Whitworth and Secretary, Department of Social Services (Social security)

Case •

[2025] ARTA 1291

•

2 July 2025

Whitworth and Secretary, Department of Social Services (Social security) [2025] ARTA 1291 (2 July 2025)

Applicant/s:  Mr Whitworth

Respondent:  Secretary, Department of Social Services

Chief Executive Centrelink    

ReviewNumber:  2025/B192733

Tribunal:General Member Mr J Nalpantidis

Place:Melbourne

Date:2 July 2025

Decision:The decision under review is set aside and the Tribunal sends the matter back to the Secretary for reconsideration with the Tribunal’s direction that Mr Whitworth was declared bankrupt on 12 June 2024 and from that date, his assets do not include a loan of $735,116 to [Business 1].

CATCHWORDS

SOCIAL SECURITY – jobseeker payment – assets test limit – business loan balance – lender’s bankruptcy – assessable asset – designated private company – attributable stakeholder – business ceased trading – no prosects of recovering debts – attributed asset is unrealisable – loan devolved to the trustee in bankruptcy – decision under review set aside

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

  1. This application for review is about whether Services Australia (Centrelink) was correct to reject Mr Whitworth’s claim for jobseeker payment on the basis that his assets were over the assets test limit for jobseeker payment to be payable to him.

  2. On 11 June 2024, Mr Whitworth lodged a claim for jobseeker payment.  On 15 August 2024, Centrelink rejected the claim on the basis that Centrelink did not receive Mr Whitworth’s partner’s Tax File Number.

  3. On 26 August 2024, Mr Whitworth requested review of this decision.

  4. Subsequently, on 26 October 2024, Centrelink determined that Mr Whitworth was not entitled to jobseeker payment because his assets, including a loan balance of $735,116 to [Business 1] (the Company) was above the allowable limit for jobseeker payment.

  5. On 25 November 2024, an authorised review officer affirmed the decision.

  6. On 7 January 2025, Mr Whitworth applied to the Administrative Review Tribunal (the Tribunal) for an independent review of this decision.

  7. A hearing was conducted on 23 April 2025 at which Mr Whitworth provided sworn oral evidence under affirmation by MS Teams audio. The Tribunal had before it documents provided by Centrelink from Mr Whitworth’s computer and paper file (215 pages), which had been copied to Mr Whitworth before the hearing.

  8. The matter was deferred for the Tribunal to undertake further legal research. On 21 May 2025, pursuant to section 63 of the Administrative Review Tribunal Act 2024, the Tribunal ordered the Registrar to make written submissions and provide further information to the Tribunal as to the effect of the lender’s bankruptcy on the assessment of Mr Whitworth’s assets for social security purposes generally and more specifically whether the loan is capable of continuing to be an assessable asset once Mr Whitworth became bankrupt.

  9. On 27 June 2025, Centrelink provided a response to the Tribunal (C1 to C2); a copy was provided to Mr Whitworth.  On 2 July 2025, Mr Whitworth provided further information about his bankruptcy; a copy was provided to Centrelink.

  10. On 2 July 2025, the Tribunal made its determination. 

  11. Relevant aspects of the material and evidence will be referred to in the Tribunal’s consideration of the issues to be decided.

ISSUES

  1. The statutory provisions relevant to this review are contained in the Social Security Act 1991 (the Act), the Social Security (Administration) Act 1999, Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 and the Social Security Guide (the Guide) which provides policy and guidelines for the application of the relevant legislation in order to promote consistency and transparency in decision-making. While the Tribunal is not bound by these guidelines it will follow them unless there is a cogent reason to do otherwise as found in Re Drake and Minister for Immigration and Ethnic Affairs (No 2).[1] The Tribunal is bound to apply the provisions set out in the legislation.

    [1] [1979] AATA 179.

  2. The issues which arise in this case are:

    ·      Was Centrelink correct to reject Mr Whitworth’s claim for jobseeker payment made on 11 June 2024?

    ·      This will depend on whether Mr Whitworth’s assets are over the assets test limit for jobseeker to be paid to him.

    ·      This requires the Tribunal to consider:

      • what assets and income, if any, from [Business 1] are attributed to Mr Whitworth;
      • whether a director’s loan to [Business 1] should be considered Mr Whitworth’s asset; and

    othe effect of Mr Whitworth’s bankruptcy on the assessment of his assets for social security purposes generally and more specifically whether the loan is capable of continuing to be an assessable asset once Mr Whitworth became bankrupt.

CONSIDERATION

Issue 1 – Was Centrelink correct to reject Mr Whitworth’s claim for jobseeker payment?

  1. Section 611 of the Act provides that a jobseeker payment is not payable to a person whose assets exceed the specified limit.  At the time of Mr Whitworth’s claim, the allowable assets test limit for jobseeker payment for a partnered person who is a non-homeowner was $693,500; jobseeker payment is not payable if a person’s assets are above that amount.

  2. It is possible for Centrelink to also administer a test pursuant to the income test set out in the Rate Calculator at section 1068 of the Act. Income includes the income of a person (and where relevant, the person’s partner). The relevant legislation provides that the income or assets test will be applied dependent upon the test that produces the lower rate for the applicant. In Mr Whitworth’s circumstances, it is the assets test.

  3. There is no dispute that Mr Whitworth is partnered and a non-homeowner.    

Mr Whitworth’s evidence and submissions

  1. Mr Whitworth told the Tribunal that initially he was verbally told his claim was rejected via a telephone call by a Centrelink officer in August 2024, when he was told his jobseeker payment claim was rejected because his partner’s Tax File Number not being provided.  He was later advised it was due to a beneficiary loan he had with the Company which was considered his asset and therefore his assets were above the allowable limit and his claim for jobseeker payment was rejected on this basis.

  2. The Centrelink material includes an online claim for jobseeker payment submitted by Mr Whitworth dated 11 June 2024.  Consistent with Mr Whitworth’s evidence, a Centrelink notice dated 15 August 2024 advised Mr Whitworth his claim for jobseeker payment was rejected on the basis that Centrelink did not receive his partner’s Tax File Number. 

  3. The Centrelink records show on 26 August 2024 Mr Whitworth requested a review of the decision and the matter was referred to a complex assessment officer who determined that Mr Whitworth had a beneficiary loan with the Company, with a balance of $735,116, which was considered his asset.  In a Centrelink document record dated 15 August 2024, the complex assessment officer noted:

    Loans are financial assets and are deemed. *Mr Whitworth* has a loan of $735,889.11 to the company. CAO Unable to apply Social security Guide 4.6.5.65 (Loans that no longer exist) due to personal bankruptcy. As company is unaffected at this stage.(under administration, de-registered, liquidation etc) Claim will reject due to assets.

  4. On 26 October 2024, Centrelink reassessed Mr Whitworth’s claim for jobseeker payment taking into consideration the complex assessment officer assessment.  As a result of this reassessment, Mr Whitworth’s claim for jobseeker payment was rejected on the basis that his total assets, inclusive of the beneficiary loan to the Company, were above the allowable assets test limit of $693,500 for members of a couple who are non-homeowners.

  5. Mr Whitworth gave evidence that he was the sole shareholder and director of the Company, however the company ceased trading on 14 June 2024, when he became bankrupt.  He told the Tribunal that the Company has no income and assets and he had not drawn a salary or income from the Company since November 2023.  He submitted that as he is declared bankrupt he can no longer act as a director and his shareholding has no value.    

  6. Centrelink determined that the Company is a designated, controlled private company, Mr Whitworth is an attributable stakeholder and as the sole shareholder was attributed 100% of the income and assets of the company. 

Is the Company a designated private company?

  1. Part 3.18 of the Act explains the means tested treatment of private companies and private trusts. For a company to be subject to the provisions contained in Part 3.18 of the Act the company must be a designated private company.

  2. Section 1207N provides that the company is a “designated private company” if at least two of the following conditions are met:

    ·     The consolidated revenue of the company is less than $25 million;

    ·     The consolidated assets are less than $12.5 million;

    ·     The company and its subsidiaries have fewer than 50 employees.

  3. The Tribunal has considered the evidence from Mr Whitworth and material provided by Centrelink and is satisfied that at least two of the above conditions are met in relation to the Company, so it is a designated private company.

Is Mr Whitworth an attributable stakeholder and what is the actual attribution of income or assets to him?

  1. The next step to consider is whether any or all of the assets held in the company should be  attributed to Mr Whitworth, and what percentage of the assets are attributed to him. Assets held in a company under the Act are to be attributed to a person for the purposes of calculating their rate of payment. The Tribunal must work out the attribution percentage attributable to Mr Whitworth.

  2. In order to do so, Mr Whitworth must pass the control test or the source test in accordance with section 1207Q of the Act. In relation to the control test subsection 1207Q(2) provides a person passes the control test if they hold direct voting interests in the company which are 50% or more.

  3. Section 1208E of the Act provides that if a person is an attributable stakeholder of a company on or after 1 January 2002 the value of the asset is equal to the person’s attribution percentage. Mr Whitworth is therefore attributed 100% of the company income and assets.

  4. The Tribunal finds that Mr Whitworth is the sole shareholder of the Company which means that 100% of the assets and income of the company are attributed to Mr Whitworth. 

  5. The Tribunal finds that the Company no longer trades and has $0 income with attributed net assets of $0.  This is consistent with the complex assessment officer assessment of the income and assets of the company as $0.

  6. Based on the company financial statements ending 14 June 2024, a Centrelink complex assessment officer determined the company had net income and assets of $0, attributed to Mr Whitworth. The Tribunal accepts the assessment made by the complex assessment officer.

Treatment of loans to a company

  1. Section 11 of the Act provides an asset means property or money. Section 1122 of the Act provides that the person’s assets include the value of the unsecured loan which remains unpaid.

  2. The financial statements for the Company show Mr Whitworth has a loan balance to the Company of $735,116.

  3. For the purposes of section 1122 the unpaid value of the loan to the company remains Mr Whitworth’s asset in accordance with section 11 of the Act.

  4. Mr Whitworth acknowledged that he has made various loans to the company which accrued over a 12-year period, which accumulated to $735,116 when the Company ceased trading in mid-2024.  Mr Whitworth told the Tribunal he was previously a sole trader and set up the company structure in 2012 into which he transferred his personal capital.  He told the Tribunal that the company experienced financial difficulties during the COVID pandemic restriction period and he transferred funds into the company the keep it afloat; he told the Tribunal that his partner also supported the company by not receiving wages (of $60,000) and she also used her personal credit card to meet company expenses ($35,000).  He said the outstanding loan may also include these amounts.  In 2022 the outstanding loan was approximately $481,000 and he transferred approximately $250,000 into the company in the last year of its operations; these funds came from his divorce property settlement and a $100,000 inheritance from his grandfather in 2021.

  5. Mr Whitworth gave evidence that the Company has significant debts for which he is personally liable, as a prior director of the company or under personal guarantees he had provided.  Mr Whitworth submitted that there is no prospect of him being repaid the loan amounts listed in the company financial statements, as the company had no funds to repay the loan and he is bankrupt.  

  6. The bankruptcy form dated [in] May 2024, lists the Company’s debts as totalling $1,442,672, including a debt of $994,291 to the ATO which Mr Whitworth is personally liable to pay (as the company director) as well as further debts of $429,278 to various financial institutions for which he was personally liable.  An ATO Creditors Statutory Demand for payment of debts dated [in] May 2024 to the Company, shows a running debt tally of $1,001,594.88.   The Centrelink material includes numerous ATO director penalty notices, for net GST amounts which Mr Whitworth was personally liable to pay as a director of the Company.   The ATO notices state Mr Whitworth was required to pay the full amount within 21 days or proceedings will be commenced to wind up the Company.  Mr Whitworth gave evidence that he was unable to pay the amounts demanded by the ATO and he attempted to negotiate a payment plan with the ATO.

  7. Mr Whitworth told the Tribunal the Company debts to the ATO continued to grow as penalties and interest were applied by the ATO to the outstanding debts, which included an additional $300,000 in June 2024.  Mr Whitworth gave evidence that he attempted to negotiate a repayment plan with the ATO who were prepared to remove the penalties if Mr Whitworth paid 25% of the outstanding ($1,000,000) debt and $35,000 per month.  Mr Whitworth was not in a financial position to meet this proposal and [in] May 2024, the ATO sent him notice of demand to pay the full amount within 21 days and failure to do so may result in the company being wound-up.

39.Mr Whitworth gave evidence that he consulted a lawyer about de-registering the company and was advised that it would cost between $40,000 and $60,000, which he could not afford.  Mr Whitworth then commenced personal bankruptcy proceedings.  In a statement dated 1 June 2024, Mr Whitworth stated “as of the [date in] June 2024 I will no longer be director of [Business 1] due to my becoming Bankrupt and unable by law to be a director or be a shareholder of any company”. 

  1. Mr Whitworth told the Tribunal that from [June] 2024, he ceased to be eligible to be a director of the company after being declared bankrupt, and the Company does not have a current director, it has no funds and the ASIC fees are not up to date.  Effectively, the Company is in limbo and it will take a creditor to wind up the company.  As a disqualified director, he is unable to do so.  He submitted that as the Company is not trading and has no funds, it is unlikely a creditor will incur the expense of commencing proceedings to wind up the company.  

  2. The Centrelink material includes a Certificate of Appointment of Trustee, for the bankrupt, Mr Whitworth.  The date administration started was 12 June 2024, which is also the date the trustee was appointed.  Subsequent to the hearing, Mr Whitworth provided an Australian Financial Security Authority – National Personal Insolvency Index to the Tribunal which states Mr Whitworth’s petition was accepted on 12 June 2024, with a commencement date [in] June 2024 and the trustee was appointed on 12 June 2024.  Mr Whitworth was an undischarged bankrupt with a commencement date of 12 June 2024; the end date was not specified.   The Tribunal so finds. 

  3. Mr Whitworth estimated that the ATO and bank debts, for which he is personally liable increased to $1,442,000 and even if the Company had funds, which it does not, priority would be taken to pay these debts before he could claim anything (in relation to the loan as an unsecured creditor). Mr Whitworth gave evidence that his bankruptcy is for three years and any assets he may be entitled to, including any loans owed to him, which he submitted is theoretical, would be owned by the trustee for the benefit of the bankrupt estate. Under any scenario, Mr Whitworth submitted that the Company loan could not possibly be considered his asset in any practical sense.

  4. Subsection 1208H(1) of the Act provides that if a company or trust is a borrower under the loan; and the loan is not secured by a charge or encumbrance over one or more assets of the company or trust, then the Secretary (or the Tribunal standing in the shoes of the Secretary) may determine in writing the value of the specified asset of the company is to be reduced by the whole or a specified part of the amount of the loan. Subsection 1208H(3) of the Act provides that when making a determination under subsection (1) the decision maker must comply with the relevant decision making principles, which are the Social Security (Attribution of Asset) Principles 2017.

  5. The Tribunal has found that Mr Whitworth has loans to the Company in the amount of $735,116, and Centrelink has assessed those loans to the Company, as Mr Whitworth’s asset for the purposes of jobseeker payment, and this precludes him from jobseeker payment on the basis of his assets being above the allowable limit. 

  6. The Tribunal has found that the Company also has debts (over $1.6 million) to various secured creditors, superannuation, financial institutions and the Australian Taxation Office (ATO).  A number of ATO notices were sent to Mr Whitworth notifying him that he is personally liable for the ATO debt.  The Tribunal finds as a director of the Company, Mr Whitworth is personally liable for various debts to the ATO, which amount to over $1 million). The Tribunal also finds that the Company has various other loans, as amounting to $429,278 on 31 May 2024, which Mr Whitworth provided personal guarantees for which he is personally liable.

  7. The Tribunal finds the Company has effectively not traded since [June] 2024 and it has no funds. This is consistent with the Centrelink complex assessment officer’s assessment of the Company’s financial position. 

  8. Mr Whitworth gave evidence, accepted by the Tribunal that he has not drawn income from the Company since 21 November 2023.

  9. Mr Whitworth submitted that even if the Company had assets, the order of payment of creditors would be as follows: firstly, staff entitlements, followed by secured creditors, then unsecured creditors and all would take precedence before unsecured loans, such as a director’s loan would be paid.  As the Company’s other debts are significantly more than the (director’s) loan to Mr Whitworth, Mr Whitworth submitted the reality is that there are no prospects of the listed director’s loan in the balance sheet ever being repaid.  Mr Whitworth submitted therefore, if it is considered that a director’s loan exists, such a loan would have no value.

  10. Mr Whitworth submitted he is not able to commence proceedings to recover the loan during the bankruptcy.  He submitted that as a bankrupt, the director’s loan falls within the bankruptcy and therefore even if it was recovered by the bankruptcy trustee, as his debts in bankruptcy are significantly higher than the loan, the value of the loan should be considered $0.

  11. There is no dispute the Company is not trading and has no income and assets.  There is also no dispute that the Company remains registered and is not under administration, de-registered, in liquidation, or in the process of being wound up. For this reason, Centrelink has not considered the loan as having failed.

  1. Mr Whitworth submitted that as a bankrupt he is disqualified to serve as a Director of the Company and he does not have the legal standing to wind up the company, and in any case he does not have the funds to do this and the Company is in limbo.  Mr Whitworth submitted the Company has no current active director. The applicant further submitted that the ATO or other creditors may wind-up the Company but such action has not occurred because of the significant cost of commencing such proceedings, with no prosects of recovering the debts in light of the Company’s financial circumstances.

  2. It was Mr Whitworth’s evidence that as of the [day in] June 2024 he was no longer a director of the Company due to becoming bankrupt.  Based on information from the Australian Financial Security Authority – National Personal Insolvency Index submitted to the Tribunal, subsequent to the hearing, the Tribunal has found Mr Whitworth is an undischarged bankrupt from 12 June 2024, which is also the date a trustee in bankruptcy was appointed.  Mr Whitworth is therefore no longer a director of the Company, which has ceased trading. The Tribunal places no significance on the date of bankruptcy being 12 June 2024 rather than [later in] June 2024.

  3. Mr Whitworth submitted that as the Company ceased operating, and has no income or assets, it will not be able to pay back the loans made by Mr Whitworth.  He submitted the company’s assets are less than its accumulated debts, and the director’s loan will never be repaid and even so falls within the scope of the bankruptcy trustee.  Mr Whitworth submitted it is likely to be ultimately written off through the liquidation process.

  4. The circumstances in which an attributed asset is unrealisable is found in section 1208F of the Act. Subsection 1208F(1) of the Act provides, if a person is an attributable stakeholder of a company on or after 1 January 2002; and at the time the company owns a particular asset; under section 1208E the value of the person’s assets is an amount equal to their attribution percentage of the value of the asset help by the company. Subsection 1208F(3) of the Act provides that in determining whether an asset is an unrealisable asset of a company subsection 11(12) applies to a company.

  5. Subsection 11(12) provides that an asset is an unrealisable asset if the person cannot sell or realise the asset or use the asset as security for borrowing.

  6. Centrelink contends the director’s loan made by Mr Whitworth to the Company as listed in the Company financial statements, is an asset of Mr Whitworth who is the 100% attributable stakeholder of the Company. The Act provides the asset cannot be an unrealisable asset, which means the value of the loans made by Mr Whitworth to the company cannot be disregarded under section 1208F of the Act.

  7. Section 1122 of the Act provides a loan no longer exists when it has been repaid, it will then cease to be an asset of the company (and Mr Whitworth as the 100% attributable stakeholder).

  8. The Guide at 4.6.5.65 explains that a loan no longer exists for social security purposes in particular circumstances including when it is repaid, the borrower is bankrupt or enters a debt agreement under Part 9 or 10 of the Bankruptcy Act 1966 (Commonwealth), the lender forgives the loan, the lender takes a loan contract to court to have it enforced and obtains a court order to allow collection of the money, the lender takes a loan contract to court to have it enforced and is unsuccessful in court, the company that borrowed the money is in administration and subsequently placed in liquidation, or loans to the company become subject to a deed of company arrangement (in these cases, the loan is taken to have ceased to exist from the date that the company was placed in administration).  The Tribunal is satisfied that the Company loan has not been repaid nor is there evidence that any other actions listed in the Guide been undertaken in relation to the Company loan.

  9. The Guide does not consider the circumstances of when the lender is bankrupt.

What effect does Mr Whitworth’s bankruptcy have on the assessment of his assets for social security purposes?

  1. The Tribunal sought submissions from Centrelink as to the effect of Mr Whitworth’s bankruptcy on the assessment of his assets for social security purposes generally and more specifically whether the Company loan listed as $735,116, is capable of continuing to be an assessable asset for the purposes of jobseeker payment, once he became bankrupt.

  2. In response, Centrelink submitted that if is the Tribunal is satisfied that Mr Whitworth became bankrupt, then the loan of $735,116 should not form part of his assessable assets for his jobseeker claim, noting:

    3. It is the position in bankruptcy law that once a person becomes bankrupt, most of their assets (with a few exceptions as identified in the Bankruptcy Act) in the trustee in bankruptcy (Bankruptcy Act 1966 (Cth) s 58). This includes loans owed to the bankrupt. This means that the Trustee becomes the owner of the property upon commencement of the bankruptcy and can deal with the property for the benefit of the bankrupt estate.

    4. Given most assets including loans owed to the bankrupt devolves to the Trustee as at the date of the bankruptcy, it follows then that those devolved assets are not assets of the bankrupt under the Social Security Act 1991.

    5. In line with the above, the Secretary submits that the loan of $735,116.00 owed to the Applicant devolved to a Trustee as at the commencement of his bankruptcy. As such, the loan of $735,116.00 is not an assessable asset of the Applicant for the purposes of assessing his claim for jobseeker payment. This is consistent with the Tribunal’s decision in Mitchell and Secretary, Department of Social Services [2016] AATA 1036, [54].

  3. The Tribunal found the Company loan of $735,116 owed to Mr Whitworth, is devolved to his trustee in bankruptcy as at the commencement of his bankruptcy, on 12 June 2024, and as such the loan is not an assessable asset of Mr Whitworth for the purposes of assessing his entitlement to jobseeker payment.

  4. The Tribunal therefore set aside the Centrelink decision to reject Mr Whitworth’s claim for jobseeker payment made on 11 June 2024 and sends the matter back to Centrelink to reconsider Mr Whitworth’s entitlement for jobseeker payment, in line with the Tribunal’s finding that he was declared bankrupt on 12 June 2024 and his assets as at that date do not include a loan of $735,116 to [Business 1].

DECISION

The decision under review is set aside and the Tribunal sends the matter back to the Secretary for reconsideration with the Tribunal’s direction that Mr Whitworth was declared bankrupt on 12 June 2024 and from that date, his assets do not include a loan of $735,116 to [Business 1].

Date of hearing:

23 April 2025

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Mitchell and Secretary, Department of Social Services (Social services second review) [2016] AATA 1036