iii) if that person was, at that time, a family member of another person who is receiving or claiming youth allowance and is not independent--the other person;
became qualified for a social security pension or a social security benefit; or
(b)less than 5 years before the time referred to in paragraph (a) and before the time when the Secretary is satisfied that the person who disposed of the asset could reasonably have expected that the person, the person's partner or the other person, as the case may be, would become qualified for such a pension or benefit.
Mr Fischer relies on s 1127(b). He maintains that, at the time he made the gift to his daughter, his financial position was such that he knew he would not qualify for the age pension when he turned 65. I accept what he says but that is not the test.
A person is qualified for age pension if they reach pension age and he or she has 10 years qualifying Australian residence: s 43. There is no dispute that he qualified for the age pension on turning 65. The question is whether, at the time he made the gift to his daughter, he “could have reasonably expected [that he] would become qualified” for the age pension.
It is clear from s 43 that “qualification” for a pension is different from the rate at which a pension is paid or whether it is payable at all. The fact that, at the time, Mr Fischer had no intention or expectation of applying for the age pension is not to the point. The question is not whether he could have reasonably expected he would be granted the pension. It is whether he could “reasonably have expected” to “become qualified” for the age pension.
Mr Fischer refers to decisions of the Tribunal in Re Copley and Secretary, Department of Social Security (1992) 25 ALD 351, Re Secretary, Department of Social Security and Tripolino (1998) 51 ALD 748 and Re D’Souza and Secretary, Department of Social Security [1998] AATA 224. However, none of those decisions supports his case.
In Re Copley, the Tribunal rejected the applicant’s contention that his subjective belief that he would die soon after disposing of an asset and so had no reasonable expectation of ever claiming a pension, meant the disposition of his assets should be disregarded. The Tribunal pointed out (at 25) that, whatever Mr Copley’s subjective belief about his impending death, the judgment about his expectations was an objective one and convincing evidence was needed of objective grounds for finding a person in his position had a “reasonable expectation that he would never qualify for the pension”.
In Tripolino, the Tribunal found the applicant had reasonable grounds for believing his employment would continue when he transferred assets to a family trust. He was subsequently made redundant and applied for newstart allowance. Dispositions before he learned of his pending redundancy were found not to affect his pension.
In D’Souza, the applicant had various medical conditions, none of which affected his ability to work. The Tribunal found that he could not have reasonably expected to qualify for a disability support pension within five years when he disposed of a property.
Tripolino and D’Souza involved circumstances that neither applicant could have reasonably foreseen. In contrast, becoming qualified for an age pension is entirely predictable, regardless of whether a person actually applies for the pension, or applies and is granted a reduced, or no, pension.
I am satisfied that, at the time he made the gift to his daughter, Mr Fischer could reasonably have expected to become qualified for the age pension within five years. It follows that he cannot rely on s 1127(b)
Has the value of the gift been correctly calculated?
Section 1126AA provides, in effect, that if person who is not a member of a couple makes a disposition, or dispositions, of less than $10,000 in a single year, then the provisions concerning disposal of assets do not apply.
Section 1126AB operates to qualify this concession by providing, in effect, that the total amount disposed of cannot be more than $30,000 over a five year period.
When Centrelink calculated the value of Mr Fischer’s assets for the purposes of the income test, it took into account s 1126AA and discounted the value of the gift by $10,000, giving a final value of $90,000.
Mr Fischer contends that Centrelink should have applied s 1126AB and discounted the gift by $30,000. I do not agree. Section 1126AB is concerned with multiple disposals. It limits the total that can be disposed of over five years to $30,000. It does not enable a disposal made in a single year to be amortised over several years. Not only is that interpretation contrary to the plain language of s 1126AB, it is directly contrary to s 1126AA.
There is one matter which should be noted but which makes no difference to the outcome of Mr Fischer’s application. In his application for the age pension, Mr Fischer declared his relationship to the woman he has lived with for many years. He has apparently always been paid the pension as a member of a couple. For reasons which are not clear, Centrelink (and the SSAT) applied ss 1126AA and AB, which concern dispositions by a person who is not a member of a couple, rather than ss 1126AC and AD which concern dispositions by a person who is a member of a couple.
It makes no difference to the rate of Mr Fischer’s pension, or the outcome of this application because, while ss 1126AC and AD in effect halve the value of a disposition, a couple’s ordinary income is pooled for the purposes of the pension (s 1064-E2). As a result, Mr Fischer’s assets and income, and the effect on his pension, are the same position.
CONCLUSION
In summary, for the reasons set out above, I am satisfied that Mr Fischer disposed of an asset when he gave his daughter $100,000 in 2007. The disposition cannot be disregarded for the purposes of assessing the rate of his age pension because, at the time, he could reasonably have expected to qualify for the pension within five years – as opposed to whether he could reasonably have expected to apply for, or been paid, the pension. I am satisfied that it was correct to discount the amount of the disposition by $10,000 and not by $30,000 as Mr Fischer claims.
I affirm the decision under review.
I certify that the preceding 32 (thirty -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey. ...........[sgd].............................................................
Associate
Dated 21 September 2012
Date(s) of hearing 19 September 2012 Applicant In person Solicitors for the Respondent Ms A Bain, Sparke Helmore
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