Williams and Department of Family and Community Services [2000] AATA 35 (18 January 2000)

Last Updated: 4 February 2000

DECISION AND ORAL REASONS FOR DECISION [2000]AATA 35

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S94/283

General Administrative DIVISION )

Re SELINA WILLIAMS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION AND ORAL REASONS FOR DECISION

Tribunal Senior Member WJF Purcell

Date 18 January 2000

Place Adelaide

Decision For the reasons given orally at the Hearing of the matter, the Tribunal sets aside the decision under review and remits the matter to the delegate for assessment of the applicant's eligibility for payment of age pension as and from 8 March 1993 on the basis that the amount of $430,000 is not to be included as an asset for the purposes of the Social Security Act 1991.

(Signed)

WJF PURCELL

(Senior Member)

CATCHWORDS

SOCIAL SECURITY - pensions, benefits and allowances - age pension -

Social Security Act 1991 ss.1123, 1124, 1125A, 1126, 1129

ORAL REASONS FOR DECISION

18 January 2000 Senior Member WJF Purcell

1. This is an application for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 25 July 1994 (T2) which affirmed two decisions of a delegate of the respondent (the Department) to refuse payment of age pension because of the value of assets and to refuse also payment of age pension pursuant to the assets test hardship provisions.

2. The evidence before the Tribunal comprised the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (the T documents), together with exhibits tendered by the parties. The applicant was represented by her husband, Mr Williams (the husband) who gave oral evidence, and called their accountant, Ms Gibson, who gave evidence by way of telephone link-up. The Department was represented by Ms Odgers.

3. The applicant and the husband are trustees of the Norm Williams Family Trust (the family trust) which is a discretionary trust established some 20 years ago. They also had a 25 per cent interest in Dembicon Nominees Pty Ltd (Dembicon) a company which was in financial difficulties in 1990, and by 1992/93 the company was in extreme financial difficulties and was placed into receivership by its major creditor, the Commonwealth Bank, on 4 June 1993.

4. The applicant, who was born on 1 February 1932, applied for age pension on 8 March 1993. The application was rejected on 8 April 1993, on the basis that the applicant's assets exceeded the allowable limit. On 21 February 1992 the applicant and the husband had signed a deed of forgiveness releasing the family trust from payment of credits or loan accounts in the sum of $430,000. The delegate treated the deed of forgiveness as a disposition of assets, and the amount of the deprived assets would preclude payment of pension. The delegate also refused to apply the hardship provisions to enable pension to be paid. These decisions were affirmed by the authorised review officer (ARO) and by the SSAT by the decision under review of 25 July 1994.

5. In the course of its reasons for decision the SSAT stated:

"...

The Tribunal was satisfied that the reason the Deed of Forgiveness was signed was in order to protect Mr and Mrs Williams and certainly not for the purposes of obtaining a social security advantage. However, in assessing what value should be placed upon the amount of the disposition, the Tribunal considered that it could only accept the value of the disposition as being that amount which was accepted by Mr and Mrs Williams at the time they signed the Deed of Forgiveness. It may be that Dembicon Nominees at the time the Deed was signed would not have been able to honour their debts to the NWFT. ... However, the Tribunal found that at the time the Deed was signed there was no other basis upon which to attach a value to the disposition other than that amount which was accepted by Mr and Mrs Williams. In that case it was an amount of $430,000. The Tribunal has therefore found that Mr and Mrs Williams did dispose of an asset in signing the Deed of Forgiveness and in that Deed, they forgave the NWFT from repaying to them an amount of $430,000. They did not receive any consideration for this disposition. Thus the amount which Mr and Mrs Williams disposed of is $430,000.

...

... The Tribunal considered that if Mr and Mrs Williams were suffering financial hardship then applying these guidelines the disposal of property did result in a deprivation of income and did contribute to the resultant financial hardship. As a result, the Tribunal considered that the discretion to disregard the disposal could not be exercised in this case.

...

... The Tribunal therefore considered that since they were not suffering severe financial hardship the provisions of section 1129 could not be applied in Mrs Williams' case."

6. Section 1123 of the Act sets out the definition of disposal of assets:

"1123.(1) For 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."

7. Section 1124 of the Act calculates the amount of the disposition:

"1124. If a person disposes of assets, the amount of the disposition is:

(a) if the person receives no consideration for the destruction, disposal or diminution--an amount equal to:

(i) the value of the assets that are destroyed; or

(ii) the value of the assets that are disposed of; or

(iii) the amount of the diminution in the value of the assets whose value is diminished; or

(b) if the person receives consideration for the destruction, disposal or diminution--an amount equal to:

(i) the value of the assets that are destroyed; or

(ii) the value of the assets that are disposed of; or

(iii) the amount of the diminution in the value of the assets whose value is diminished;

less the amount of the consideration received by the person in respect of the destruction, disposal or diminution."

8. Section 1125A(6) of the Act provides the relevant disposal limit:

"1125A.(6) In this section:

"disposal limit" means:

(a) in relation to assets disposed of on or after 1 March 1986 and before 1 March 1991--$4,000; and

(b) in relation to assets disposed of on or after 1 March 1991--$10,000."

9. Section 1126 of the Act concerns disposal of assets as it concerns members of couples:

"1126.(1) Subject to subsections (2), (3) and (4), if, on or after 1 March 1986:

(a) a person who is a member of a couple has disposed of an asset of the person:

(i) during a pension year of the person; or

(ii) if the person is not receiving a pension or payment of a kind referred to in subsection 11(10) but the person's partner is receiving such a pension or payment or is receiving a youth training allowance--during a pension year of the person's partner; and

(b) the amount of that disposition, or the sum of that amount and the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during that pension year, exceeds disposal limit;

then, for the purposes of this Act:

(c) there is to be included in the value of the person's assets for the period of 5 years that starts on the day on which the disposition takes effect:

(i) 50% of the amount by which the sum of the amount of the first-mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during the pension year exceeds disposal limit; or

(ii) 50% of the amount of the first-mentioned disposition;

whichever is the lesser amount; and

(d) there is to be included in the value of the assets of the person's partner for the period of 5 years that starts on the day on which the disposition takes place:

(i) 50% of the amount by which the sum of the amount of the first-mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during the pension year exceeds disposal limit; or

(ii) 50% of the amount of the first-mentioned disposition;

whichever is the lesser amount."

10. Section 1129 of the Act sets out the financial hardship rules:

"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."

11. The applicant's accountant, Ms Gibson, gave evidence, which I accept, that over a number of years the family trust had accrued undrawn distributions from the sale of the couple's shares and real estate. The family trust had purchased also from other related entities units or further shares in Dembicon, and by early 1992 those assets were represented in the family trust ledger as assets of more than $430,000, acquired through loans advanced by the applicant and the husband, but Ms Gibson said in evidence, as a matter of fact, with the collapse of Dembicon, that asset was valueless and unrealisable therefore.

12. I am satisfied on the evidence that the $430,000 loan account the applicant and the husband had with the family trust represented an asset as at February 1992, which is valueless. In my view the asset should be disregarded, therefore, for the purposes of the Act. I consider that the value of the applicant's assets for the purpose of the Act should not include the amount of $430,000 which the delegate treated as a disposition of assets for no consideration, or for inadequate consideration.

13. For these reasons the Tribunal sets aside the decision under review, and remits the matter to the delegate for assessment of the applicant's eligibility for payment of age pension as and from 8 March 1993, on the basis that the amount of $430,000 is not to be included as an asset for the purposes of the Social Security Act 1991.

I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member WJF Purcell

Signed: .....................................................................................

Personal Assistant

Date/s of Hearing 18 January 2000

Date of Decision 18 January 2000

Counsel for the Applicant Mr Williams

Solicitor for Applicant -

Counsel for the Respondent Ms L. Odgers

Solicitor for the Respondent Centrelink