"VZM" and Secretary, Department of Family and Community Services
[2000] AATA 186
•10 March 2000
DECISION AND REASONS FOR DECISION [2000] AATA 186
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V1999/388
GENERAL ADMINISTRATIVE DIVISION )
Re "VZM"
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr B. H. Pascoe, Senior Member
Date10 March 2000
PlaceMelbourne
Decision The Tribunal sets aside the decision under review and in its stead finds that section 1130B of the Social Security Act 1991 ("the Act") applies to the applicant; she has an unrealisable asset and the annual rate of ordinary income from such asset for the purposes of section 1130C(3)(c) of the Act is $9,000 and remits the matter to the respondent to calculate the rate of parenting payment in accordance with such findings.
.........(Sgd) B. H. Pascoe..........
Senior Member
CATCHWORDS
SOCIAL SECURITY – parenting payment – value of assets – whether another person has equity in asset – whether unrealisable asset – whether severe financial hardship – annual rate of ordinary income on unrealisable asset
Social Security Act 1991 ss. 500Q, 1130B, 1130C
REASONS FOR DECISION
10 March 2000 Mr B. H. Pascoe, Senior Member
This is an application to review a decision of the Social Security Appeals Tribunal ("the SSAT") which affirmed a decision of the respondent to cancel parenting payment to the applicant. The decision was on the grounds that the applicant's assets were above the limit of entitlement of a homeowner and that the hardship provisions of section 1130B of the Social Security Act 1991 ("the Act") did not apply.
At the hearing the applicant was represented by Ms M. Baczynski of counsel and the respondent by Ms P. D'Cunha, an advocate of Centrelink. Evidence was given by the applicant. The Tribunal ordered that the identity of the applicant be confidential pursuant to section 35 of the Administrative Appeals Tribunal Act 1975.
The applicant gave evidence that she was born in Turkey and was the eldest of three children in the family which migrated to Australia. At age 19 she was taken back to Turkey by her parents and forced to marry a man there whom she did not know. A week after the marriage she and her husband came to Australia. She gave a history of unhappiness and violence by her husband. After initially living with her parents, they then lived in rented houses until 1992 when a house was purchased. The applicant said that the house was purchased in her name as her husband had promised to change his ways and said that he would buy the house for her. In 1994 the husband arranged with friends of his to purchase jointly a taxi licence and taxi. The licence was acquired in the joint names of the applicant and the wife of the husband's friend. A bank loan in the name of the applicant for $94,000 was taken out to finance the purchase of her share of the taxi and licence. The applicant said that she was opposed to taking on more debt but her husband insisted. The husband drove the taxi for one or two years but sold the vehicle in 1995. In December 1995 the loan taken out for the taxi and licence was consolidated with the existing housing loan with the house as sole security. While the house is in the sole name of the applicant, the loan is in the joint names of her husband and herself.
The applicant said that her husband left her in 1997. Subsequently, he returned and sought forgiveness but she refused. She then filed for divorce which was finalised in 1998. She said that she does not know where her former husband lives and has no contact with him other than occasional calls from him arranging to take the children on an outing. The applicant said that she is still fearful of her former husband and, because of concern as to what he might do and threats made by him, has not sought any maintenance or property settlement order of the Family Court nor sought any intervention order against him. She maintained that he would be entitled to a share of the value of the taxi licence and, as the income from the licence is used to meet payments on the home mortgage, she would be forced to sell her house. The applicant said that she had no current contact with the joint owner of the taxi licence and understood that she could not sell her half share unless the joint owner was also prepared to sell. A letter from the Victorian Taxi Directorate was tendered which confirmed that the licence could only be transferred in toto and no part sale was permissible. The applicant stated that she had no income other than approximately $250 per fortnight in family allowance and has been forced to borrow some $5,000 from her sister to meet outstanding bills. She had attempted to borrow from three banks without success. A letter from the Bank of Melbourne who holds the house mortgage was tendered advising that the bank was unable to advance further funds based on the applicant's ability to pay and the structure of the taxi licence ownership.
It was submitted on behalf of the applicant that the former husband of the applicant, who had made repayments on the loan to acquire the taxi licence from his earnings as a taxi driver and from subsequent employment, had an equity in the 50% share of the licence and such equity would be enforceable under the Family Law Act. The fact that he had not initiated any proceedings in relation to his interest did not result in the applicant having the full ownership of the 50% share in the licence. It was said that even a small share of the asset being attributable to the former husband would reduce the value of the asset below that which would disqualify the applicant from parenting payment under section 500Q of the Act. Alternatively, it was submitted that the 50% share in the taxi licence was an unrealisable asset and that the applicant was suffering severe financial hardship so that section 1130B applied. As such, it was said that she was entitled to the maximum rate of parenting payment adjusted by the annual rate of income received from the lease of the 50% share of the licence. It was said that the income was $750 per month, or $9,000 per annum, from which should be deducted the interest paid on the loan taken out to acquire that share in the licence. Ms Baczynski stated that this net figure was $5,335 per annum.
For the respondent, it was submitted that the evidence of the applicant was that the assets of the house and the licence had been put in her name as consideration for staying with her husband at the time. It was said that the couple had separated in 1997 and divorced in 1998 but no attempt had been made by the former husband to claim any interest in the taxi licence and there was no evidence that he would seek or obtain any interest. The decision of the respondent and the SSAT was based on the value of a taxi licence being $258,300 and the applicant's half share valued at $129,125. The maximum asset value for the purposes of section 500Q is $125,750. At the hearing, the respondent tendered a letter from the Victorian Taxi Directorate setting out the average price of taxi licences from September 1998 to October 1999 showing that such price had increased from $265,000 to $286,000 over the period. Consequently, it was submitted that the current value gives a value of the applicant's interest of $143,000 requiring her to demonstrate that the husband had an equity of at least $17,250 or over 12% in that asset. It was submitted that there was no evidence that the asset was unrealisable, as while a half interest could not be sold separately, there had been no contact with the other joint owner and no evidence of whether or not that joint owner would be prepared to either sell or acquire the applicant's half interest. It was said that the alleged hardship suffered by the applicant was the result of her retaining and increasing the value of her asset and that is not appropriate while the taxpayer is funding living expenses through a parenting payment. The applicant had not been able to indicate the future of the joint ownership of the taxi licence and it was unknown as to how long the alleged hardship would continue while the asset increased in value and the loan taken out to acquire it was being reduced utilising the income from the licence. Finally, it was submitted that, if the asset was found to be unrealisable, the income of $9,000 per annum was not business income and the gross amount should be regarded as ordinary income without any deduction for interest.
Section 500Q excludes entitlement to parenting payment in the following terms:
"500Q (1) Parenting payment is not payable to a person who is not a member of a couple if the value of the person's assets exceeds the person's assets value limit.
(2) A person's assets value limit is worked out using the following table:
Assets Value Limit Table
Column 1 Column 2 Column 3
Item Person's situation Assets value limit1 Person is a homeowner $125,750
2 Person is not a homeowner $215,750"
The applicant's primary argument was that her former husband had a sufficient equity in the 50% share of the taxi licence to reduce the value of her equity in the asset below $125,750. She was unable to explain why the licence and the taxi itself were registered in her name and why the licence remained in her name after the taxi was sold. There is no evidence that the former husband considers himself as being entitled to any share of the asset and the best that can be said is that, if he sought an order from the Family Court, and, if the Court granted such an order, he might well be entitled to an interest. However, some two years have passed since separation and one year since divorce but the applicant can give no specific reason for her view that her husband may claim an interest. She has some contact with him, albeit occasional but is not able to state that the matter has been raised. Given that the suggestion that the former husband may have an entitlement is purely a suggestion and a possibility rather than being a probability, the Tribunal is unable to find that the share of the taxi licence owned by the applicant has a value less than the maximum figure allowed by section 500Q.
Access to financial hardship rules are provided under section 1130B of the Act:
"1130B(1) If:
(a)a pension PP (single) is not payable to a person because of the application of an assets test; and
(b)the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
(c) 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 decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(d)the person has an unrealisable asset; and
(e)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(f)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.
In this case the Tribunal needs to be satisfied that the share in the taxi licence is an unrealisable asset and that the applicant would suffer severe financial hardship if the section does not apply. Under section 11(12) of the Act an asset is an unrealisable asset if the person cannot sell or realise the asset and cannot use the asset as a security for borrowing. There is no doubt that the 50% interest in the licence cannot be sold as such to a third party. It could be sold to the other joint holder or could be sold in conjunction with the joint holder to a third party. Unfortunately, there is no evidence of the ability of the joint holder to acquire the applicant's interest or a willingness to join with the applicant in selling the licence. However, without such cooperation of the joint holder, the applicant is unable to sell or realise the asset. Given that requirement, it is appropriate to accept that the asset as such cannot be sold or realised. Apart from the statement of the Bank of Melbourne that it would not lend on the security of the asset, it is clear that the applicant has no capacity to service any further debt and could not borrow on the security of her interest in the taxi licence. Consequently at this point in time, the asset is unrealisable. It should be noted that the fact that an asset is unrealisable at a given point in time does not mean that it remains unrealisable for an indeterminate future time. As the time from the date of the applicant's divorce lengthens it may well be necessary for the applicant to clearly demonstrate that the joint owner of the taxi licence will not cooperate in any realisation of the licence.
Having found that the applicant qualifies for the application of section 1130B it is then necessary to consider the effect of section 1130C which provides, as far as it is relevant to this matter:
"1130C(1) If section 1130B applies to a person, the value of any unrealisable asset of the person is to be disregarded in working out whether a pension PP (single) is payable to the person.
1130C(2) If section 1130B applies to a person, there is to be deducted from the person's pension PP (single) maximum payment rate an amount equal to the person's adjusted annual rate or ordinary income.
1130C(3) The adjusted annual rate of ordinary income of a person who is not a financial hardship farmer is an amount per year equal to the sum of:(a)the person's annual rate of ordinary income (other than income from assets); and
(b)the person's annual rate of ordinary income from assets that are not assets tested; and
(c)either:
(i) the person's annual rate of ordinary income from unrealisable assets; or
(ii) the person's notional annual rate of ordinary income from unrealisable assets;
whichever is the greater; and
(d)an amount per year equal to $26.00 for each $250 of the value of the person's assets (other than disregarded assets).
1130C(4) …
1130C(5) For the purposes of subsections (3) and (4), an asset is not assets tested if the value of the asset is to be disregarded under subsection 1118(1).
1130C(6) A person's notional annual rate of ordinary income from unrealisable assets is:(a)the amount per year equal to 2.5 per cent of the value of the person's unrealisable assets; or
(b)the amount per year that could reasonably be expected to be obtained from a purely commercial application of the person's unrealisable assets;''
whichever is the lesser.
1130C(7) Subsection (2) applies:(a)subject to subsection (9); and
(b)despite section 500Q.
1130(8) …
1130(9) If the sum of the rate of pension PP (single) that would, apart from this subsection, be payable to a person and the annual rate of ordinary income of the person exceeds the maximum payment rate, the rate so payable is to be reduced by the amount per year of the excess."
The annual rate of ordinary income from the unrealisable assets of the applicant is $9,000. While in a commercial sense, it may be argued that the applicant incurs an interest expense on the proportion of the loan relevant to the acquisition of the taxi licence, there is no provision of the Act which allows such interest to be deducted from the gross income unless the income is derived from the carrying on of a business. The applicant is a passive recipient of a monthly fee payable by the sub-licensee and, in no way, can it be said that she is carrying on a business. There is a secondary problem in the allowance of interest even if the applicant could find a basis under the Act for any allowance. The loan is in joint names with joint liability and the present balance of the loan is secured solely on the house and an unknown part of the loan relates to the purchase of the interest in the licence and the taxi, which was sold subsequently. The quantum of interest which could be said to relate directly to the income derived by the applicant is uncertain. In any event, no reduction can be made of the gross income for the purpose of section 1130C. Consequently, the amount under section 1130C(3)(c) is $9,000. The matter should be remitted to the respondent to calculate the rate payable pursuant to section 1130C.
The decision under review should be set aside and in its stead the Tribunal find that the applicant's interest in the taxi licence is an unrealisable asset, section 1130B of the Act applies and the applicant's annual rate of ordinary income from such unrealisable asset is $9,000 with the matter to be remitted to the respondent to calculate the rate of parenting payment in accordance with these findings.
I certify that the ten (10) preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B. H. Pascoe, Senior Member
Signed: .....................................................................................
Personal AssistantDate/s of Hearing 7 December 1999
Date of Decision 10 March 2000
Counsel for the Applicant Ms M. Baczynski
Solicitor for the Applicant Coburg Community Legal Centre
Solicitor for the Respondent Ms P. D'Cunha, Centrelink
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