Attard and Secretary, Department of Social Services (Social services second review) [2015] AATA 990 (18 December 2015)

Last Updated: 18 December 2015

Attard and Secretary, Department of Social Services (Social services second review) [2015] AATA 990 (18 December 2015)

Division	GENERAL DIVISION
File Number	2015/2691
Re	Raymond Attard
	APPLICANT
And	Secretary, Department of Social Services
	RESPONDENT

DECISION

Tribunal	Dr Gordon Hughes, Member
Date	18 December 2015
Place	Melbourne

The Tribunal affirms the decision under review.

[sgd]........................................................................

Dr Gordon Hughes, Member

SOCIAL SECURITY - newstart allowance – liquidated assets waiting period – loan funds deposited in applicant's bank account – applicant asserted that funds were surplus to his requirements

Legislation
Social Security Act 1991 sections 14A(1), 14A(4), 19C(2), 598(1), 598(2A), 598(5), 620, 621

Cases

Biddlecombe and Department of Family and Community Services [1999] AATA 528

Re Jacobsen and Secretary, Department of Social Security [1992] AATA 101 (20 March 1992) Williamson and Secretary, Department of Family and Community Services [2003] AATA 652

Morales and Secretary, Department of Family and Community Services [2004] AATA 669

REASONS FOR DECISION

Dr Gordon Hughes, Member


18 December 2015

1. The applicant had $102,545.00 in two Commonwealth Bank accounts at the time he applied for newstart allowance.
2. The applicant obtained a loan from the Commonwealth Bank to purchase a property. However, the funds were in excess of his immediate requirements. .
3. The issues before the Tribunal were whether the funds in the applicant's accounts constituted "liquid assets" for the purposes of section 598 of the Social Security Act 1991 (the Act); and whether those liquid assets should be taken into account when determining whether a Liquid Assets Waiting Period (LAWP) should apply to the applicant prior to the newstart allowance becoming payable.

LEGISLATION

4. Section 598(1) of the Act provides:

Subject to subsections (4A), (5), (6), (7) and (8), if:
(a) the value of a person's liquid assets exceeds the person's maximum reserve on:
(i) the day following the day on which the person ceased work or ceased to be enrolled in a full time course of education or of vocational training; or
(ii) the day on which the person claims a newstart allowance; and
(b) the person is not a transferee to a newstart allowance;
the person is not qualified for a newstart allowance for a period unless the person has served the liquid assets test waiting period in relation to the claim before the beginning of that period.

5. Section 598(2A) of the Act provides:

Work out the number of formula weeks (disregarding any fractions of a week) in relation to the claim using the formula:

where:
"liquid assets" means the person's liquid assets.
"maximum reserve amount" means the maximum reserve in relation to the person under subsection 14A(1).
"divisor" means, in relation to a person:
(a) if the person is not a member of a couple and does not have a dependent child--$500; or
(b) otherwise--$1,000.

6. Section 598(5) of the Act provides:

(5) If the Secretary is satisfied that a person is in severe financial hardship because the person has incurred unavoidable or reasonable expenditure while serving a liquid assets test waiting period, the Secretary may determine that the person does not have to serve the whole, or any part, of the waiting period.
Note 1: For in severe financial hardship see subsection 19C(2) (person who is not a member of a couple) and 19C(3) (person who is a member of a couple).
Note 2: For unavoidable or reasonable expenditure see subsection 19C(4).

7. Section 19C(2) of the Act provides:

A person who is not a member of a couple and who makes a claim for parenting payment, austudy payment, special benefit, disability support pension, carer payment or one of the following allowances:
(a) newstart allowance;
(b) widow allowance;
(c) mature age allowance;
(d) sickness allowance;
(e) youth allowance;
is in severe financial hardship if the value of the person's liquid assets (within the meaning of subsection 14A(1)) is less than the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person:
(f) if the person's claim were granted; and
(g) in the case of a person to whom an income maintenance period applies, if that period did not apply.

8. Section 14A(4) of the Act provides:

If:
(a) a person sells the person's principal home; and
(b) the person is likely, within 12 months, to apply the whole or part of the proceeds of the sale in acquiring another residence that is to be the person's principal home;
so much of the proceeds of the sale as the person is likely to apply in acquiring the other residence is to be disregarded during that period for the purposes of determining the amount of the person's liquid assets.

9. Section 620 of the Act provides:

(1) Subject to subsection (2), a person is subject to an ordinary waiting period unless:
(a) at some time in the 13 weeks immediately before the person's start day, the person received an income support payment; or
(fa) the following conditions apply:
(i) the person is a member of a couple;
(ii) the person's partner dies;
(iii) immediately before the partner's death, the person was receiving a partner allowance; ...
(iv) within the period of 4 weeks that starts on the day after the day on which the partner dies, the person claims a newstart allowance; or
(g) the Secretary is satisfied that the person is in severe financial hardship.
...
If:
(a) a person sells the person's principal home; and
(b) the person is likely, within 12 months, to apply the whole or part of the proceeds of the sale in acquiring another residence that is to be the person's principal home; so much of the proceeds of the sale as the person is likely to apply in acquiring the other residence is to be disregarded during that period for the purposes of determining the amount of the person's liquid assets.

10. Section 621 of the Act provides:

(1) Subject to subsection
the ordinary waiting period is the period of 7 days that starts on the day after the end of the liquid assets test waiting period referred to in subsection 598(2).
(7) If:
(a) after the commencement of this subsection, a person becomes temporarily incapacitated for work or study and claims sickness allowance; and
(b) because of sections 693 and 694 (ordinary waiting period), sickness allowance is not payable to the person for a period starting on the day (the applicable day ) applicable to the person under subparagraph (i) or (ii), as the case may be:
(i) if the person is not disqualified for sickness allowance under section 676 (liquid assets test)--the person's sickness allowance start day; or
(ii) if the person is disqualified for sickness allowance under section 676 (liquid assets test)--the day after the day on which the person's sickness allowance liquid assets waiting period ends; and
(c) during that period the person ceases to be incapacitated for work or study and claims newstart allowance;
then, despite subsections (1), (2) and (3), the person's ordinary waiting period is a period of 7 days starting on the applicable day.

DISCUSSION

11. The applicant stopped working on or about 29 October 2014 and lodged a claim for newstart allowance with Centrelink on 11 November 2014.
12. The Social Security Act 1991 governs all entitlements to social security payments. Part 2.12 of the Act sets out entitlements to newstart allowance.
13. Section 598(1) of the Act provides that if the value of a person's liquid assets exceeds the person's maximum reserve on the day on which they became qualified for newstart allowance, then the newstart allowance is not payable until the person has served a LAWP.
14. The "maximum reserve" for the applicant was, by virtue of section 14A(1) of the Act, $10,000.
15. On 5 November 2014, the applicant had $34,959.08 and $67,586.74, totalling $102,545.82, in two separate Commonwealth Bank personal transaction accounts. The applicant had a 100% interest in property in Beresford Road, Wollert, which he purchased for $378,000 on 16 October 2014 and which was subject to a $196,000 mortgage. The value of the property was estimated at $350,000. The respondent accordingly assessed that the applicant had liquid assets of $102,545 at the time of his claim.
16. The applicant contends that the money held in the Commonwealth Bank accounts was money advanced to him by the bank for the property in Beresford Road, Wollert, and therefore did not form part of his liquid assets. The applicant contends that the bank loan money exceeded his requirements and that he had no need for it, and subsequently returned it to the bank on 10 December 2014.
17. Between 23 July 2014 and 25 March 2015, the applicant had been involved in the sale and purchase of various properties. Specifically, the applicant had sold his principal home in Phoenix Court, Wollert on 23 July 2014, with settlement occurring on 26 September 2014; on 16 October 2014 he settled the purchase of the property in Beresford Road, Wollert; and on 25 March 2015 he settled the purchase of a property in Northcott Street, Melton South, and the sale of the property in Beresford Road, Wollert.
18. At all relevant times, the applicant's principal place of residence was either Phoenix Court, Wollert, or Northcott Street, Melton South. The applicant did not reside in the property in Beresford Street which was tenanted at the time of purchase.
19. In Re Jacobsen and Secretary, Department of Social Security [1992] AATA 101 (20 March 1992) the Tribunal took a literal interpretation of the term "liquidated damages" and found that it means "no more than assets which are capable of ready conversion into cash". This decision was cited by the Tribunal in Biddlecombe and Department of Family and Community Services [1999] AATA 528 at paragraph 17, Williamson and Secretary, Department of Family and Community Services [2003] AATA 652 at paragraph 22-24, and in Morales and Secretary, Department of Family and Community Services [2004] AATA 669 at paragraph 11-12. The common approach in all of these decisions was that if funds are available for use at the discretion of the borrower, they represent "liquid assets" regardless of the borrower's intention as to how those funds are to be applied.
20. In the present case, the applicant had the borrowed funds from the Commonwealth Bank at his disposal. There were no restrictions on how those funds should be applied, as evidenced by cash withdrawals and retail purchases which he made using those funds. Accordingly, the Tribunal finds that the funds represented "liquid assets" of the applicant for the purposes of section 598 of the Act.
21. Given this finding, it is next necessary to determine the effect on the applicant's entitlement to newstart allowance payments. The LAWP is determined by a formula set out in section 598(2A) of the Act. The formula is applied by subtracting $10,000 from $102,545, and dividing this amount by $500 which equals 185 weeks. Section 598(2B) provides that if the number of formula weeks is more than 13 weeks, the LAWP is 13 weeks. Accordingly, the applicant's LAWP would be 13 weeks.
22. Section 598(1)(a) of the Act stipulates the period as to when the LAWP commences- that is on the day after the person ceased work or full time study or claimed newstart allowance. This would mean that in this case, the LAWP would start on 30 October 2014 and end on 28 January 2015.
23. An exception exists under section 598(5) in circumstances where a person is in severe financial hardship, having incurred unavoidable or reasonable expenditure while serving a LAWP. Section 19C(2) provides that the person will be in "severe financial hardship" if the value of their liquid assets is less than the maximum fortnightly amount of newstart allowance that would otherwise be paid, that is, $515.60 per fortnight.
24. Given that the applicant's liquid assets at the relevant time exceeded $515.60, he does not satisfy the definition of "severe financial hardship".
25. In addition to the LAWP, there is an ordinary waiting period which applies to the applicant as he does not meet any of the exceptions otherwise set out in section 620 of the Act. The ordinary waiting period applies for seven days from 28 January 2015 (the end of the LAWP), thus extending the overall waiting period in accordance with section 621 of the Act. In summary, the applicant is subject to an overall waiting period commencing 30 October 2014 and concluding on 4 February 2015.
26. Section 14A(4) of the Act provides that if a person sells their principal home and is likely within 12 months to apply the whole or part of the proceeds of sale towards acquiring another principal home, then so much of the proceeds of sale that the person is likely to apply to that purchase are to be disregarded for the purposes of determining the amount of "liquid assets". However, this exception does not apply in the present case because the applicant did not apply the proceeds of sale from his principal home to the purchase of another principal home, but rather to the purchase of a tenanted investment property. Furthermore, the $102,545 of liquid assets were not the proceeds from the sale of the applicant's principal home but rather the leftover balance of the $280,000 Commonwealth Bank investment home loan used to purchase the property in Beresford Road, Wollert.

DECISION

27. For the reasons stated above, the Tribunal affirms the decision under review.

I certify that the preceding 27 (twenty-seven) paragraphs are a true copy of the reasons for the decision herein of: Dr Gordon Hughes, Member

[sgd]........................................................................
Administrative Assistant

Dated 18 December 2015

Date of hearing	23 November 2015
Applicant	In person
Advocate for the Respondent	James Henderson, Department of Human Services