Gill and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 41 (31 January 2011)

Last Updated: 1 February 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 41

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/5731

GENERAL ADMINISTRATIVE DIVISION		)
	Re		HAROLD GILL

Applicant

And

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

Respondent

DECISION

Tribunal

Dr P McDermott, RFD, Senior Member

Date 31 January 2011

Place Brisbane

Decision

The Tribunal affirms the decision under review.

..............................................
Senior Member

CATCHWORDS

SOCIAL SECURITY – Benefits and entitlements – Age pension – Date of entitlement to age pension – Financial investments of applicant subject to deeming provisions – Deemed income in excess of income test threshold – No entitlement to age pension until date financial investments ceased – Decision affirmed

Social Security (Administration) Act 1999 (Cth) Schedule 2

Social Security Act 1991 (Cth) ss 9, 1064, 1076, 1077, 1078, 1081, 1082, 1083, 1084, 1121

Social Security Amendment (Further Simplification) Act 2004 (Cth)

Secretary, Department of Family and Community Services v Draper [2003] FCA 1409; (2003) 79 ALD 394

Taylor and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 852

REASONS FOR DECISION

31 January 2011

Dr P McDermott, RFD, Senior Member

INTRODUCTION

1. Mr Harold Gill (the applicant) seeks review of a decision made by Centrelink to commence his age pension from 18 December 2008. He contends that he should have been paid age pension from an earlier date. I give my reasons why I consider that social security law precludes the earlier payment of age pension to the applicant who was otherwise qualified to receive that benefit.

BACKGROUND

2. On 24 November 2008, the applicant contacted Centrelink to claim age pension.
3. On 5 December 2008, he lodged his claim form for that benefit. On that date, the applicant had lodged information about his financial circumstances. He lodged an income and assets form (form SA369.0801) as well as various financial statements, including a Margin Loan Statement from Colonial Geared Investments which indicated that the applicant held total securities of $1,554,766.72. At the outset, I should mention that the applicant has quite properly made full disclosure to Centrelink of his assets.
4. On 4 December 2009, representations were made to Centrelink by the applicant’s local Member of Parliament on behalf of the applicant to seek an exemption from the deeming provisions. On 5 May 2010, Centrelink wrote to the applicant to advise him that his request for an exemption had not been granted.
5. The applicant later provided further documentation which indicated the securities in the Margin Loan Statement were applied towards repayment of a loan on 18 December 2010.

PRIOR DECISIONS

6. On 22 December 2008, Centrelink made a decision to grant the applicant’s claim for age pension with effect from 18 December 2008.
7. On 18 February 2009, the decision was affirmed by an authorised review officer (“ARO”).
8. On 23 April 2009, the Social Security Appeals Tribunal (“SSAT”) affirmed the decision.
9. On 2 December 2009, the applicant lodged an application for review with this Tribunal to seek review of the decision.

LEGISLATION

10. The legislation which is relevant to the consideration of this application is the Social Security (Administration) Act 1999 (Cth) (“the Administration Act”) and the Social Security Act 1991 (Cth) (“the Act”).
11. The Administration Act requires the Secretary to assess a person’s qualification for age pension during the period of 13 weeks from the deemed date of claim, which is 24 November 2008[1].
12. The Act provides that age pension is subject to a means test[2]. The applicable means test is in section 1064-A1 of the Act. The means test provides that there is an income test as well as an assets test (Modules E and G).
13. In applying the income test, the Secretary is required to take into consideration the “financial investments” of a claimant[3]. The Act provides that, for the purposes of the Act, a claimant is deemed to have derived ordinary income from those financial investments[4].
14. Age pension is not payable to a person if the person’s age pension rate would be nil[5].

MARGIN LOAN DOCUMENTATION

15. The applicant in giving evidence stated that he first took out a margin loan in 2000 on the advice of his financial planners, Storm Financial. However, when this application was heard, there was no documentation in evidence relating to the margin loan facility. The case of the applicant is that he had no access to funds in the Accelerator Cash Account.
16. During the hearing I remarked that it was important to obtain any documentation relating to the establishment of the margin loan facility. The ARO had assumed that the Accelerator Cash Account had not been opened by the applicant. This assumption is understandable having regard to information provided by the applicant.
17. At the conclusion of the hearing, I adjourned the application after being advised that the respondent was prepared to issue an information notice under s 199 of the Administration Act. The respondent issued an information notice to the Commonwealth Bank of Australia (“CBA”) to require the production of documents that related to the applicant’s margin loan and Accelerator Cash Account.
18. The senior legal counsel of the CBA had, in response to the information notice, produced various margin loan application documents. These documents comprised the executed application form that was signed by the applicant on 9 October 2008; this was an application to Colonial Geared Investments for an Accelerator Cash Account. The CBA also produced a number of associated documents (Margin Loan, Terms and Conditions; Accelerator Cash Account, General Information and Terms and Conditions; Accelerator Cash Account, Terms and Conditions).
19. As the various margin loan documents had not been formally admitted as evidence, they were admitted as evidence at an adjourned hearing of this application that was held by telephone. At that hearing the applicant, who had been provided with the documents, was given the opportunity to seek legal advice and to make submissions.

CONSIDERATION

20. The applicant, in common with many other people, has lost his home as a consequence of taking out a margin loan on the advice of financial planners from Storm Financial. He did this because Mr Emmanuel Cassimatis from Storm Financial had promised him returns in excess of $80,000 a year. However, instead, the applicant has lost his home. Whilst having sympathy for the position that the applicant is in, this application has to be resolved by the application of social security law.
21. Central to this application is the fact that in October and November 2008, the proceeds of sale of investments, totalling $1,554,766.72[6], were placed into a CBA Accelerator Cash Account by that financial institution. That account is in the name of the applicant. On 23 April 2009, the applicant informed the SSAT that the CBA did this “without his knowledge or consent”[7]. In an undated letter to Centrelink, the applicant had earlier remarked that the account had been “set up by Colonial”[8].
22. I have no doubt that the applicant, in stating that the CBA Accelerator Cash Account was opened without his consent, was honest in relying on his memory. Indeed, it would be difficult for most people who were a party to a margin loan agreement to recall what documentation they had previously signed let alone understand that documentation. I also recognise that these events occurred at a time when he lost his wife and another member of his family was severely ill.
23. The margin loan documentation that was admitted into evidence after the original hearing included an application to Colonial Geared Investments for an Accelerator Cash Account. That application had been signed by the applicant on 9 October 2008. That document contains a statement by the applicant that he had been given a copy of the Accelerator Cash Account General Information and Terms and Conditions documentation. The applicant, at the adjourned hearing of this application that was held by telephone, stated that he did not receive that documentation even though he acknowledged signing the application.
24. The Terms and Conditions document includes the following statement: “The Accelerator Cash Account is a product of the Commonwealth Bank of Australia”[9]. The Terms and Conditions document, which is drafted in what is referred to as Plain English, defines the terms “we”, “us” and the “Bank” as meaning the “Commonwealth Bank of Australia”. Part 1 of the Terms and Conditions document also refers to the opening of an “account” which is also defined as an Accelerator Cash Account.[10]
25. Having regard to the signed application form and the Terms and Conditions document, I am satisfied (and so find) that on 9 October 2008 the applicant signed an application form to open an Accelerator Cash Account with the CBA. I consider that the funds in the Accelerator Cash Account, which are the proceeds of the sale of investments of the applicant, would constitute “deposit money” under s 8 of the Act which is defined as “the person’s money which is deposited in an account with a financial institution”. As such, the Accelerator Cash Account would be a “financial investment” under s 9 of the Act, which defines that expression to include “deposit money”. A “financial investment” is also defined under s 9 of the Act to be a “financial asset”.
26. As the Accelerator Cash Account is a “financial asset” under the Act, it is subject to Division 1B of Part 3.10 which imposes a test of deemed income from financial assets. A person who has financial assets is taken, for the purposes of the Act, to receive ordinary income on those assets in accordance with s 1076 of the Act[11]. At the time that he claimed age pension, the applicant had a deemed income under the deemed income provisions of the Act[12]. I do not have discretion under social security law to not apply this Division.
27. At the time of his claim, the deemed income of the applicant from his financial assets (which include the Accelerator Cash Account) was some $92,144 per annum or $3,544 per fortnight[13]. The maximum fortnightly income threshold for age pension was then $1,557.75 for a single person without any children in their care[14]. This precludes the applicant from being eligible for the payment of age pension before 18 December 2008, when I find that the Accelerator Cash Account was closed and the entire proceeds of $1,547,791.57 were then applied towards the margin loan. I make this finding having regard to the accounts of the CBA[15]. Until then, age pension could not be lawfully paid to the applicant as his age pension rate was nil[16].
28. The applicant in giving evidence remarked that he did not have access to the Accelerator Cash Account. I accept that evidence as the funds in the Accelerator Cash Account were secured to pay his liabilities under the margin loan. Indeed, Part F of the application for an Accelerator Cash Account states that “I confirm that I am offering this account as security for the Loan facility referred to below”. An undated letter from the Margin Loan Division of the CBA confirms that the Accelerator Cash Account was held as “collateral” against an outstanding margin loan debt. The applicant stated that his liabilities under the margin loan exceeded the value of the sum in the Accelerator Cash Account. Assuming that the Accelerator Cash Account had been secured as contended by the applicant, I have to consider the application of s 1121 of the Act. This section provides for the reduction of the value of a particular asset by the value of an encumbrance or charge over that asset.
29. After the decision of the Federal Court of Australia in Secretary, Department of Family and Community Services v Draper[17], s 1121 of the Act was amended by the Social Security Amendment (Further Simplification) Act 2004 (Cth)[18]. This amendment came into force on 25 March 2004. The amendment inserted the words “(other than Division 1B of Part 3.10)” into s 1121(1) which now provides:

If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.

30. As a consequence of this amendment to the Act, the value of a person’s financial asset cannot be reduced by the value of a charge over the asset for the purpose of applying the deemed income provisions of Division 1B of Part 3.10 of the Act. Consequently, the secured funds in the Accelerator Cash Account cannot be disregarded in calculating the deemed income of the applicant.

EXEMPTED FINANCIAL INVESTMENTS

31. The Minister may under section 1084 of the Act determine that specified financial investments or a specified class of financial investments are not to be regarded as financial assets for the purposes of ss 1076, 1077 or 1078 of the Act. Representations were unsuccessfully made on behalf of the applicant for the Minister to grant an exemption in respect of his Colonial securities. This Tribunal does not have jurisdiction to review any exercise of Ministerial discretion under s 1084[19].

MANAGEMENT OF MARGIN LOAN

32. It is fair to say that the applicant had issues with the management of the margin loan facility including the imposition of a “break fee” upon the change of the interest rate on the margin loan to a variable rate. He also remarked that he was concerned about the fact that the agreed margin loan ‘loan share ratio’ (LSR) was exceeded and also about timing issues which impacted on his taxation liability. However, I do not have jurisdiction to resolve those issues in determining this application.

CONCLUSION

33. I consider that the applicant was entitled to the payment of age pension from 18 December 2008 on the date when the Accelerator Cash Account was closed. It is for that reason that I affirm the decision under review. I would, however, recommend that the Secretary endeavour to provide assistance from a social worker to the applicant, who is living on his own and living in a part of the State which has been subject to the recent floods.
    

I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member

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

Danielle Armstrong, Research Associate

Date/s of Hearing 28 September 2010 and 23 November 2010

Date of Decision 31 January 2011

Applicant was self-represented

Solicitor for the Respondent Mr Joe Guthrie, departmental advocate

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[1] Social Security (Administration) Act 1999 (Cth) Schedule 2, 4(1).
[2] See Social Security Act 1991 (Cth) ss 9, 1064, 1076, 1081, 1082, 1083, 1084, 1121.
[3] Social Security Act 1991 (Cth) s 9.
[4] Social Security Act 1991 (Cth) ss 1076(2), 1081, 1082, 1083.
[5] Social Security Act 1991 (Cth) s 44.
[6] T-Document 8, Folio 78.
[7] T-Document 2, Folio 10
[8] T-Document 11, Folio 97.
[9] Accelerator Cash Account Terms and Conditions, p 12.
[10] Accelerator Cash Account Terms and Conditions, p 12.
[11] Social Security Act 1991 (Cth) s 1076(2).
[12] Social Security Act 1991 (Cth) ss 1081 – 1083.
[13] In these reasons, which are a matter of public record, I have not given particulars of the financial assets. There is no issue as to what those financial assets are: T-Document 16, Folio 108.
[14] T-Document 16, Folio 108.
[15] T-Document 1, Folio 92.
[16] Social Security Act 1991 (Cth) s 44.
[17] (2003) 79 ALD 394.
[18] Schedule 2, item 28.

[19] Taylor and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 852 at [8].