(a) Mr Ferrier's rate of age pension is to be reassessed;

(b) The value of the asset identified as an unpaid present entitlement in [Trust 1] is to be reconsidered on the basis that it was not a loan attracting application of section 1122 of the Social Security Act 1991;

(c) Any arrears payable have effect from 6 April 2023.

SOCIAL SECURITY - Age Pension - homeowner asset test - unpaid present entitlement in a family trust - market value of a property - value of loan to a trust - date of effect - decision under review set aside and remitted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

1. This review concerns a decision of Services Australia -Centrelink (Centrelink) to pay a reduced rate of age pension calculated under the homeowner assets test.
2. On 6 April 2023, Mr Ferrier lodged a claim for age pension. On 25 September 2023, Centrelink granted age pension, effective from 6 April 2023, and notified Mr Ferrier of the rate payable having applied a reduction under the homeowner assets test. On the date age pension was granted, Mr Ferrier's total combined assets were calculated by Centrelink to be $1,379,781 and his combined annual income was $13,326.12.
3. On 25 October 2023, Mr Ferrier contacted Centrelink and provided further information in respect of his income and assets and requested internal review of the decision to reduce his rate of payment. Mr Ferrier, relevantly, contended that his assets were valued at $1,298,532, having excluded from his calculation funds recorded as 'unpaid present entitlement' in a family trust.
4. On 4 September 2024, an authorised review officer affirmed the decision to pay a reduced rate of age pension.
5. Mr Ferrier made an application to the Administrative Review Tribunal (the Tribunal) on 15 December 2024, seeking independent review of the Centrelink decision.
6. A hearing was conducted on 26 March 2025, and Mr Ferrier participated in the hearing via MS Teams video conference. He gave affirmed evidence.
7. In response to an order issued by the Tribunal, on 7 May 2024 the Secretary lodged submissions concerning the characterisation of the unpaid present entitlement contained in a family trust. Mr Ferrier's reply submissions were lodged on 14 May 2024.
8. The Tribunal had regard to the evidence given and submissions made by Mr Ferrier at the hearing, the documents produced by Centrelink pursuant to section 23 of the Administrative Review Tribunal Act 2024 numbered as pages 1 to 539 (the hearing papers), materials lodged by Mr Ferrier with his application for review and on 31 January 2025 marked as pages A1 to A6, and the submissions lodged by the Secretary and Mr Ferrier on 7 May 2025 and 14 May 2024, respectively. Mr Ferrier confirmed receipt of the hearing papers prior to the hearing.

1. The statutory provisions relevant to this review are contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).
2. The Social Security Guide (the Guide) contains governmental guidelines and policy to assist Centrelink officers in their application of the social security law. The Tribunal had regard to the Guide where relevant. The Tribunal acknowledged that, whilst it may be guided by policy and it is not bound to follow it, it should consider the relevant government policy which is consistent with the provisions or objects of the Act.[1]
3. Mr Ferrier told the Tribunal that he did not dispute the reduction of the rate of his age pension on the basis of portability while he was outside of Australia or that his asset test was to be assessed on the basis that he was a homeowner. He confirmed that the 2 grounds on which he sought review of the authorised review officer's decision were the characterisation of an unpaid present entitlement in a family trust as a loan, and secondly, the valuation amount of his property at [Address 1].
4. The ultimate issue that arises in this case is whether the rate of age pension paid to Mr Ferrier should be reduced. This requires consideration of whether an unpaid present entitlement in a family trust was a loan and therefore to be assessed as an asset for the purposes of the pension assets test, and whether the correct valuation of a property was taken into consideration to reduce the rate payable of age pension.

1. Under the Rate Calculator in section 1064 of the Act, a person's rate of age pension is subject to both an income test and an assets test. The rate payable is the lower of the rates under the 2 tests. Mr Ferrier's rate of age pension was reduced under the assets test.
2. The effect of a person's assets on the maximum rate is assessed in accordance with the Rate Calculator Module G contained in clause 1064-G1 of the Act. For a partnered homeowner, the rate of age pension is reduced in accordance with clause 1064-G2 of the Act once a person's assets exceed the lower asset limit.
3. In his claim for age pension Mr Ferrier listed his assets to include '[Trust 1] and company loan' with a balance of $220,950 of which his share was 100%. He listed his partner's asset in [Trust 1] and company loan to be valued at $252,178 of which Mr Ferrier had 0% share. Mr Ferrier also listed a rental property at [Address 1], as having a current market value estimate of $500,000.
4. In respect of his involvement in private trusts and companies, Mr Ferrier declared that he and his partner were involved in [Trust 2] and [Trust 1]. He declared that neither he nor his partner were directors, shareholders or otherwise involved in a private company.
5. Several materials were lodged with Centrelink to verify Mr Ferrier's assets. Relevantly, the materials included:

(a) Trust tax return 2022 for [Trust 1], listing current and total liabilities as $129,728;

(b) Letter under the hand of [Ms A] of [Accountants 1] dated 4 April 2023, advising that Mr Ferrier was the sole director and shareholder of [Business 1], and there had been no trading through the entity and no assets or liabilities held. The letter expressed that the intention is to deregister the company in due course;

(c) Letter under the hand of [Ms A] of [Accountants 1] dated 4 April 2023, advising that the firm acted as tax agents for [Trust 1], and attaching 2022 financial statements. The letter confirmed an intention to wind up the trust;

(d) Financial statements for the year ended 30 June 2022 for [Trust 1]. The balance sheet records $129,728.32 in unpaid present entitlements as the total liability of the trust. In the notes to the financial statements, the unpaid present entitlements were assigned to Mr Ferrier and his partner.

1. Mr Ferrier told the Tribunal that over the last 5 years he and his partner had liquidated their assets with the intention of travelling overseas for several years. The unpaid present entitlement represented monies he had paid into the trust to pay for renovations and a property subdivision undertaken on real estate and maintenance of [an asset 1] held by the trust. The monies paid were recorded as an unpaid present entitlement as a recording system only. He said that these monies were never considered to be a loan and there were no terms or interest considerations to ascribe the characteristics of a loan. Mr Ferrier did not consider the unpaid present entitlement to be an asset.
2. Mr Ferrier contended that as the monies were paid by him and he was a beneficiary of the trust, he considered it unreasonable to consider them loans because, to do so, created an obligation on the trust to repay monies that cannot be realised. Mr Ferrier contended that the unpaid present entitlement should be considered to be an accounting feature of a trust and an entry that related to an entitlement of the trust beneficiary. Mr Ferrier told the Tribunal that the trust had since been wound up with no assets to distribute.
3. The evidence in support of the submissions was:

(a) A minute of a meeting [held] on 30 June 2022, signed by Mr Ferrier as chairperson, to resolve to wind up [Trust 1] prior to its vesting date of 26 July 2079, that there were no assets left in the trust as they had been previously distributed, and balances owed to beneficiaries 'have been written off as no available assets or cash available to pay'; and

(b) A letter under the hand of [Ms A] of [Accountants 1] dated 20 March 2025, advising that the final return for [Trust 1] was lodged for the year ended 30 June 2022,and as a result the trust was wound up. The letter states that 'there was no capacity to repay the loan to [Mr and Ms Ferrier] and therefore was written off in full'.

1. Under section 1122 of the Act, a loan is described as:

If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.

1. Topic 1.1.L65 of the Guide provides the following definition:

This definition applies to all payments subject to assets testing provisions.

• an actual lending of money or an asset (1.1.A.290) of a particular value, AND
• a clear intention to repay.

• an advance of money, or
• the payment of an amount for, on account of, on behalf of or at the request of a person where there is an obligation, whether expressed or implied, to repay the amount.

1. Implicit in the language of section 1122 of the Act is that there is an actual lending of money or property. This is mirrored by the description provided in the Guide.
2. In common parlance a loan comprises of consideration, a promise and clear intention to repay, and terms for repayment that may include interest. There was no evidence before the Tribunal that demonstrated that the unpaid present entitlements had any characteristics consistent with a loan. While the unpaid present entitlements may once have been an unsecured debt of [Trust 1], the Trust's accountants have corroborated that there were no assets left in the trust as they had been distributed and liabilities were written off.
3. Having considered the contemporaneously prepared documents and the evidence of Mr Ferrier, the Tribunal is not satisfied that the unpaid present entitlement recorded in the accounts of [Trust 1] was a loan as defined in section 1122 of the Act.

1. In submissions to the Tribunal, the Secretary concedes that the unpaid present entitlement is not a loan (as previously determined by the authorised review officer) rather it was an asset capable of assessment under the pensions asset test. Both Mr Ferrier and the Secretary submit that the value of the unpaid present entitlement following the winding up of [Trust 1] was zero.

1. The Tribunal finds that the decision on 25 September 2023 to pay a reduced rate of age pension on the basis that an unpaid present entitlement was a loan valued at $129,728.32 was not the correct legal decision.

1. In the age pension claim lodged on 6 April 2023, Mr Ferrier listed a rental property at [Address 1], as having a current market value estimate of $500,000.

1. On 19 June 2023, Mr Ferrier advised Centrelink via telephone that he estimated the market value of the property to be $460,000. No corroborating documents were provided to confirm the valuation.

1. On 1 July 2023, a contract for sale was entered with a sale price of $470,000. This document was lodged with Centrelink on 21 August 2023. The Tribunal observed that sale price alone may not be a true representation of market value. For example, sale prices might be affected by availability, the state of the property market, or urgency to sell.

1. The decision for review relates to whether, at the time of Mr Ferrier's claim for age pension, the market value of the property at [Address 1], was $500,000. The Tribunal is unaware whether an application for reassessment of assets and decision concerning Mr Ferrier's assets following the sale has been made and any subsequent decision concerning the value of Mr Ferrier's assets after 6 April 2023 is not the subject of this review. The hearing papers confirm that the daily rate of age pension paid to Mr Ferrier was increased from the fortnight commencing 1 August 2023 because of a decrease in the asset amount used the assess the rate.[2]

1. The Tribunal accepts that the value of the property may have reduced by 1 July 2023, however that is not the period of the time the subject of this review. The Tribunal is therefore satisfied, and so finds, that as a 6 April 2023, the figure recorded by Centrelink of $500,000 for property at [Address 1], was the correct sum to be used in assessing Mr Ferrier's asset values.

1. Mr Ferrier was sent the authorised review officer's decision by prepaid post to his last known address. Sections 160 and 163 of the Evidence Act 1995 contain presumptions concerning service by post of letters having been sent by Commonwealth agencies. In the absence of sufficient evidence to the contrary and by application of those provisions the notice is presumed to have been given to Mr Ferrier on 20 September 2024. Thirteen weeks from that date was 20 December 2024.

1. The Tribunal is satisfied, and so finds, that Mr Ferrier lodged his review application with the Tribunal on 15 December 2024 - that is, within 13 weeks of the reviewable decision. It follows that any arrears payable take effect from 6 April 2023.[3]

The Tribunal sets aside the decision under review and remits the matter back to the Chief Executive Centrelink for reconsideration in accordance with the following directions:

(a) Mr Ferrier's rate of age pension is to be reassessed;

(b) The value of the asset identified as an unpaid present entitlement in [Trust 1] is to be reconsidered on the basis that it was not a loan attracting application of section 1122 of the Social Security Act 1991;

(c) Any arrears payable have effect from 6 April 2023.

[1] Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

[3] Section 109 of the Administration Act.