Editors --- "Age pension: assets; former director and shareholder of private company; whether attributable stakeholder; percentage of attributable assets" [2008] SocSecRpr 41; (2008) 10(4) Social Security Reporter, Article 7

• TRAKAS and SECRETARY TO THE DFHCSIA
• Background
• The issues
• Discussion
• Formal decision

---

Age pension: assets; former director and shareholder of private company; whether attributable stakeholder; percentage of attributable assets

TRAKAS and SECRETARY TO THE DFHCSIA

(2008/785)

Decided: 3rd September 2008 by R. Perton

Background

On 25 November 2005, Trakas made an application for age pension. Centrelink rejected the claim on 4 July 2006 on the basis that Trakas’ assets and attributable assets exceeded the amount at which age pension was payable.

Trakas and his now deceased wife purchased shops in Prahran and Malvern in 1970 and 1973 respectively. In September 1990, they established private company, Sheldon Lodge Pty Ltd (the company), with 16 shares in total. Trakas held four shares, his wife four shares and their two children held four shares each. Trakas, his wife and his daughter were appointed directors of the company.

In August 1995, Trakas and his wife transferred, by deed of gift, the Prahran and Malvern properties to the company. At all relevant times, however, Trakas owned his principal place of residence in his own right.

In September 1999, Trakas’ wife died suddenly. Her four shares in the company were left to Trakas. In May2003, Trakas executed a deed disclaiming any interest in his late wife’s estate. Her shares were transferred equally to their two children. Trakas also transferred two of his four shares to his daughter for $46,000.

In October 2003, Trakas transferred a third share to his son for $34,000. Therefore, by October 2003, Trakas only held one of sixteen shares in the company. He remained a director at this time.

On 21 November 2005, Trakas resigned as director of the company and, on 24 November 2005, he transferred his final share in the company to his daughter for $36,000.

The issues

There was no dispute between the parties that the value of the assets of the company at the relevant date were $576,142; that Trakas resigned as director on 21 November 2005; and that Trakas had not owned any shares in the company since 24 November 2005.

The parties also agreed that the company was a designated private company within the meaning of s.1207N of the Social Security Act 1991(the Act) and that the company was a controlled private company pursuant tos.1207Q of the Act.

The issues before the AAT were:

whether Trakas was an attributable stakeholder of the company; and

if so, what was his asset attribution percentage.

Discussion

The AAT considered the Principles in the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 to determine whether Trakas was an attributable stakeholder of the company and, if so, his asset attribution percentage.

In weighing up all the factors in Part 2 of the Principles, the AAT gave considerable weight to the contributions that Trakas had made to the company. The AAT noted that the only assets of the company until the date he sold his shares were assets that he and his late wife had gifted to the company. The AAT noted that these gifts were made several years before the introduction of the attributable stakeholder provisions.

The AAT accepted that, from 25 November 2005 onwards, Trakas did not receive any benefit from the company. Nonetheless, given the source of the assets of the company and that his children remained the beneficiaries of the company, the AAT was satisfied that Trakas was an attributable stakeholder of the company pursuant to s.1207X(1)(a) of the Act.

Having determined that Trakas was an attributable stakeholder of the company, his attribution percentage was 100% unless the AAT determined otherwise under s.1207X.

In weighing up the factors in Part 3 of the Principles and deciding whether Trakas’ asset attribution percentage should be less than 100%,the AAT gave considerable weight to the company’s legal structure and administration. The AAT was satisfied that Trakas had had no involvement with the company since 24 November 2005. The AAT was satisfied that Trakas genuinely resigned as a director of the company before the claim for age pension was made, and that he had received market value for his shares in the company.

In the circumstances, the AAT was satisfied that Trakas’ asset attribution percentage should be 0% as from the date of his claim for age pension.

Formal decision

The AAT set aside the decision under review and remitted the matter to the respondent to assess Trakas’ claim for age pension in accordance with a direction that, under s.1207X(1)(b)(ii) of the Act, Trakas’ asset attribution percentage was 0%.

[S.O.]