Trewin and Secretary, Department of Family and Community Services
[2002] AATA 437
•7 June 2002
DECISION AND REASONS FOR DECISION [2002] AATA 437
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2001/933
GENERAL ADMINISTRATIVE DIVISION )
Re MARGARET TREWIN
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES COMCARE
Respondent
DECISION
Tribunal Mr R G Kenny, Member
Date7 June 2002
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
..................(Sgnd).................
R G Kenny
Member
CATCHWORDS
SOCIAL SECURITY – age pension - assets test – whether loans to family trust should be treated as assets – valuation of loans - relevance of hardship provisions
Social Security Act 1991, ss 11, 55, 1064, 1064G, 1122, 1129
Social Security (Administration) Act 1999
Re Ling and Secretary, Department of Family and Community Services [1999] AATA 797
Re Mendes and Secretary, Department of Family and Community Services [2000] AATA 22
Re Hughes and Secretary, Department of Social Security (1992) 25 ALD 754
REASONS FOR DECISION
7 June 2002 Mr R G Kenny, Member
The Application
On 9 August 2000, Margaret Trewin (the applicant) lodged a claim for age pension which is payable in accordance with the terms of the Social Security Act 1991 (the Act) and the Social Security (Administration) Act1999 (the Administration Act). On 10 April 2001, her claim was rejected on the basis that her and her partner's assets were greater in value than the allowable limit. That decision was affirmed by an authorised review officer on 22 May 2001 and, in turn, by the Social Security Appeals Tribunal on 17 September 2001. On 15 October 2001, the applicant sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).
Appearances
The applicant attended the hearing but was not represented. Mr Z McEwan appeared on behalf of the Secretary, Department of Family and Community Services (the respondent).
At the hearing, the following material was taken into evidence from:
the respondent:
exhibit T1 – documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act1975 (the T documents: T1-T32);
exhibit R1 – a statement of facts and contentions from the respondent; and
exhibit R2 – an extract from the Guide to Social Security Law with attached authorities.
the applicant:
exhibit A1 – a letter, dated 9 January 2002, from the applicant and her husband, Mr G Trewin.
Background
The undisputed facts in this case are as follows.
The applicant was born on 23 November 1935, is married and lives with her husband in their own home. They are directors of Triumph Management Pty Ltd which is the trustee of the Trewin Family Trust (the Trust). Over the years, they have engaged in a range of business enterprises on the Gold Coast including the operation of several motor vehicle franchises with some success until 1999 when the business they conducted at that time was placed into receivership. Since then, their company has managed various Midas franchises and currently has two of these, one in the Gold Coast area and one in Toowoomba. The company is attempting to sell these businesses.
To provide for their future and for that of their children, the applicant and her husband have made many loans to the Trust totalling more than 1.7 million dollars. Most of these loans were made after 1986 (see exhibit A1). The loans have not been repaid and the balance sheet for the Trust for the year ending 30 June 2000 reveals outstanding loans in the amounts of $152,402.36 (see T18 at 202) and $1,605,627.60 (see T18 at 215). The Trust recorded a net loss for that financial year of $1,332,711.18 (see T18 at 211).
The applicant and her husband own their own home and an adjacent block of land which, in all, are valued at approximately $500,000 and both of these have been used to secure a loan to their company. The loan is with Suncorp Metway and is currently in the amount of $260,000. They also have personal effects and two motor vehicles which, together, are valued at approximately $58,000 (see T11 at 78). In addition, they have a small amount of savings available to them.
Respondent's Case
Mr McEwan submitted that the loans to the Trust constitute an asset and that they should be assessed at their face value as they appear in the Trust balance sheet. He conceded that, on the evidence, there was no realistic likelihood that they would be repaid to the applicant and/or her husband and that, in that sense, they were unrealisable assets. Nevertheless, he maintained that this did not impact on the value that had to be ascribed to them. He also submitted that the bulk of the loans had been made after 27 October 1986 and that the effect of section 1122 of the Act and cases decided thereunder was that they had to be given their face value of more than $1.7 million.
At that level, and along with the non-disputed value of the other assets of the applicant and her husband, Mr McEwan submitted that the value of the assets exceeded the threshold of payability. He said that, as at the date of the claim in August 2000, this threshold was $407,000 as calculated in accordance with the relevant rate calculator in the Act.
10. In relation to the unrealisable nature of the loans, Mr McEwan submitted that this characterisation would only have relevance if a decision was made under section 1129 of the Act which relates to financial hardship and which allows for those types of assets to be disregarded. However, he also submitted that, in order for that to be done, an application in a prescribed form had to be made specifically seeking a decision in relation to financial hardship. He submitted that this had not been done by the applicant in relation to her claim of 9 August 2000 although he noted that an earlier such application had been made in 1999. He submitted that this earlier claim had been rejected and that no appeal against the decision had been made.
Applicant's Case
11. The applicant accepted the correctness of the facts as summarised in paragraphs 5 to 7 above. Her only concern was the way in which the respondent was prepared to concede that the loans to the Trust were unrealisable and, nevertheless, to maintain that they constitute assets for the purposes of the asset test. She submitted that the respondent was really trying to "have it both ways" and that this was unfair. She maintained her belief that there was nothing that could be done for herself or her husband in relation to the loans as they stood in the sense that they could not withdraw funds or use the amounts for any form of security.
12. The applicant noted that reference had been made by the respondent in communications to her that there was some prospect of being able to bring a civil action against a company which had been responsible for them being placed into receivership, thereby providing them with a capital sum at some future time. She said that legal advice that she had obtained was to the effect that there was a prospect of success in that regard but that no decision had been made to pursue that avenue. She and her husband were mindful of the costs that were involved and their financial position did not assist them in advancing their claim. She submitted that the prospect of bringing this cause of action was hypothetical and should not be used against them.
13. The applicant conceded that no specific request had been lodged for her circumstances to be considered under the financial hardship provisions. She said that she had obtained a copy of the approved form but that it had not yet been completed.
Issues and Legislation
14. Section 43 of the Act sets out the qualifying criteria for the age pension. It is conceded by the respondent in this case, and I am reasonably satisfied, that the applicant meets those requirements. Once it has been determined that a person is qualified to receive age pension, the matter of the relevant rate has to be determined. In that regard, sub-section 44(1) of the Act provides that age pension is not payable if the pension rate is nil. In the decision under review, it was detemined that the level of the assets of the applicant and her husband was such that the rate of age pension was nil and that, therefore, age pension was not payable to the applicant.
15. Relevant to the detemination of the value of assets in this case are the following provisions of the Act:
"11 Assets test definitions
11(1) In this Act, unless the contrary intention appears:
…
asset means property or money (including property or money outside Australia).
…
Homeowner
11(4) For the purposes of this Act:
(a) …
(b)a person who is a member of a couple is a homeowner if:
(i)the person, or the person's partner, has a right or interest in one residence that is:
(A)the person's principal home; or
(B)the partner's principal home; or
(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; and
…
Unrealisable asset
11(12) An asset of a person is an unrealisable asset if:
(a)the person cannot sell or realise the asset; and
(b)the person cannot use the asset as a security for borrowing.
…
55How to work out a person's age pension rate
A person's age pension rate is worked out:
(a)if the person is not permanently blind—using Pension Rate Calculator A at the end of section 1064 (see Part 3.2); …
…
1064Rate of age … pension …
1064(1)The rate of:
(a)age pension; …
is … to be calculated in accordance with the Rate Calculator at the end of this section.
…
1118 Certain assets to be disregarded in calculating the value of a person's assets
1118(1)In calculating the value of a person's assets for the purposes of this Act…, disregard the following: …
(b)if the person is a member of a couple—the value of any right or interest of the person in one residence that is the principal home of the person, of the person's partner or of both of them that:
(i)is a right or interest that gives the person or the person's partner reasonable security of tenure in the home; …
…
1122Loans
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.
…
1129Access to financial hardship rules—pensions
1129(1)If:
(a)either:
(i)a social security pension is not payable to a person because of the application of an assets test; or
(ii)a person's social security pension rate is determined by the application of an assets test; and
(b)either:
(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A and 1126 (disposal of assets) do not apply to the person; or
(ii)the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(c)the person, or the person's partner, has an unrealisable asset; and
(d)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Secretary must determine that this section applies to the person."
16. The applicant and her husband are "members of a couple" and "homeowners" under the Act. The issue for the Tribunal is whether the assets of the applicant and her husband exceed the level which precludes payability of age pension.
Consideration
17. The rate calculator referred to above at module 1064G sets an asset limit of a person above which the rate of age pension payments begins to be reduced because of the value of those assets. Where that level is exceeded, age pension payment decreases until, when the maximum value of assets is reached, it becomes nil. In evidence before the Tribunal were extracts from "A Guide to Commonwealth Government Payments" (the Guide) for 1 July to 19 September 2000 which period includes the date of the applicant's claim (see R2 at page 2). The Guide records the level of assets which, if exceeded at the time of the applicant's claim, reduce the amount of age pension to nil. In the case of the applicant, who is a partnered homeowner, that level was $407,000.
18. Apart from the loans to the Trust, the assets of the applicant and her husband comprise the block of land adjacent to their home, their personal effects, their two motor vehicles and the small amount of savings available to them. The value of those assets is well below the threshold of $407,000. However, the asset value will be exceeded if the loans, or a significant proportion of them, to the Trust are also assets under the Act.
19. In relation to loans, section 1122 of the Act provides that, for amounts lent by a person after 27 October 1986, so much of a loan as remains unpaid to the person must be included as an asset for the purposes of the Act. The evidence is unclear as to the precise timing of the loans by the applicant and her husband to the Trust but they accepted in evidence that most of the amount of $1.7 million was lent after 1986. On the evidence, I am reasonably satisfied that the amount lent after 27 October 1986 exceeded $407,000. Indeed, this was not disputed by the applicant.
20. The only issue raised by the applicant was whether or not the loans should be treated as being unrealisable. The term "unrealisable asset" is defined in sub-section 11(12) of the Act and Mr McEwan conceded that the loans in this case fall within that category. I am also reasonably satisfied that the loans can be so characterised. However, that finding has no relevance to the application of the assets test when assessing the value of assets. In the circumstances of this case, the only occasion when the notion of an unrealisable asset would be relevant is if the financial hardship provisions in section 1129 of the Act were invoked. In a case such as this, that provision has application where the age pension is not payable to the applicant because of the application of the assets test and the applicant has lodged a request in the approved form for the financial hardship provisions to be extended to her. This means that the notion of an unrealisable asset is only relevant after the value of the applicant's assets has been determined. Of course, a specific request must also be lodged and that has not been done by the applicant.
21. Mr McEwan submitted that the loans are to be assesed at their face value rather than at some lesser amount which would reflect their unrealisable nature and I accept his submission in that regard: see Re Ling and Secretary, Department of Family and Community Services [1999] AATA 797; Re Mendes and Secretary, Department of Family and Community Services [2000] AATA 22; and Re Hughes and Secretary, Department of Social Security (1992) 25 ALD 754. The terms of section 1122 are clear and their application in this case means that the value of the assets of the applicant and her husband exceed the threshold level of $407,000 beyond which the age pension ceases to be payable.
Decision
22. The Tribunal affirms the decision under review.
I certify that the preceding 22 paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member
Signed: .................................................................................
AssociateDate of Decision 7 June 2002
Date of Hearing 24 May 2002
The Applicant Appeared in Person
Solicitor for Respondent Mr Z McEwan, Departmental Advocate
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