Schulz and Repatriation Commission [2003] AATA 769 (8 August 2003)

Last Updated: 8 August 2003

DECISION AND REASONS FOR DECISION [2003] AATA 769

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/763

VETERANS' APPEALS DIVISION	)
	Re	JOHN SCHULZ

Applicant

And

REPATRIATION COMMISSION

Respondent

DECISION

Tribunal

Mr B J McCabe, Member

Date 8 August 2003

Place Brisbane

Decision

The Tribunal affirms the decision under review.

(Sgd) B J McCabe

Member

CATCHWORDS

VETERANS' AFFAIRS - benefits and entitlements - income support pension - eligibility - assets - whether applicant's assets exceed legislative threshold - characterisation of monies owed by a trust to the applicant - whether monies should be included as an asset

Veterans' Entitlements Act 1986

REASONS FOR DECISION

8 August 2003

Mr B J McCabe, Member

INTRODUCTION

1. Dr John Schulz has applied for review of a decision of the respondent. The respondent concluded Dr Schulz was not eligible to receive an income support pension under the Veterans' Entitlement Act 1986 because he did not satisfy the assets test. The application was heard together with an application by Dr Schulz seeking review of a decision of the Secretary of the Department of Family and Community Services. The Secretary in that case had decided the applicant was ineligible to receive a pension under the Social Security Act 1991. The decision in that case is Re John Schulz and Secretary, Department of Family and Community Services (Q2002/864, Q2002/687) (the Centrelink proceedings).

THE MATERIAL BEFORE THE TRIBUNAL

2. The Tribunal was provided with the material contained on the respondent's files pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Dr Schulz appeared on his own behalf at the hearing. He was questioned by Ms Ford for respondent and Ms Shea, the Centrelink advocate.

THE FACTS

3. The history of the transactions under question in this case is set out in the decision relating to the Centrelink proceedings. I adopt those findings of fact in this case.

4. The essence of the dispute in this case is similar to that discussed in the Centrelink proceedings. Dr Schulz is a principal beneficiary of a discretionary trust. He is the sole director and shareholder in the trustee company. The trust owns the family home of Dr Schulz and his wife. The trust's accounts showed the trust owed Dr Schulz $329,573 as at 30 June 2001. The trust had borrowed money from a bank secured against the home and another property owned by Dr Schulz in his own name. That bank loan was paid out of the proceeds of the sale of Dr Schulz's property, so the trust now owed the money to the applicant. The loan is unsecured.

5. Dr Schulz says the borrowed money was used to purchase his home, and that his home is an exempt asset for the purposes of the asset test (in other words, the value of the home is not included in the calculation of the total value of the applicant's assets). In those circumstances, he argues the value of the loan should not be taken into account in the application of the assets test.

THE LEGISLATION

6. Section 45S of the Act requires that persons applying for income support satisfy an assets test. If the value of an applicant's assets exceed the amount calculated under the rate calculator provided for in section 5Q, the entitlement to payments is affected, and ultimately ceases. The rate calculator is set out in Part 2 of Schedule 6 of the Act.

7. The applicant's assets include property and money: section 5L. Choses in action, like debts, are clearly assets because they are property. In any event, section 5J says a financial asset includes financial investments, which in turn include:

(a) available money; or

(b) deposit money; or

(c) a managed investment; or

(d) a listed security; or

(e) a loan that has not been repaid in full; or

(f) an unlisted public security; or

(g) gold, silver or platinum bullion; or

(h) an asset-tested income stream (short term).

8. In this case, there is a loan to the trust that has not been repaid in full. The value of the loan (that is, the amount unpaid on the loan) must be taken into account in the calculation of the applicant's assets.

9. Dr Schulz said the decision-maker should not ignore the fact the monies advanced under the arrangement were used to fund the purchase of the home (or, more accurately, to pay out the bank which had funded the purchase of the home). As I understand his argument, the value of the loan should be exempt because it was used to fund the purchase of an asset that was exempt by reason of section 52. That is wrong.

10. I am satisfied the applicant had a right or interest that afforded him reasonable security of tenure in his home within the meaning of section 5L(4) and section 52. There was a legal interest arising out of the unwritten lease, and the security of tenure could be inferred from the fact the landlord was under the control of the applicant. (I explored the reasons for that conclusion in more detail under the comparable provisions in the Social Security Act 1991 in the Centrelink proceedings. I adopt that reasoning here). In other words, the applicant's status as a home-owner arises independently of the existence of the debt. The debt is the product of a separate transaction between the applicant and the trustee company on behalf of the trust. Once the money is advanced, it is the trustee's money to be administered on behalf of the beneficiaries. The applicant does not have any interest in that money, or in anything that the money is used to purchase. (If the debt was secured, the security arrangement might confer an interest in the property - but that was not the case here). The lender retains a right to demand repayment according to the terms of the loan. That is a valuable right and a form of property, and therefore an asset that must be taken into consideration.

CONCLUSION

11. Dr Schulz has chosen to arrange his affairs in a particular way. Those arrangements have legal consequences that he presumably intended. One consequence is that the loan transaction creates a valuable right that is a form of property. The value of that property is properly considered in the administration of the assets test provided for in the Act. The fact the loaned monies were used to fund the purchase of an exempt asset is irrelevant for the purposes of the Act. This is not an unintended or anomalous result, nor is it unjust: it is entirely consistent with the scheme and purpose of the legislation.

12. The decision of the respondent is therefore affirmed.

I certify that the 12 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member

Signed: Sarah Oliver

Associate

Date of Hearing 25 February 2003

Date of Decision 8 August 2003

The Applicant appeared in person

Counsel for the Respondent Ms E Ford

Solicitor for the Respondent Australian Government Solicitor