Zalewska-Moon and Repatriation Commission (Veterans' entitlements)

[2017] AATA 2852

Zalewska-Moon and Repatriation Commission (Veterans' entitlements) [2017] AATA 2852 (3 October 2017)

Division:VETERANS' APPEALS DIVISION

File Number(s):      2017/1544

Re:Graham Zalewska-Moon

APPLICANT

AndRepatriation Commission  

RESPONDENT

AndBozena Zalewska-Moon

JOINED PARTY

DECISION

Tribunal:A G Melick AO SC, Deputy President

Date:3 October 2017

Date of written reasons:        5 January 2018

Place:Hobart

The decision under review is affirmed.

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A G Melick AO SC, Deputy President

VETERANS’ ENTITLEMENTS – overpayment of service pension – disposal of assets – deprived asset – whether transfer of property constitutes disposal of asset – decision under review affirmed.

LEGISLATION

Veterans’ Entitlements Act 1986 (Cth)

REASONS FOR DECISION

A G Melick AO SC, Deputy President

5 January 2018

BACKGROUND

1. This application relates to a decision made by a delegate of the respondent on 3 August 2016. Mr and Mrs Zalewska-Moon have been in receipt of service pensions under the Veterans’ Entitlements Act 1986 (the Act) since 6 September 2000 (with an effect date for payment of 24 March 2000).

2. The Department of Veterans’ Affairs (the Department) wrote to Mr and Mrs Zalewska-Moon on 16 June 2015 as part of the Department’s Enhanced Compliance Program and requested details of their current personal and financial circumstances. Further requests were sent in August 2015, November 2015 and March 2016 after no replies were received.

3. On 2 June 2016, the Department received a completed ‘Review of Personal & Financial Circumstances’ form from Mr and Mrs Zalewska-Moon. On 3 August 2016, a delegate updated the income and asset details for the applicants using the information provided in their reply of 2 June 2016.

4. In a letter dated 12 August 2016 the Zalewska-Moons’ were informed that a ‘deprived asset’ of $490,000 had been recorded in their service pension assessment. This related to the transfer of an Australian property by the applicants to their daughter. The Australian Valuation Office valued the property at $490,000 in 2013. The applicants lived in the property when they were granted service pensions in 2000 but Poland subsequently became their usual place of residence. In a letter from Mr Zalewska-Moon to the Department in March 2016, he stated that no money had been involved in the transfer although he believed an amount of $1 was listed as the sale price on the transfer document. Records showed that the transfer to their daughter took place on 25 July 2014.

5. The delegate determined that this property transfer amounted to a deprived asset and that this was to remain in the applicants’ assessment for a period of five years, beginning 25 July 2014. As a result of this disposal of assets, there was a retrospective reduction of the Zalewska-Moons’ pensions. The applicants were notified that they had received $18,821.62 ($9,410.81 each) in service pension payments to which they were not entitled.

6. Pursuant to s 57A of the Act, Mr Zalewska-Moon lodged a request for review of the delegate’s decision on 14 October 2016. This review was sent to Mr and Mrs Zalewska-Moon by letter dated 25 November 2016. Mr Zalewska-Moon lodged an application for review with this tribunal on 14 March 2017.

   LEGAL FRAMEWORK

7. The Zalewska-Moons’ rate of service pension is determined under the income test. ‘Asset’ is defined in the Act in s 5L(1) to mean ‘property or money (including property or money outside Australia)’. The formula for determining deemed income from financial assets in regards to members of a couple is contained in s 46E.

8. Section 5J(1)(b) provides ‘deprived assets’ are included in the meaning of ‘financial assets’ for the purposes of the Act and s 5J(2B) defines ‘deprived assets’ as:

   (2B) For the purposes of this Act, an asset is a deprived asset if:

   (a) a person has disposed of the assets; and

   (b) the value of the asset is included in the value of the person’s assets by Subdivision BA or BB of Division 11 of Part IIB.

   Note:    For circumstances in which a person is taken to dispose of assets see section 52E.

9. The disposal of assets by persons in receipt of service pensions is regulated by the Act. Section 52E states:

   52E      Disposal of assets

   For the purposes of this Act, a person disposes of assets of the person if the person engages in a course of conduct that diminishes, directly or indirectly, the value of the person’s assets and:

   (a) the person receives no consideration in money or money’s worth for the diminution in value of the person’s assets; or

   (b) the person receives inadequate consideration in money or money’s worth for the diminution in the value of the person’s assets;

10. The ‘amount of disposition’ is defined in s 52F of the Act. This section relevantly provides that where a person disposes of assets and receives no consideration for the consequent diminution, the ‘amount of the disposition’ is ‘an amount equal to the amount of the diminution in the value of the assets’.

11. Where a disposition relates to members of couples, the length of time it is held and its amount is defined in subsection 52JC(2). In this case, the delegate determined that an amount of $490,000 was to be recorded as a deprived asset and remain in the applicants’ pension assessment for a period of five years (beginning 25 July 2014, the date of the property transfer).

12. Section 205 of the Act enables the respondent to raise and recover overpayments of entitlements. In its statement of facts, issues and contentions, the respondent extracted the provisions of s 205 relevant to this matter:

    205      Recovery of overpayments

    (1)  This section applies where:

    (a)  in consequence of a false statement or representation, or of a failure or omission to comply with this Act, the regulations or any other legislative instrument made under this Act, an amount has been paid by way of pension, allowance or other pecuniary benefit under this Act that would not have been paid but for the false statement or representation or but for the failure or omission; or …

    (c)  an amount has purported to have been paid by way of pension, allowance or other pecuniary benefit under this Act, the Social Security Act, the Social Security Act 1947 or the Seamen’s War Pensions and Allowances Act 1940 that was not lawfully so payable; …

    CONTENTIONS

13. A hearing was held on 3 October 2017. All three parties appeared by phone: Mr and Mrs Zalewska-Moon reside in Poland and the respondent’s representative was given leave to appear by phone. Mr Zalewska-Moon made submissions on behalf of himself and his wife.

14. In his statement of facts, issues and contentions, Mr Zalewska-Moon contended that the respondent’s assertion (that as a result of the property transfer the applicants had received no consideration in money or money’s worth for the diminution) was incorrect. Instead he argued that the $1 sale price and an agreement between the Zalewska-Moons and their daughter that she bear ‘all relevant costs, fee and other debts against the property’ amounted to due consideration. Further to this, Mr Zalewska-Moon noted that an outstanding mortgage and municipal rates in arears were included in the amounts agreed to be paid for by their daughter.

15. Mr Zalewska-Moon also attributed the overpayment to himself and his wife to failures by the respondent, namely a neglect of its legislative responsibility to investigate the ‘non-compliance’ of the applicants when it did not receive a response to letters sent in June, August and November 2015. He stated that the letters of June, August and November 2015 were never received by himself or his wife. Mr Zalewska-Moon contended that prior to the reduction of a pension under 56B, the respondent was under a legislative duty to investigate non-compliance.

16. For completeness, I set out the relevant notification provisions – section 54 (as it appeared in the respondent’s statement of facts, issues and contentions) and section 56B – below:

    54       Secretary may require notification of an event or change of circumstances

    (1) The Secretary may give a person:

    (a) to whom a service pension or income support supplement is being paid;  … a notice that requires the person to inform the Department, or an officer specified in the notice, if:

    (d) a specified event or change of circumstances occurs; or

    (e) the person becomes aware that a specified event or change of circumstances is likely to occur. …

    (3) An event or change of circumstances is not to be specified in a notice under subsection (1) unless the occurrence of that event or change of circumstances might affect:

    (a) the payment to the person of the pension; …

    (4)  A notice under subsection (1):

    …

    (c)  must specify the period within which, and, subject to subsection

    (5) The period specified under paragraph (4)(c) must end not later than 14 days after:

    (a) the day on which the event or change of circumstances occurs; or

    (b) the day on which the person becomes aware that the event or change of circumstances is likely to occur.

    56B      Automatic rate reduction—recipient not complying with section 54 notification obligations

    Where:

    (a)  a person who is receiving a service pension or income support supplement is given a notice under section 54; and

    (b)  the notice requires the person to inform the Department or a specified officer of the occurrence of an event or change in circumstances within a specified period (in this section called the notification period); and

    (c)  the event or change in circumstances occurs; and

    (d) the person does not inform the Department or specified officer of the occurrence of the event or change in circumstances within the notification period in accordance with the notice; and

    (e) because of the occurrence of the event or change in circumstances, the person’s rate of pension or income support supplement is to be reduced;

    then, except where otherwise provided for by this Act, the pension or income support supplement becomes payable to the person at the reduced rate on the day on which the event or change in circumstances occurs.

17. Mr Zalewska-Moon submitted that s 56B ‘necessitates the respondent investigating the circumstances for the non-return … … as a prelude to a reduction of pension’. He contended that earlier action by the respondent (in processing the change of circumstances resulting from property transfer) would have reduced the amount to be repaid by the applicants. Ultimately, Mr Zalewska-Moon argued that there had been a ‘failure to act in a timely manner’ amounting to ‘negligence’ by the respondent.

18. The respondent submitted that transfer of property from the applicants to their daughter for no consideration amounted to the disposal of an asset under ss 52E, 52F and s 52JC of the Act. It was also submitted that the amount held against the applicants’ pension assessment should be $480,000 (the value of the property, $490,000, minus the $10,000 allowable gift limit) and that this should be held for a period of five years, beginning from the date of the disposition (25 July 2014).

19. The respondent contended that as a result of the deemed income (arising from the disposition of the deprived asset), the Zalewska-Moons received a higher rate of pension than they were entitled to. Where persons fail to properly inform the Department of the disposal of assets, this constitutes non-compliance under s 54 of the Act. As a result, there will be an automatic reduction of pension under s 56B and a consequent raising and recovery of that overpayment under s 205. As I have stated above, the total amount of the overpayment in this matter was $18,821.62 ($9,410.81 each).

20. The respondent submitted that the tribunal is unable to review the kind of automatic reduction or recovery of overpayment outlined in the preceding paragraph, though it noted the tribunal may be able to consider some steps leading to the reduction and whether an automatic reduction actually occurred.

    CONSIDERATION

21. The purpose of the Act’s deprivation provisions (ie the provisions relating to the disposal of assets by persons receiving entitlements under the Act) is explained in the Department’s Consolidated Library of Information and Knowledge and was extracted in the relevant reviewable decision in this matter. The purpose is stated to be ‘to limit the potential for a person to avoid the income and assets tests’ and that for the provisions to apply, ‘it must be shown that a person has diminished directly or indirectly the value of: an asset; an income; or a source of income.

22. Sections 5J(1)(b), 5J(2B) and 52E operate to render the applicants’ property transfer as a deprived asset and s 205 authorises the recovery action undertaken. For the sake of completeness, I will deal with the applicants’ concerns about the respondent’s alleged lack of diligence in respect of the s 54 and s 56B notification requirements.

23. In the reviewable decision, the delegate noted that the applicants were issued with a ‘You and Your Pension’ booklet when they were first granted the service pension in 2000. This booklet describes gifts as ‘an asset which is given away without receiving the market value of that asset in return’ and that:

    [i]f you give away more than $10,000 in a pension year, the extra amount above $10,000 will be counted as if it were still your asset under the assets test for 5 years. Income will be deemed on the extra amount as well.

24. The delegate also noted that Mr and Mrs Zalewska-Moon had ‘received numerous advice letters since September 2000 reinforcing their financial obligations to notify the Department if they dispose of any assets.’

25. At the hearing, Mr Zalewska-Moon conceded that what the respondent had submitted in its statement of facts, issues and contentions was ‘essentially, correct’ but repeated his concerns regarding the calculation of the overpayment and the neglected responsibility of the Department in following up on his failure to respond to their letters.

26. I sympathise with Mr Zalewska-Moon’s submission that the apparent delay by the respondent in following up on their requests for information in 2015 may have significantly lessened the overpayment and resulting debt that he and his wife are now repaying. However, the tribunal’s power does not extend to the waiver of debt or to compel enquiries into the management of such matters within the Department.

27. The respondent has correctly set out the relevant law and principles in its submissions as I have referred to at paragraphs 18 to 20 above and I have noted the effect thereof at paragraph 22.

28. The provisions of the Act do not provide any support for the contentions of the applicants and accordingly, for the reasons outlined above, the decision under review is affirmed.

I certify that the preceding 28 (twenty-eight) paragraphs are a true copy of the written reasons for the decision of A G Melick AO SC, Deputy President

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Associate

Dated: 5 January 2018

Date(s) of hearing:	3 October 2017
Applicant:	In person
Counsel for the Respondent:	Mr K Rudge
Solicitors for the Respondent:	Repatriation Commission
Joined Party:	In person