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[2009] AATA 71
respondent. The Tribunal affirmed the decision to increase Mr Kavanagh’s disability support pension from 23 May 2007, the date Centrelink was informed of the relevant change.
1 cited instrument linked from this judgment.
The Tribunal decided that Mr Kavanagh’s substantially increased mortgage debt changed his financial circumstances because it reduced his equity in a rental property. The relevant statutory rule linked the effective date of the pension increase to the later of when the change happened and when Centrelink was told. As the Tribunal found that Centrelink was not told before 23 May 2007, it affirmed the decision to apply the increase from that date.
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In Kavanagh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 71, the Administrative Appeals Tribunal considered the effective date of an increase in Patrick Kavanagh’s disability support pension. The decision under review increased his pension from 23 May 2007. Mr Kavanagh sought an earlier date, and the AAT ultimately affirmed the decision under review ([1], [9]).
The issue arose from loans secured against Mr Kavanagh’s rental property at 1 Station Street, Mentone. He had arranged two loans in 2003 and informed Centrelink of them on 12 February 2004. He subsequently supplied documents showing a combined outstanding balance of $72,941.18. Centrelink then accounted for that debt in assessing the property under the pension assets test ([3]).
The debt later increased substantially. On 23 May 2007, Mr Kavanagh contacted Centrelink about the value of his assets. Documents he subsequently supplied recorded a total outstanding loan balance of $211,146.17 as at 30 June 2007. The increased debt resulted in an increase to his pension from 23 May 2007 ([4]).
Mr Kavanagh said that the loan arrangements allowed further funds to be drawn, that he did not have to make repayments, and that he believed he had previously told Centrelink about the debt increasing. However, he could not produce evidence of earlier notice. The Tribunal found that Centrelink’s records showed the two loans had been disclosed in 2004, but did not show that the steadily increasing debt had been reported before May 2007 ([5]).
The Tribunal also considered whether Centrelink should have made enquiries of its own. It found that the information recorded in 2004 showed regular repayments and gave no indication that the debt was likely to rise substantially. The Tribunal therefore saw no basis to expect Centrelink to make enquiries beyond its regular requests that Mr Kavanagh report changes in his financial position ([6]).
The Tribunal’s statutory starting point was s 110(1) of the Social Security (Administration) Act 1999. As reproduced in the reasons, where a favourable determination follows a person informing the Department of an event or change of circumstances, the determination takes effect on the later of the day the person informed the Department and the day the event or change occurred ([7]).
The parties disagreed about whether the growing loan balance amounted to a “change of circumstances”. Mr Kavanagh’s representative argued that it did not, describing the situation as a query about his pension rate in light of the loan. The representative also relied on Re Secretary, Department of Social Security and Austin [1995] AATA 35; (1995) 37 ALD 279 ([8]).
The Tribunal said that the reasoning in Austin did not assist Mr Kavanagh’s argument. It noted that the Tribunal in Austin had treated “change” and “circumstances” according to their ordinary meanings, referring to variation or alteration in a person’s condition or state with respect to material welfare. In Austin, the change identified was reaching a required ten years’ residence in Australia. In Kavanagh, the relevant circumstances were different: a substantial increase in secured borrowing had reduced the equity in a property worth about $300,000 ([8]).
The Tribunal characterised the reduction in net equity, by $138,205 over three years through unpaid interest and further withdrawals, as a “clear alteration in the material welfare” of Mr Kavanagh ([8]). It therefore found a change of circumstances. Importantly, the existence of the loans was not itself the whole issue. The Tribunal distinguished the debt level Centrelink knew about in 2004 from the later, substantial increase in that debt.
The timing rule then determined the result. The evidence did not establish that Mr Kavanagh had told Centrelink about the increased borrowing before 23 May 2007. Because s 110(1) made the operative date the later of the date of change and the date of notice, the determination could not take effect earlier than the date Centrelink was informed. The Tribunal accordingly affirmed the decision to use 23 May 2007 ([8]–[9]).
This decision did not purport to alter the statutory rule in s 110(1). It applied the rule to the facts before the Tribunal: a favourable pension determination followed notice of a change in financial circumstances, and the effective date depended on both when the change occurred and when Centrelink was informed ([7]–[9]).
The decision’s contribution is its application of the concept “change of circumstances” to a substantial increase in secured borrowing that reduced a person’s net equity in real property. The Tribunal did not treat every movement in property values or every change in a mortgage balance as necessarily decisive. It contrasted ordinary changes in property and mortgage values with the major financial change it found on the evidence in Mr Kavanagh’s case ([8]).
The Tribunal’s treatment of Austin was also fact-specific. It used the ordinary-meaning approach described there, but concluded that the example in Austin, reaching ten years’ residence in Australia, did not resolve the different factual question before it. The decision therefore supports a cautious reading: a substantial, documented reduction in net equity may amount to a change in material welfare, while the effective date under s 110(1) remains tied to the statutory notice-and-occurrence comparison ([8]).
Nothing in the supplied judgment indicates a change to the general operation of s 110(1), or sets out a comprehensive test for every type of financial change. The reasoning turns on the size and nature of the debt increase, the effect on equity, and the evidence about what Centrelink knew and when.
At [7], the Tribunal set out s 110(1): the determination takes effect on the day the person informs the Department or the day the event or change occurs, “whichever is the later”. In plain English, notice alone does not necessarily make the change effective from the date of notice if the relevant event happened later. Conversely, where notice comes later than the change, the statutory wording makes the notice date the operative date.
At [8], the Tribunal described the reduction in Mr Kavanagh’s equity as “a clear alteration in the material welfare” of the applicant. In ordinary terms, the Tribunal regarded the increased debt as more than an administrative adjustment to a mortgage account: it significantly altered the financial position relevant to the assets test.
Also at [8], the Tribunal said s 110(1) limited the increase to “the date on which he informed Centrelink” and found that date was “no earlier than 23 May 2007”. This reflects the evidentiary finding that there was no record or other evidence establishing earlier notice of the increasing debt. The Tribunal did not find that Centrelink had never been told about the loans; it expressly accepted that the two loans had been disclosed in 2004. The missing notice concerned the subsequent increase in the debt ([5], [8]).
At [6], the Tribunal explained why it did not accept that Centrelink should have independently discovered the increase. The 2004 records showed ordinary mortgage loans and regular repayments, with nothing indicating a likelihood of substantial future increases. The finding is tied to those records and circumstances, rather than a general statement that an agency can never have an obligation to make enquiries.
The decision is most directly relevant to a social security assets-test situation where a person’s financial position changes after an initial debt or asset position has been reported, and a later favourable determination depends on when the agency was informed. Its reasoning is particularly relevant where a liability secured against property grows substantially and thereby reduces the owner’s net equity.
The factual comparison in this case included an earlier reported debt of $72,941.18, a later debt of $211,146.17, and a Tribunal finding that the resulting reduction in equity was $138,205 over about three years ([3], [4], [8]). Those amounts are facts of this case, not thresholds stated by the Tribunal. The judgment does not establish a minimum amount or percentage by which debt must increase before there is a change of circumstances.
The decision also highlights the importance of the distinction between reporting the original existence of a loan and reporting a later material increase. Centrelink knew of the two loans from 2004, but the Tribunal found no evidence that it had been informed of the later increases before 23 May 2007 ([5]). Thus, the precedent may be relevant where the agency has accurate information about an initial financial position, but the disputed event is a subsequent material change.
A further relevant feature is the evidentiary record about agency knowledge. The Tribunal relied on the lack of records of earlier notice and on the information available to Centrelink in 2004 when rejecting the argument that it should have initiated its own enquiries ([5]–[6]). The decision does not resolve how a different record, such as evidence of earlier notification or agency knowledge of likely increases, would affect the analysis.
The supplied judgment contains no later decisions applying, distinguishing or otherwise treating Kavanagh. It therefore provides no basis for describing its subsequent reception by courts or tribunals.
The only other decision identified in the reasons is Re Secretary, Department of Social Security and Austin [1995] AATA 35; (1995) 37 ALD 279. The Tribunal considered that decision at [8], including its approach to the ordinary meaning of “change” and “circumstances”. It distinguished the factual setting: Austin concerned reaching a ten-year residence requirement, while Kavanagh concerned a substantial increase in debt and the resulting reduction in property equity. No later treatment beyond what is contained in the supplied reasons can be stated on this source.
The decision does not define how large a financial change must be to qualify as a change of circumstances under s 110(1). The Tribunal described the reduction in Mr Kavanagh’s equity as a major change, but did not set out a general threshold or a formula for assessing other cases ([8]).
The reasons also do not provide a detailed method for identifying the precise date on which the change in net equity occurred. The evidence included a debt balance as at 30 June 2007, while the Tribunal found that Centrelink was informed on 23 May 2007 and applied the increase from that date ([4], [8]). The reasons do not separately analyse how the timing of each withdrawal or the accumulation of unpaid interest affected the date of the change for s 110(1).
The judgment’s comments on Centrelink enquiries are similarly confined to the information available in this case. The Tribunal found that the 2004 records showed regular repayments and did not suggest substantial future increases ([6]). It does not establish what the result would be if an agency had records indicating that debt was likely to increase, had received incomplete or contradictory information, or had otherwise been alerted to a material change.
Finally, the decision is an AAT decision applying the statutory text reproduced in its reasons. The supplied material does not address later legislative amendments, subsequent authority, or the current administrative-law setting. Any use of the decision for a present matter would therefore require checking the relevant current legislation and later authorities.
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DECISION AND REASONS FOR DECISION [2009] AATA 71
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
SOCIAL SECURITY- disability support pension - assets test - increase in borrowings secured against real estate - date for increase in rate of pension - change of circumstances - date on which respondent informed of change.
Re Secretary, Department of Social Security and Austin [1995] AATA 35; (1995) 37 ALD 279
...if a favourable determination is made following a person having informed the Department of the occurrence of an event or change of circumstances, the determination takes effect:
(a) on the day on which the person so informed the Department; or
(b) on the day on which the event or change occurred;
I certify that the nine [9] preceding paragraphs are a true copy of the reasons for the decision herein of Mr B H Pascoe
Advocate for the respondent Mr T de Uray, Centrelink Legal Services
The Tribunal affirmed the decision to increase Mr Kavanagh’s disability support pension from 23 May 2007, the date Centrelink was informed of the relevant change.