Kavanagh and Secretary, Department of Families, Housing, Community Services and Indigenous affairs [2009] AATA 71 (5 February 2009)

Last Updated: 11 February 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 71

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2008/2210

GENERAL ADMINISTRATIVE DIVISION		)
	Re		PATRICK KAVANAGH

Applicant

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal

Mr B H Pascoe, Senior Member

Date 5 February 2009

Place Melbourne

Decision

The Tribunal affirms the decision under review.

(sgd) B H Pascoe
Senior Member

SOCIAL SECURITY- disability support pension – assets test – increase in borrowings secured against real estate – date for increase in rate of pension – change of circumstances – date on which respondent informed of change.

Social Security (Administration) Act 1999, s 110 (1)

Re Secretary, Department of Social Security and Austin [1995] AATA 35; (1995) 37 ALD 279

REASONS FOR DECISION

5 February 2009

B H Pascoe, Senior Member

1. This is an application to review a decision of the respondent dated 18 September 2007 to increase the rate of the applicant’s disability support pension from 23 May 2007 and not from an earlier date. This decision was affirmed by the Social Security Appeals Tribunal on 14 April 2008.
2. At the hearing the applicant, Mr P Kavanagh, was represented by Mr T Fernandz, a solicitor, and the respondent by Mr T de Uray, a Legal Services Officer of Centrelink. Evidence was given by Mr Kavanagh.
3. Mr Kavanagh owns a rental property at 1 Station Street, Mentone. Two loans secured against this property were arranged through Aussie Mortgage Solutions in 2003. On 12 February 2004 he informed Centrelink of the existence of these two loans and, subsequently, provided documentary evidence of the outstanding balance on the loans of $55,208.90 and $17,732.28, a total of $72,941.18. His rate of disability support pension was adjusted to allow for the loans from 12 February 2004. Subsequently, until 23 May 2007, this same amount was deducted from the market value of the rental property for the purpose of the pension asset test for Mr Kavanagh. Regular letters from Centrelink advising of the rate of pension and reminding Mr Kavanagh of his obligation to advise of any change which may affect his rate of pension showed a net asset position allowing for the $72,941 debt.
4. It is noted that the standard letters sent to Mr Kavanagh explained the need to advise of any changes in income or assets which might reduce his pension and did not mention any reduction in net assets. Nevertheless there is no record of any advice or questions raised by him as to the increase in the debt secured against the rental property until 23 May 2007. On that date Mr Kavanagh contacted the Cheltenham office of Centrelink regarding the value of his assets. Subsequently he provided documents from Aussie Mortgage Solutions showing a total outstanding debt of $211,146.17 as at 30 June 2007. This resulted in an increase in pension from 23 May 2007.
5. Mr Kavanagh said that the arrangement under the loans was that he was not required to make any repayments and was able to draw further funds on his loan account to meet personal expenses. He said that the rental income from the property was used to meet personal expenses with no part used to pay interest costs. He believed that he had informed Centrelink of the increasing debt but could produce no evidence of having done so. He believed that he had queried why Centrelink were recognizing one loan only not both loans. However, it seems clear that any confusion over whether there was one loan or two loans arose only in August 2007 when the original decision maker mistakenly believed that Centrelink had not been advised of a second loan until 30 July 2007. It is clear from the records that the existence of two loans was advised and recorded in 2004. The only thing that was not changed in the records was the steadily increasing debt over the subsequent years.
6. It was submitted for Mr Kavanagh that Centrelink, given Mr Kavanagh’s medical condition, had an onus to have knowledge of the increasing debt and to regularly update its records by direct enquiry. However, it is clear from the records that Centrelink had no knowledge that the loan would increase to any material extent. At the meeting with the Centrelink officer on 12 February 2004 when Mr Kavanagh advised an approximate total debt of $71,841, the officer noted that he had advised Mr Kavanagh that negative gearing was not working for him because he is on a low income. It is actually reducing how much he has to live on because he has to make up the difference out of his own pocket. From this note, it is clear that the loans were regarded as normal mortgage loans which were more likely to reduce than increase. In addition, the copies of the loan accounts provided in 2004 showed regular repayments as might be expected. There was nothing to indicate a likelihood of future substantial increases in the total debt. I have no reason to take a view that Centrelink should itself initiate any enquiry other than the regular request to Mr Kavanagh to advise of any change in his financial position.
7. Section 110(1) of the Social Security (Administration) Act 1999 provides that:

...if a favourable determination is made following a person having informed the Department of the occurrence of an event or change of circumstances, the determination takes effect:

(a) on the day on which the person so informed the Department; or
(b) on the day on which the event or change occurred;

whichever is the later.

8. It was submitted for Mr Kavanagh that there was no change of circumstances. It was said that he simply queried his rate of pension because of the loan. Mr Fernandz sought to rely on the decision of this Tribunal in Re Secretary, Department of Social Security and Austin [1995] AATA 35; (1995) 37 ALD 279. However, I am unable to see how that decision assists. Deputy President Forgie considered it appropriate to give the words change and circumstances their ordinary meaning of variation, alteration, modification, deviation, transformation of the condition or state of a person with respect to material welfare. In that case the found change of circumstances was having reached a required 10 year residence in Australia. Here, it is appropriate to find a change of circumstances in the reduction of a net equity in a real estate property with a market value of $300,000 by $138,205 from the non payment of interest and further withdrawals in relation to the secured debt over three years. This is a clear alteration in the material welfare of Mr Kavanagh. While Mr Fernandz sought to argue that it is normal to have changes in values of property and the outstanding balance of mortgages, the position of Mr Kavanagh between 2004 and 2007 involved a major change in his financial circumstances. As such, I am satisfied that s 110(1) applies to limit the decision to increase his rate of pension as a result of a reduction in net assets to apply only from the date on which he informed Centrelink. This date was no earlier than 23 May 2007.
9. It follows that the decision under review should be affirmed.
   

I certify that the nine [9] preceding paragraphs are a true copy of the reasons for the decision herein of Mr B H Pascoe

signed: (sgd) Cassie Renfrew

Clerk

Date/s of Hearing 27 January 2009

Date of Decision 5 February 2009

Advocate for the applicant Mr T Fernandz

Solicitor for the applicant Mano Associates

Advocate for the respondent Mr T de Uray, Centrelink Legal Services