Cocks; Secretary, Department of Family and Community Services [2002] AATA 1179 (1 November 2002)

Last Updated: 19 November 2002

DECISION AND REASONS FOR DECISION [2002] AATA 1179

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V2002/500

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICE

Applicant

And MARIE COCKS

Respondent

DECISION

Tribunal Mr J Handley (Senior Member)

Date 1 November 2002

Place Melbourne

Decision The decision of the SSAT made on 11 April 2002 is set aside and in substitution IT IS DECIDED Ms Cocks: i) Is an attributable stakeholder of the Stanley David Cocks Trust; and ii) The specified asset and income attribution is not less than 100%.

...........Sgd. Mr J. Handely............

Senior Member

CATCHWORDS

Social Security - Applicant beneficiary of estate of her father - receives income from the estate, access to capital and resides rent free in a house owed by the trust - whether an attributable stakeholder - whether income and asset attribution any less than 100% - decision set aside.

REASONS FOR DECISION

1 November 2002 Mr J. Handley, Senior Member

1. This is an application made by the Secretary, Department of Family and Community Services against a decision made by the Social Security Appeals Tribunal ("SSAT") on 11 April 2002. The SSAT was then reviewing a decision made by an officer of Centrelink on 10 December 2001 to cancel Ms Cocks' claim for parenting payments on the grounds that her assets exceeded the allowable asset limit.

2. The SSAT decided to set aside the decision under review and in substitution it decided that the respondent's assets did not exceed the allowable asset limit. In effect, it decided that parenting payment should not have been cancelled.

3. In its review of the decision made by Centrelink, the SSAT had regard to the Social Security Act 1991 ("the Act"), the Social Security (Administration) Act 1999 (the "Administration Act") and the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 ("the Attribution Principles").

4. The application was listed for hearing in Bendigo on 7 August 2002. The respondent knew on 18 June 2002 (when I heard an application for a stay lodged by the applicant) that it was intended to list the application for hearing in Bendigo in the week commencing 5 August 2002. On the day prior to the hearing - 6 August 2002 - Ms Cocks applied for an adjournment of the hearing. I heard the adjournment request on 7 August 2002, being the day that the matter was listed for hearing. Ms Cocks submitted that she had been unable to obtain legal representation and preferred to have the benefit of a suitably qualified person representing her at the hearing. She said that she had applied for legal aid at the Bendigo office of the Legal Aid Commission of Victoria. She said that her application was rejected and she had lodged an appeal against the rejection. She said that the appeal had also been unsuccessful. Ms Cocks said that she also sought legal representation from private practitioners in Bendigo, who advised her that costs of representation would be in the vicinity of $10-15,000. She indicated that she had sought assistance from the trustees of her father's estate to meet the cost of that representation, but that request was unsuccessful.

5. Ms Cocks indicated that she sought an adjournment to explore the opportunity of obtaining legal representation outside Bendigo. She indicated that should she obtain such representation that she would not, in any event, be able to meet the costs. It was also likely that the trustees of her father's estate would also reject an application to pay for it.

6. I saw no useful purpose, in those circumstances, to permit the application to be adjourned. It seemed to me, from what Ms Cocks submitted, that having explored all reasonable opportunities to obtain representation, being denied financial assistance from both the Legal Aid Commission and from her fathers estate, that even if she were to obtain representation that she would not be able to meet such costs.

7. I decided, therefore, that the application should proceed. I heard evidence from Ms Cocks and two witnesses the applicant called.

8. At the conclusion of the proceedings, I indicated that I intended to reserve my decision and publish written reasons. Ms Cocks then indicated that she in fact had not lodged an appeal against the rejection made by the Legal Aid Commission and would have preferred the opportunity to do so. She also indicated that she would have preferred the opportunity to have representation at the hearing.

9. On reflection - having regard to the complexities of the legislation (which will be referred to later) and being unsure whether an appeal against the rejection by the Legal Aid Commission had or had not been made, I arranged for a letter to be forwarded to Ms Cocks indicating that I intended to publish a statement summarising the evidence heard in Bendigo and giving her the opportunity to obtain legal representation within 14 days of receipt of the summary. The letter indicated that should she obtain such representation that I would consider any written submissions made and/or hear any application to resume the hearing.

10. On the one hand, I am satisfied that more than an adequate opportunity was given to the respondent to obtain legal or other representation. However, on reflection, the expeditious management of applications before the Tribunal should not overlook or ignore procedural fairness. The applicant is a single mother living in rural Victoria. She would not have access to the welfare or community legal services that exist in Melbourne. Additionally, the legislation applicable to this application is complex and it was learnt at the hearing that this appeal is the first heard under the "Attribution Principles". I decided at the conclusion of the hearing that it was appropriate that Ms Cocks be given the opportunity to obtain legal or other representation. I arranged for a document to be forwarded to Ms Cocks, in terms identical to paragraphs 1-45 of this decision, save for amendment correcting errors of typing, punctuation and grammar. A letter which accompanied that document offered Ms Cocks the opportunity to obtain legal or other representation and, within 14 days of receipt of the letter, she or her representatives were invited to either lodge written submissions or apply for a resumption of the hearing.

Background

11. Ms Cocks is presently 26 years of age, having been born on 16 September 1976. She is the daughter of the late Stanley David Cocks, who died on 12 April 1997. In a will dated 14 June 1996, the late Mr Cocks appointed National Mutual Trustees Ltd, Executor of his will and trustee of his Estate. He devised all chattels to Ms Cocks absolutely, and left the balance of his estate, both real and personal, to his trustees to pay all debts and expenses and then hold the residue upon trust to apply income from it to his daughter, Ms Cocks, during her lifetime. The will also provided that should the income prove to be insufficient, the Trustee shall have "absolute and uncontrolled discretion" to apply the "corpus" for her "maintenance, benefit, welfare and comfort" during her lifetime. Additionally, the Trustees were obliged to hold property on trust to divide it equally between the surviving children of the respondent.

12. At all relevant times prior to December 2001, Ms Cocks was in receipt of parenting payment. At that time, she was living in the house her father formerly owned, but which is now registered in the name of the Estate. Ms Cocks resides in that house rent free with her daughter, Jemmea, currently aged 8 years, who was born on 5 June 1994.

13. The applicant attributed to Ms Cocks the assets of the estate of her late father by the provisions of the Act, the Administration Act and the Attribution Principles. In making this decision, the applicant decided that the allowable assets limit had been exceeded and parenting payment was therefore not payable.

The Legislation

14. The Social Security & Veterans' Entitlements Legislation Amendment (Private Trust & Private Companies - Integrity of Means Testing) Act 2000 (the Amending Act") significantly amended Part 3.18 of the Act, with effect from 1 January 2002.

15. Section 1207, being the first section within Part 3.18, contains a 'simplified outline' of this Part of the legislation and says as follows-

"1207 The following is a simplified outline of this Part:

hThis Part sets up a system for the attribution to individuals of the assets and income of private companies and private trusts (s.1207Y and 1208E).

* Attribution starts on 1 January 2002.

* For an asset or income to be attributed to an individual;

(a) the company must be a designated private company or the trust must be a designated private trust (sections 1207N and 1207P); and

(b) the company must be a controlled private company in relation to the individual or the trust must be a controlled private trust in relation to the individual (sections 1207Q and 1207V); and

(c) the individual must be an attributable stakeholder of the company or trust (s.1207X).

* A company or trust will be a controlled private trust or a controlled private company if the individual passes a control test or a source test.

* An individual will not be an attributable stakeholder of a trust if the trust is a concessional primary production trust in relation to the individual.

* The asset deprivation rules and the income deprivation rules are modified if attribution happens."

16. The provisions of 1207P(1) are applicable because the Trust in issue is a 'designated private trust'. That section reads as follows:

"For the purposes of this Part, a trust is a designated private trust unless-

all of the following conditions are satisfied:

the trust is a fixed trust;

the units in the trust are held by 50 or more persons;

the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual or individuals to avoid the application of this part and/or Division 11A of Part IIIB of the Veterans' Entitlements Act; or

the trust is a complying superannuation fund (see sub-section (3)); or

the trust is an excluded trust (see sub-section (4)).

17. For the purposes of this application, I am also satisfied that the trust is a "controlled private trust", for the purposes of s.1207V, which reads as follows:

"1207V(1) for the purposes of this Part, a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and:

the individual passes the control test set out in subsection (2); or

the individual passes the source test set out in subsection (3).

1207V(2) Control test For the purposes of this section, the individual passes the control test in relation to a trust if:

the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)) is the trustee, or any of the trustees, of the trust; or

a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or

a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or

the aggregate of:

the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and

the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);

is 50% or more or

a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment or the corpus or income of the trust; or

a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or

a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or

a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.

1207V(3) Source test - For the purposes of this section, an individual passes the source test in relation to a trust if:

the individual has transferred property or services to the trust after 7.30pm, by standard time in the Australian Capital Territory, on 9 May 2000; and

the underlying transfer was made for no consideration or for a consideration less than the arm's length amount in relation to the underlying transfer.

1207V(4) Group - A reference in this section to a group in relation to an individual is a reference to:

the individual acting alone; or

an associate of the individual acting alone; or

the individual and one or more associates of the individual acting together; or

2 or more associates of the individual acting together.

1207V(5) Income - In this section:

income means income within the ordinary meaning of that expression".

18. To determine whether an individual is an attributable stake holder of a company or a trust - and relevantly whether Ms Cocks is an attributable stake holder of a trust - s.1207X(2) applies, and it reads as follows:

"1207X(2) Trust For the purposes of this Part if:

a trust is a controlled private trust in relation to an individual; and

the trust is not a concessional primary production trust in relation to the individual (see section 1208U);

then:

the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and

if the individual is an attributable stakeholder of the trust - the individual's asset attribution percentage in relation to the trust is:

100%; or

if the Secretary determines a lower percentage in relation to the individual and the trust- that lower percentage; and

if the individual is an attributable stakeholder of the trust - the individual's income attribution percentage in relation to the trust is:

100% or

if the Secretary determines a lower percentage in relation to the individual and the trust - that lower percentage".

19. The Attribution Principles - in so far as they apply to the operation of s.1207X(2) - were introduced by reason of a power given to the Secretary of the applicant, pursuant to s.1209E(1) of the Act. The section provides that if the Secretary formulates Principles, those Principles are to be "complied with by him or her in making decisions" under the designated legislation. It follows that this Tribunal, in the review of decisions of government or its departments, is obliged to take account of those Principles. That is to say, compliance is also required by this Tribunal.

20. Section 1207X(2)(c), as referred to above, deems an individual to be an attributable stakeholder, of a controlled private trust, unless the Secretary otherwise determines. Subsection (d) and (e) provides that the asset and income attribution percentage respectively, in relation to a controlled private trust is 100%, or if the Secretary determines a lower percentage in relation to the individual and the trust - that lower percentage. The Principles are to be considered to determine whether an attribution of less than 100% is to apply. Principle 4 reinforces this position as follows:

"Purpose

These principles set out decision-making principles with which the Secretary must comply in making a determination, under s.1027X of the Act that:

an individual is not an attributable stakeholder of a company or trust; or

a specified percentage, lower than 100%, is the asset attribution percentage, or income attribution percentage, of an attributable stakeholder of a company or trust".

21. Part 2 of the Principles is concerned with the determination of whether an individual is not an attributable stakeholder. Principle 5 provides the "purpose" of this Part and Principle 6 concerns the application. Section 5 and 6 are reproduced as follows-

"5 Purpose

This Part sets out decision-making principles with which the Secretary must comply in making a determination, under paragraph 1207X(1)(a) or (2)(c) of the Act, that an individual is not an attributable stakeholder of a company or trust.

6 Application

(1) This part applies if, but for a determination by the Secretary, the individual would be an attributable stakeholder of the company or trust.

(2) The Secretary must consider the relationship between the individual and the company or trust having regard to:

(a) the reason why, but for a determination, the individual would be an attributable stakeholder; and

(b) the circumstances mentioned in this Part.

(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company or trust".

22. Principles 7-13, being the remaining sections within this part, are reproduced as follows:

"7. Circumstances affecting relationship with company or trust

(1) The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder of the company or trust.

(2) For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:

circumstances arising from the legal structure of the company or trust;

circumstances arising from the administrative arrangements of the company or trust;

whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust.

8. Contribution to company or trust

If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:

the value of the contribution; and

the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and

the effect of the contribution on the financial position of the company or trust; and

if the individual received consideration for the contribution, the amount of consideration

9. Past benefit from distributions by company or trust

(1) The Secretary must consider whether the individual has received a benefit from a distribution made by the company or trust.

(2) If an individual has received a benefit, the Secretary must also consider:

(a) the value of the benefit; and

(b) If the individual has received a benefit on more than 1 occasion, the frequency with which the individual has received benefits.

(3) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

10. Future benefit from distributions by company or trust

(1) The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.

(2) If subsection (1) applies, the Secretary must also consider the likely value of the benefit.

(3) For this section, the Secretary must have regard to:

(a) the constituent documents of the company; or

(b) documents, if any, establishing the terms of the trust.

(4) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

11. Benefit from assets and income of company or trust

(1) The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 9 or 10) from the assets or income, or both, of the company or trust.

(2) For this section, benefit:

is not limited to a benefit to which the individual has a legal or equitable entitlement; and

(b) includes benefits received or derived in the form of property or services.

12. Existing attribution to individual

(1) The Secretary must consider whether the individual is:

(a) under the Act - an attributable stakeholder of any other company or trust; or

(b) under the Veterans' Entitlement Act 1986 - an attributable stakeholder of the company or trust, or of any other company or trust.

(2) If subsection (1) applies, the Secretary must also consider:

(a) the asset attribution percentage attributed to the individual, if any; and

(b) the income attribution percentage attributed to the individual, if any.

13. Other circumstances

The Secretary must consider any other circumstances that affects the involvement of the individual with the activities or the administration of the company or trust."

23. Part 3 concerns the decision-making Principles with which the Secretary must comply under s.1207X(d)(ii), if it determined that the asset attribution percentage is lower than 100% (emphasis added).

24. Principle 15 concerns the application of this part and it reads as follows:

"15. Application

(1) This Part applies if, but for a determination by the Secretary, the asset attribution percentage of the attributable stakeholder, in relation to the company or trust, would be 100%.

(2) The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part.

(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine a percentage lower than 100% as the asset attribution percentage.".

25. Principles 16 to 22 are reproduced as follows:

"16. Circumstances affecting relationship with company or trust

(1) The Secretary must consider whether there are relevant circumstances that make it appropriate for the individual to have an asset attribution percentage of 100%.

(2) For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:

(a) circumstances arising from the legal structure of the company or trust;

(b) circumstances arising from the administrative arrangements of the company or trust;

(c) whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust an, if so, the extent of that control.

17. Contribution to company or trust

If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:

(a) the value of the contribution; and

(b) the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and

(c) the effect of the contribution on the financial position of the company or trust; and

(d) if the individual received consideration for the contribution, the amount of consideration.

18. Past benefit from distributions by company or trust

(1) The Secretary must consider whether the individual has received a benefit from a distribution made by the company or trust.

(2) If an individual has received a benefit, the Secretary must also consider:

(a) the value of the benefit; and

(b) if the individual has received a benefit on more than 1 occasion, the frequency with which the individual has received benefits.

(3) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

19. Future benefit from distributions by company or trust

(1) The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.

(2) If subsection (1) applies, the Secretary must also consider the likely value of the benefit.

(3) For this section, the Secretary must have regard to:

(a) the constituent documents of the company; or

(b) documents, if any, establishing the terms of the trust.

(4) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

20. Benefit from assets and income of company or trust

(1) The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 18 or 19) from the assets or income, or both, of the company or trust.

(2) For this section, benefit:

(a) is not limited to a benefit to which the individual has a legal or equitable entitlement; and

(b) includes benefits received or derived in the form of property or services.

21. Existing attribution to individual

(1) The Secretary must consider whether the individual is:

(a) under the Act - an attributable stakeholder of any other company or trust; or

(b) under the Veterans' Entitlements Act 1986 - an attributable stakeholder of the company or trust, or of any other company or trust.

(2) If subsection (1) applies, the Secretary must also consider:

(a) the asset attribution percentage attributed to the individual, if any; and

(b) the income attribution percentage attributed to the individual, if any.

22. Other circumstances

The Secretary must consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust".

26. Part 4 of the Principles concerns the decision-making principles with which the Secretary must comply pursuant to s.1207X(2)(e)(ii), in order to determine whether there should be an income attribution percentage lower than 100% (emphasis added).

27. Principle 24 concerns the application of this part and it reads as follows:

"Application

(1) This Part applies if, but for a determination by the Secretary, the income attribution percentage of the attributable stakeholder, in relation to the company or trust, would be 100%.

(2) The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part.

(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine a percentage lower than 100% as the income attribution percentage".

28. Principles 25 to 31 are reproduced as follows-

"25. Circumstances affecting relationship with company or trust

(1) The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to have an income attribution percentage of 100%.

(2) For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affect by any of the following circumstances:

(a) circumstances arising from the legal structure of the company or trust;

(b) circumstances arising from the administrative arrangements of the company or trust;

(c) whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust and, if so, the extent of that control.

26. Contribution to company or trust

If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:

(a) the value of the contribution; and

(b) the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and

(c) the effect of the contribution on the financial position of the company or trust; and

(d) if the individual received consideration for the contribution, the amount of consideration.

27. Past benefit from distributions by company or trust

(1) The Secretary must consider whether the individual has received a benefit from a distribution made by the company or trust.

(2) If an individual has received a benefit, the Secretary must also consider:

(a) the value of the benefit; and

(b) if the individual has received a benefit on more than 1 occasion, the frequency with which the individual has received benefits.

(3) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

28. Future benefit from distributions by company or trust

(1) The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.

(2) If subsection (1) applies, the Secretary must also consider the likely value of the benefit.

(3) For this section, the Secretary must have regard to:

(a) the constituent documents of the company; or

(b) documents, if any, establishing the terms of the trust.

(4) For this section, a distribution includes distributions:

(a) in the case of a distribution by a company - of the capital or income, or both, of the company; and

(b) in the case of a distribution by a trust - of the corpus or income, or both, of the trust.

29. Benefit from assets and income of company or trust

(1) The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in s.27 or 28) from the assets or income, or both, of the company or trust.

(2) For this section, benefit:

(a) is not limited to a benefit to which the individual has a legal or equitable entitlement; and

(b) includes benefits received or derived in the form of property or services.

30. Existing attribution to individual

(1) The Secretary must consider whether the individual is:

(a) under the Act - an attributable stakeholder of any other company or trust; or

(b) under the Veterans' Entitlements Act 1986 - an attributable stakeholder of the company or trust, or of any other company or trust.

(2) If subsection (1) applies, the Secretary must also consider:

(a) the asset attribution percentage attributed to the individual, if any; and

(b) the income attribution percentage attributed to the individual, if any.

31. Other circumstances

The Secretary must consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust."

Marie Cocks

29. Ms Cocks said that at the present time she receives income from 3 sources. She receives family payment from the applicant with respect to her daughter in the sum of $196 per fortnight ($98 p.w.). She currently works on a casual basis with the Department of Human Services as a casual attendant of intellectually disabled persons in Rochester. At present, she averages 40 hours per fortnight at $17 per hour gross. Ms Cocks also receives income on a regular weekly basis from the Trust, which is presently $225 per week. Ms Cocks understands that the Trust meets any income tax liability. With respect to the salary earned from the Department of Human Services, Ms Cocks was unsure as to the rate of taxation paid on her casual earnings, however an average of 40 hours per fortnight at $17 per hour is the equivalent of $340 gross per week. Even if income tax was assessed at 50% (which is probably greater than the rate at which it would be assessed), it would result in a net weekly income of $170. The net income from all of the above 3 sources totals $493 p.w.

30. Ms Cocks continues to reside in the house her father formerly owned, which is now registered in the name of the Trust. She does not pay rent and the Trust pays municipal rates, water rates and insurance. Ms Cocks pays the cost of gas, telephone and electricity. She said, however, that she incurred expenses for the provision of curtains and blinds, construction of concrete pathways (during the life of her father), construction of a crushed rock driveway and construction of a garden which she has not sought recovery from the trust. The construction of the garden appears extensive, because she recalled purchasing 30 conifer fees at $15 each and a number of fruit trees and shrubs.

31. Ms Cocks said that she applied to the Trustee for a greater weekly income, to compensate for the loss of parenting allowance. She said that she was advised that her application was refused because it would put the asset base of the Trust at risk. Ms Cocks agreed that the ultimate beneficiary of the Trust was her daughter and she did not wish to offend her father's wishes. Nonetheless, she said that she had no choice but to make application for funds from time to time from the Trust over and above the amount that is presently paid to her and said "no-one seems to care". She said that if a greater weekly allocation was made she would not work, would be able to spend more time with her daughter and would not incur the cost of babysitting. Ms Cocks presently works from either 7 or 7.30am until 10.30 or 11am and from either 3 or 4pm until 9pm.

32. With respect to capital applications made from the Trust, Ms Cocks agreed that Perpetual Trustees had allocated approximately $8,000 with respect to the cost of air conditioning and electrical re-wiring. She agreed that when the Trustees had an office in Bendigo - and before regular weekly income was paid - the Trust did meet the costs of car registration and a gas account. She acknowledged that the capital base of the trust was invested and earnt income annually, which was paid to her, and she assumed that subject to continuing prudent investment, future income would be paid. At the present time, Ms Cocks has routine expenses comprising petrol of $40 per fortnight, groceries at $130 per week, telephone at $100 per month, gas and electricity each at $200 every two months, child minding at $60 per fortnight, ballet lessons at $6 per week plus cost of costumes and shoes, car insurance of $300 per annum and school fees.

33. In cross-examination, Ms Cocks agreed that her father established the Trust within his Will to ensure that her daughter's father would not have access to any of his assets. She said that her father believed that Jemmea's father would deplete the assets that he bequeathed, therefore, putting her future security and that of her daughter at risk. Ms Cocks said that her father told her in his lifetime that she and her daughter would "never want for anything". However, she said that her father had never spoken to her about having access to the capital base of the trust for any maintenance or welfare needs.

Mark Lappin

34. Mr Lappin is a trust officer with Perpetual Trustees. He gave his evidence by telephone from Sydney. He was familiar with the Trust in issue in this application.

35. Mr Lappin said that the Trust was discretionary, with the Trustees exercising the discretion as to payments. He said that it would be normal practice to consider payment of capital amounts to meet unusual or extraordinary expenses, if they were in the nature of "maintenance, benefit, welfare and comfort" of Ms Cocks as directed by the Will. He said the trustees would be prepared to exercise the discretion to meet those objectives with respect (also) to the respondent's daughter.

36. In the event that Ms Cocks needed a greater weekly income payment - if for example her current pension was stopped or she did not receive regular income from her employment - the Trustees would consider a greater weekly payment, subject to completion of a statement of financial circumstances and provision of a budget. He said that if Ms Cocks was suffering hardship, the weekly payments would be reviewed. Whilst there was power under the Will to increase the weekly payments, he was obliged to also preserve the assets.

37. At the present time, Mr Lappin said that the value of the estate is in excess of $440,000. This is inclusive of the home in Rochester, which currently has an estimated value of $110,000.

38. In answer to questions from me, Mr Lappin said that the Trustee was bound to ensure that Ms Cocks did not suffer hardship and her future access to trust funds was not restricted. He acknowledged that in the exercise of the discretion given to the Trustee by the Will, all applications will not necessarily be granted. However, the Trustees were aware of their obligation to ensure that hardship does not occur.

Ian Joyce

39. Mr Joyce is an officer of the Department of Family & Community Services and works in the project section in Canberra. He gave his evidence by telephone. Mr Joyce was called to give evidence of the Departmental policy concerning the Attribution Principles and the Amending Act deeming certain persons to be attributable stakeholders of a trust and have an asset and income attribution percentage of 100%, unless the Secretary or the Tribunal determine otherwise on review.

40. He said the policy underlying the Principles was to avoid situations where persons establish Trusts, in order to conceal or cloak assets to which they have access, yet at the same time receive social security benefits.

41. By way of an example of the intended operation of the Attribution Principles, he spoke of parents purporting to establish a family trust where children are described as the beneficiaries. On the one hand, those parents might apply to Centrelink for a benefit or a pension upon the basis that they no longer hold assets, yet on close examination the assets are being used or enjoyed by them. The Department would determine that those persons (the parents) are attributable stakeholders yet their attribution percentage would not be 100% each but would be reduced and would be found under the Attribution Principles to be 50% each.

42. Likewise, in the case of a partnership involving three persons where there was an equal contribution of capital, effort and share of profits, the partners would be found to be attributable stakeholders yet the attribution percentage as against each of them would be 33.3%.

43. In the present case concerning Ms Cocks, Mr Joyce said that he was aware of her circumstances and the nature of the Trust. He said that it was important to note that where resources were available to assist in the future maintenance of a person, that those resources should be used rather than taxpayer funds. He said the Principles were intended to establish a balance or an equity between assets to which a person might have access, as opposed to persons who are in need of Centrelink benefits, who do not have access to assets of a similar type or in similar circumstances.

44. He said that it was appropriate, having regard to the Attribution Principles to attribute 100% as against Ms Cocks, because she is the sole beneficiary during her lifetime and because she has access to trust income and trust assets.

45. Subsequent to Ms Cocks receiving the statement referred to in paragraph 10 (refer earlier), she engaged a firm of solicitors. The solicitors requested a resumption of the hearing and the matter was listed for 23 September 2002. On 17 September 2002, the solicitors lodged a comprehensive Statement of Facts and Contentions. On the resumption of the hearing, Ms McInnes again appeared on behalf of the applicant Department, and Mr Belmar appeared on behalf of Ms Cocks.

46. Ms Cocks was recalled to give further evidence.

47. Mr Belmar referred Ms Cocks to an application she made to Perpetual Trustees on 18 March 2002 for funding from the Trust. Attached to the application was an estimate of probable expenditure for the following 12 months. The proposed expenditure is described as "living expenses", "clothing", "general maintenance", "medical", "education", "books", "uniforms", "excursions", "sporting", "travel" and "taxation". The statement records anticipated and probable amounts expended on these items for four quarters, thereby giving a twelve month estimate, in the sum of $11,948.

48. In apparent response to the request for payments from the Trust, Mr Lapin wrote to Ms Cocks on 27 March 2002 in the following terms (omitting formal parts):

"Thank you for completing and returning the Application for Funding from a Discretionary Trust and please be assured we appreciate your time and effort in so doing.

As trustee we have certain obligations and these include ensuring the trust continues for your life and that there is a remainder for your children. In making these comments we acknowledge the wide powers of the will to advance capital to you and will do so from to time [sic]. We will however not draw down the capital to supplement the regular payments of income now being paid to you.

Whilst we have not approved the quarterly payment of capital to you we do leave open the option for you to make requests from time to time for capital advancements. We assure you that each request will receive due and proper consideration by our company."

49. Ms Cocks said that she does receive regular correspondence from the Trustees, but which mainly concern maintenance of the home and financial information concerning the performance of Perpetual Trustees as a corporation. She said that the Trustee does not "discuss" with her the performance of the monies invested on her behalf under the trust.

50. Ms Cocks said that Perpetual Trustees acquired the corporation "National Mutual" which was the Trustee appointed by her father's will. She said that National Mutual had an office in Bendigo and she had a good relationship with officers of that company. She said that she was assisted by officers of National Mutual where she sought assistance for payment of monies for her car registration, and she found dealing with those persons convenient because they were located in Bendigo. Perpetual Trustees however are located in Sydney and her only communication with them - save for correspondence - is by telephone which she regards as being "not helpful". Usually, she said that the conversations are "short" and "half the time I don't understand what the trustee is saying". She said "Mr Lapin controls the money in the trust - I don't ".

51. In cross-examination, Ms Cocks said that National Mutual paid for her car registration at a time when it was also making regular monthly payments to her of income being monies achieved from investment of the funds held in the trust. She said the amount fluctuated because "it depended on the rise or fall of the value of shares". She said that she was not aware how the amounts paid to her were calculated. Additionally she said that the amounts paid to her did not have regard to her "needs", whereas Perpetual Trustees pay her "the same amount every month".

52. A summary of the payments made by National Mutual is contained in a letter completed by Perpetual Trustees dated 19 March 2002 and found at pages 84/85 of the T documents. Amounts described as "income", were paid monthly between July 1998 and March 2002 - save for quarterly payments in October 1997, January and April 1998 and 2 payments in January 2002. Payments have also been made which are described as "capital" in December 2001 and February 2002 in the sum of $8,073.95 and $830 respectively.

Mark Lapin

53. Mr Lapin was again called at the resumed hearing in Melbourne by Ms McInnes. He said that the Trustees could review a beneficiary's circumstances at any time. However, he said the responsibility of the Trustee was to maintain the Trust and retain the capital for the ultimate beneficiary.

54. Mr Lapin noted that Ms Cocks had income from pension and employment in the vicinity of $10,000 per annum, and was seeking income from the trust - having regard to her statement of financial circumstances - in the vicinity of $12,000 per annum. Whilst acknowledging that a capital payment to her would be considered - on a "one off" situation - he said the payments by the Trustee would be - consistent with the will - for her "comfort and benefit". He noted that the applicant last completed a statement of financial circumstances in March 2002. He said that he would be prepared to review the decision that he made on 27 March 2002 by Ms Cocks making a fresh application and completing another statement of financial circumstances.

55. In cross-examination Mr Lapin said that Ms Cocks as a beneficiary is able to request that Perpetual Trustees be removed as the Trustee. He said that if there was conflict between Perpetual Trustees and Ms Cocks that it was more than likely that Perpetual Trustees would agree to retire, but it would seek legal advice and another Trustee would need to be appointed. He noted that Ms Cocks' daughter, who is the "ultimate beneficiary" was a minor and in those circumstances, Perpetual Trustees would only retire if another Trustee company was appointed.

56. In relation to the claim for income, evidenced by the statement of financial circumstances of 18 March 2002, Mr Lapin noted that the request was greater than the income being earned from the capital investments. He said that if the trustee paid the sum then requested that the capital invested would need to be paid, the effect of which would be that lesser income would be generated into the future (because the capital would be depleted).

57. Mr Lapin said that in the event that social security payments were terminated, Perpetual Trustees would acknowledge that the income from the investments would not be sufficient to meet her day to day expenses. In those circumstances, capital payments would be made to meet necessary expenses. Food, clothing, education and car expenses were offered as examples. A discretion in those circumstances would be favourably exercised for the benefit of Ms Cocks. He said that where expenses were of the character of emergencies or necessities capital payments would always be made, yet the objective was to maintain the capital fund wherever possible and not make capital payments on a regular basis.

Submissions

58. Ms McInnes submitted that Ms Cocks satisfied the control test under s1207V(2)(d) because the aggregate of her beneficial interest in the corpus or income was 50% or more. She submitted that Ms Cocks was entitled to 100% of the income of the trust. She submitted that Ms Cocks is the "individual" envisaged by sub-paragraph (i) and her daughter is the "associate" envisaged by sub-paragraph (ii).

59. Mr Belmar on behalf of Ms Cocks submitted that Ms Cocks did not satisfy the control test under s1207V(2). He said that sub-paragraph (d) refers to 50% of the entire trust and not "50% of the income". He submitted that his client does hold a beneficial interest with respect to the income, but that sum amounts to less than 3% of the entire trust (which he based on trust assets presently of $404,908 whereas income presently is $225 from the trust).

60. In relation to s1207X(2), Mr Belmar submitted that a presumption is established that a person is an attributable stake holder unless they are deemed not to be. He submitted that the relationship existing between Ms Cocks and Perpetual Trustees, could not be a situation further removed from the relationship that should exist between a beneficiary and a trustee. He said that the Trustee was a private corporation exercising duty under a will in such a way that "all its emphasis is on its duty and not on the personal circumstances of the beneficiary". He submitted that the Trustee corporation would only act - upon the evidence of Mr Lapin - if she was in "dire straits". He said Ms Cocks was not a person intended to be deemed as an attributable stake holder and by reason of the discretionary nature of the trust, his client had no guarantee that payments will be made, in the future, other than by way of income.

61. In reply, Ms McInnes noted that under the will of her late father, Ms Cocks was entitled only to the income from the trust and not to live in the house rent free. Nonetheless, she noted that the trustee permitted Ms Cocks to remain in the house, rent free, and made regular payments by way of maintenance and improvement over the house.

62. By way of explaining asset limits giving rise to the decision to end parenting payment, Ms McInnes submitted that the trust presently had a value of $404,000. The value of a home is excluded from the assets test which resulted in assets of $318,000 being attributed to Ms Cocks. The assets test limit for a "home owner" or a person having a life interest, was $141,000. The Secretary was, in the circumstances, obliged to end parenting payment. Nonetheless, family benefit is exempt from the assets test and it continues to be paid.

Conclusion And Reasons For Decision

63. The Amending Act represents a significant policy change by the Federal government regarding the assets and income of welfare recipients. By attributing assets and income to persons who benefit from trusts and companies, it is the stated intention of government that "income support entitlements are based on a persons level of resources not on the way in which he/she holds those resources" (refer Second Reading Speech Hansard/House of Representatives 17 August 2000 page 19226.

64. Additionally "the fundamental change being proposed under this measure is that when a private trust or private company is recognised as a designated private trust or company the assets and income of these private trusts and private companies may be attributed to a person who controls or has contributed to these structures" (refer Second Reading Speech Hansard/Senate 3 October 2000 at page 17711).

65. In order to achieve the correct or preferable decision when reviewing decisions of government or an agency of government, Brennan J in Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634 extensively discussed the application and relevance of the policy of government. At 645 His Honour said:

"When the Tribunal is reviewing the exercise of a discretionary power reposed in a Minister, and the Minister has adopted a general policy to guide him in the exercise of the power, the Tribunal will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision in the circumstances of the particular case. Where the policy would ordinarily be applied, an argument against the policy itself or against its application in the particular case will be considered, but cogent reasons will have to be shown against its application, especially if the policy is shown to have been exposed to parliamentary scrutiny."

66. The Trust in issue in the present application was created by the Will of the late Mr Cocks. It is a "designated private trust" within the meaning s. 1207P. It is also a "controlled private trust" for the purposes of s. 1207V. For the purposes of the Amending Act Ms Cocks is a "individual".

67. Ms Cocks satisfies the "control test" under s. 1207V because she presently holds an aggregate of 50% or more of the beneficial interests in the corpus or income of the Trust (s.1207V(2)(d)). The evidence of Ms Cocks and Mr Lappin clearly indicate that all income obtained by the Trust from investment of the corpus is paid to her. The income and capital has been paid for her benefit. Ms Cocks has "beneficial interests" in the corpus and the income, (although s 1207V(2)(d) indicates that the beneficial interest may be in either the corpus or the income).

68. Because Ms Cocks "passes the control test" and the "designated private trust" is a "controlled private trust", it therefore follows that for the purpose of s. 1207X(2) that Ms Cocks is "an attributable stakeholder" with respect to the assets and income of the Trust. She is deemed to have that status by virtue of s. 1207X, unless determined otherwise by the Secretary. The basis to determine if at all that Ms Cocks is not an attributable stakeholder are the Attribution Principles as determined by s. 1209E. As an attributable stakeholder, the asset and income attribution percentage is either 100% or such lower percentage as determined by the Secretary. Any finding of a percentage lower than 100% is determined by reference to the Attribution Principles.

69. The late Mr Cocks appointed National Mutual Trustees Limited as the Trustee of his estate. That corporation has subsequently been acquired by Perpetual Trustees who are the current Trustees of the Estate. The relevant relationship between Ms Cocks and Perpetual Trustees exists by virtue of the Trust having been established by the late Mr Cocks and the subsequent acquisition by Perpetual Trustees of National Mutual Trustees Limited.

70. In his Will, the late Mr Cocks bequeathed all of his personal chattels to Ms Cocks for her own use and benefit absolutely. He also determined that the residue of the Estate, after payment of debts and other expenses, is to be held on Trust and the income derived is to be paid to Ms Cocks during her lifetime. Should the income prove insufficient the Trustee may pay or apply so much of the corpus as he may determine in his absolute discretion for her benefit, welfare and comfort. Whilst the Trustee is obliged to pay all of the income derived from the Trust to Ms Cocks during her lifetime, the discretion given to the Trustee only applies with respect to the payment of the "corpus".

71. From the evidence heard and read in these proceedings, the Trustee, from time to time, has paid all of the income, which has been realised by investment of Trust capital. The Trustee has also had regard to the income received by Ms Cocks from other sources. The Trustee has also been mindful that Ms Cocks continues to reside in the home previously owned by her father, which is now an asset of the Estate. She resides in that home rent free.

72. There has been an exercise of the discretion available to the Trustee against payment of capital other than for the airconditioning and home maintenance, because of the need to preserve capital to ensure future income. Mr Lapin however acknowledged that the Trustees would not ignore payment of capital to relieve Ms Cocks from straightened financial circumstances or emergency. He was obliged however to ensure that by reason of the Will directing the Trustee to pay income throughout the life of Ms Cocks that the capital should be otherwise preserved.

73. Part 2 of the Attribution Principles provide the basis to determine "whether an individual is not an attributable stakeholder". Principle 6 specifically provides that consideration must be given to whether "the effect of one or more of the circumstances mentioned in this part in relation to the individual and the company or trust provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company or trust".

74. The Principles found within this part are in the nature of criteria or guidelines to assist the determination of whether the individual is not an attributable stakeholder. All of the guidelines need not be satisfied.

75. In so far as Principles 7-13 are concerned, Ms Cocks has received all income from the Trust and some payments of capital (Principle 9). It is foreseeable, by the terms of the Trust that all future income and perhaps some payments of capital will be made (Principle 10). Ms Cocks resides in the home formally owned by her father rent free and she therefore receives or derives a benefit in the form of property in which she has an equitable entitlement (Principle II). Ms Cocks is not an attributable stakeholder in relation to any other company or trust or under the Veterans' Entitlements Act 1986 (Principle 12). Ms Cocks has made no contributions to the Trust (Principle 8).

76. Principle 7(1) directs enquiry into whether there are "relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder ..... of the trust". Sub-principle (2) refers to the relationship between the individual and the trust being affected by 3 listed circumstances ((a), (b) and (c)). Only (c) appears to be relevant namely, whether the individual "can be reasonably expected to exercise effective control in relation to the trust".

77. Ms Cocks, the individual, "passes the control test in relation to (the) trust" by s.1207V(2)(d) because her beneficial interest is greater than 50% of the income of the trust. But whether she can be "expected to exercise effective control" is not as straight forward.

78. The expression "effective control" is not defined by the Principles or by the Amending Act.

79. "Effective" is defined in the Penguin Macquarie Dictionary as meaning-

"serving to effect the purpose; producing the intended or expected result."

80. The word "control" is defined at s.1207A as follows-

"Control includes control as a result of, or by means of, trusts, agreements, arrangements, understandings and practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights".

81. Ms Cocks has some "effective control" of the trust by virtue of her status as the named beneficiary. She can -

(i) enforce her right to be paid income

(ii) enforce her right to acquire all chattels

(iii) assert her right to be paid capital for her maintenance, benefit, welfare and comfort.

82. Any failure by the trustee to acknowledge and comply with i) and ii) above or improperly or unfairly exercise his discretion with respect to iii) would give Ms Cocks certain rights against the trustee. This in effect is "effective control" because the purpose of the trust is "effected" and Ms Cocks can exercise "control" within the above definition.

83. Alternatively, she can only "reasonably be expected to exercise control in relation to the trust" to the extent permitted by the will and by law. She cannot for example, control the payment of capital - this would be inconsistent with the Testators intention and would be a fetter upon the discretion of the trustee. Therefore, insofar as the allocation of capital is concerned, it cannot be said that Ms Cocks can "reasonably be expected to exercise effective control". Nonetheless, the trustee would be obliged to pay capital if the income paid from the estate is "insufficient" (refer Will).

84. However, not all of the Principles in Part 2 need apply or be satisfied in order to determine whether the individual is not an attributable stakeholder of the trust. There are competing arguments as to whether Ms Cocks can reasonably be expected to effectively control the trust, however Principle 6(3) determines that consideration must be given to whether one or more of the circumstances of Part 2 "provides a sufficient basis on which to determine that the individual is not an attributable stakeholder".

85. Ms Cocks, for earlier reasons, satisfies principles 9, 10, & 11. For the purposes of Principle 13 the "other circumstances that affect (Ms Cocks") involvement with the activities or the administration of the .... trust" is her continuing entitlement to benefit from the trust. The entitlement to income will remain for her lifetime. Access to the capital is also available. She presently resides rent free in her father's former home which is now an asset of the trust. Future residence in that home is secure. If the trustee decides to sell it, Ms Cocks could legally resist thereby exercising effective control. Alternatively, if it was sold there would be a greater sum of capital assets thereby generating an increased income. Additionally the capital assets are preserved pursuant to the will to be the basis of an income for her life and if necessary to be drawn and used. No person other than her daughter (who can only benefit upon Ms Cocks death) has any right or interest in the assets or the income. Ms Cocks cannot in my view exclusively receive all income from the capital assets of the trust but deny attribution of those assets. To decide otherwise would also be contrary to the applicable legislation and its intent and the policy of Government which did receive parliamentary scrutiny (refer Drake).

86. Consideration of the Principles is required in order to decide whether the beneficiary should not be determined as an attributable stakeholder or if the beneficiary is an attributable stakeholder whether the income and asset attribution percentages should be lower than 100%. On balance, I am not satisfied that Ms Cocks has been able to demonstrate a sufficient basis upon which to determine that she is not an attributable stakeholder. Additionally, I am unable to find any basis to determine that the asset attribution percentage or the income attribution percentage should be any lower than 100%. Attribution of 100% must be specified as applicable to Ms Cocks because she is presently the sole beneficiary of the trust.

87. The Principles under Part 3 and Part 4 with respect to the determination of the asset and income attribution percentages are the equivalent as were found under Part 2. For the foregoing reasons, I can find no basis other than to determine that the asset and income attribution percentages under s. 1207X(2)(d) and (e) are any less than 100%.

88. In all of the circumstances, I am satisfied that the decision under review should be set aside and in substitution it is decided that Ms Cocks is an attributable stakeholder of the Trust and has an income and asset attribution percentage of 100%. The primary decision made by an officer of Centrelink of 10 December 2001 should therefore be reinstated.

I certify that the 88 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Handley (Senior Member)

Signed: Katherine Navarro................

Associate

Date/s of Hearing 7 August and 23 September 2002

Date of Decision 1 November 2002

Counsel for the Applicant Mr Belmar

Solicitor for the Applicant Morrison & Sawyers

Counsel for the Respondent Ms McInnes, Departmental Advocate

Solicitor for the Respondent Centrelink