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Thursday 26 Apr 2018

Disposal of Assets Case

By: Denny Meadows

A recent decision of the Administrative Appeals Tribunal (AAT) General Division (second level of appeal) (Stavrinidis and Secretary Department of Social Services decided 12 February 2018) found that an age pensioner (Mrs S) who put her daughter on the title of their new home was not caught by the gifting provisions of the Social Security Act.Social Security Rights Victoria successfully argued that the daughter’s ongoing contribution over many years was adequate consideration for the joint share that she acquired.

Mrs S was the sole owner of a house that she lived in with her husband (until he died in 1993), her daughter and her daughter’s children.That house was sold in 2015 and the proceeds were used to purchase a new house, into which the whole family moved.The daughter was made a joint owner of the new house even though she did not make a direct financial contribution to the purchase.

Centrelink decided that in making her daughter a joint owner of the new house Mrs S effectively gifted 50% of the property to her daughter. Centrelink applied the gifting provisions contained in s 1123 of the Social Security Act to significantly reduce Mrs S’s pension.For the gifting provisions to apply, two requirements must be met:

  1. the destruction, disposal or diminishing in value of an asset and
  2. this was done for no or inadequate consideration or to obtain a social security advantage.

The AAT accepted there was no suggestion that the Applicant ever intended to obtain a social security advantage.The main issue dealt with by the AAT was whether the daughter had provided adequate consideration for her half share of the new home.

Mrs S gave evidence, which was accepted by the AAT, that after the death of her husband, her daughter had “been like my husband” as she provided care for her and did things that her husband used to do, especially paying household bills. Mrs S’s daughter compiled a list of 12 items of her expenditures from the years 1991-2015 in the prior house. Included in the expenditures were $7,000 paid towards her father’s funeral and maintenance costs. She also provided a list of 45 expenditures in 2015 in relation to the current house, including furniture. In addition the AAT accepted that the extent of the daughter’s past contributions was greater than could be recalled.

The AAT found that Mrs S and her daughter had a clear, if not explicit, understanding to live together in the new house and continue to both contribute to running the household, with corresponding benefits and burdens. Mrs S’s daughter became a joint owner in recognition of that understanding. The AAT was satisfied that what the daughter contributed to the household constituted adequate consideration for her half share and therefore it had not been gifted to her.

The AAT rejected a submission by the Department that the arrangement between Mrs S and her daughter was merely a “family arrangement” as it had a “financial and/or carer aspect”. The contributions by the Applicant’s daughter went well beyond “just what children do” or “what happens in families”.

The AAT also agreed that a constructive trust existed whereby the Applicant’s daughter acquired a half interest in the prior house in return for her contributions to it.As the proceeds of the sale of that house were applied to buying the new house, the daughter’s half share in the new house could never be a gift.