Social Security Act 1991 ss 14A, 598, 1121

Re Williamson and Secretary, Department of Family and Community Services [2003] AATA 652

Re Jacobson and Secretary, Department of Social Security (AAT 7846, 20 March 1992)

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

Re Berry and Secretary, Department of Social Security (AAT 10378, 28 August 1995)

The applicant seeks review of a decision made by Centrelink on 3 November 2003 not to waive a liquid assets waiting period ("LAWP") prior to a grant of newstart allowance. This decision was affirmed by an Authorised Review Officer on 28 November 2003 and by the Social Security Appeals Tribunal on 8 December 2003.

The issue for the Tribunal in this case is to determine whether the LAWP has been correctly imposed.

At the hearing of the application Mr Morales appeared and gave evidence. In addition the following documentary evidence was tendered:

Exhibit 1 "T" Documents

Exhibit 2 Letter from Centrelink dated 5 May 2004

Exhibit 3 Medical Certificate

The following provisions of the Social Security Act 1991 are relevant:

"14A.(1) In Parts 2.11, 2.11A, 2.12, 2.14 and 2.23A:

'liquid assets', in relation to a person, means the person's cash and readily realisable assets, and includes:

(a) the person's shares and debentures in a public company within the meaning of the Corporations Law; and

(b) amounts deposited with, or lent to, a bank or other financial institution by the person (whether or not the amount can be withdrawn or repaid immediately); and

(c) amounts due, and able to be paid, to the person by, or on behalf of, a former employer of the person;

(d) an amount that is a qualifying eligible termination payment for the purposes of Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act; or

(i) has claimed or is receiving a youth allowance or an austudy payment; and

(ii) is undertaking a tertiary course of education in any year or part of a year;

an amount necessary to cover the reasonable expenses incurred, or likely to be incurred, by the person in that year or that part of a year and that are directly related to his or her undertaking the course, including:

(iii) up front course fees; and

(iv) HECS payments; and

(v) union fees; and

(vi) costs of text books; and

(vii) costs of any tools or equipment required to undertake the course, including computer software; and

(viii) expenses directly related to any field trips undertaken for the purposes of the course; and

(ix) such other expenses as are approved by the Secretary.

'maximum reserve', in relation to a person, means:

(a) if the person is not a member of a couple and does not have a dependent child--$2,500; or

(b) in any other case--$5,000.

14A.(2) For the purposes of Parts 2.11, 2.11A, 2.12, 2.14 and 2.23A, a person's liquid assets are to be taken to include:

(a) the liquid assets of the person's partner; and

(b) the liquid assets of the person and the person's partner.

14A.(3) If:

(a) during the 4 weeks immediately before a person claims youth allowance, austudy payment, newstart allowance or sickness allowance, the person or the person's partner transfers liquid assets to a person of any age who is the natural or adopted child of the person or the partner; and

(i) the person transferring receives no consideration or inadequate consideration, in money or money's worth for the transfer; or

(ii) the Secretary is satisfied that the purpose, or the dominant purpose, of the transfer was to enable the claimant to obtain, youth allowance, austudy payment, newstart allowance or sickness allowance;

then the transfer is to be taken, for the purposes of this section, not to have occurred.

14A.(4) 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.

14A.(5) If:

(a) a person has or had a debt not related to the person's principal home or to any other residential property in which the person holds or held, solely or jointly, any right or interest; and

(b) since becoming unemployed or incapacitated for work or study (as the case requires), the person has, in order to discharge the debt in whole or in part, made a payment that the person was not obliged to make; and

(c) since becoming unemployed or incapacitated for work or study (as the case requires), the person had not already made such a payment in order to discharge that debt in part;

the amount of the payment referred to in paragraph (b) is to be disregarded for the purposes of determining the amount of the person's liquid assets.

14A.(5A) If:

(a) a person has or had a debt not related to the person's principal home or to any other residential property in which the person holds or held, solely or jointly, any right or interest; and

(b) since becoming qualified for youth allowance or austudy payment (as the case requires), the person has, in order to discharge the debt in whole or in part, made a payment that the person was not obliged to make; and

(c) since becoming qualified for youth allowance or austudy payments (as the case requires), the person had not already made such a payment in order to discharge that debt in part;

the amount of the payment referred to in paragraph (b) is to be disregarded for the purposes of determining the amount of the person's liquid assets.

14A.(6) For the purpose of determining whether a liquid assets test waiting period applies in relation to a claim for a social security benefit, subsection (5) can apply to a payment made after the claim if the payment is made before such a liquid assets test waiting period would end under section 549A, 575A, 598 or 676 (whichever is applicable).

...

598.(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.

1121.(1) If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person's assets for the purposes of this Act, is to be reduced by the value of that charge or encumbrance.

1121.(2) Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:

(a) the charge or encumbrance is a collateral security; or

(b) the charge or encumbrance was given for the benefit of a person other than the person or the person's partner.

1121.(3) Subsection (1) does not apply to a charge or encumbrance over assets that are to be disregarded under section 1118.

1121.(3A) Subsection (1) does not apply to an asset that is an asset-tested income stream (long-term).

1121.(4) If:

(a) there is a charge or encumbrance over assets; and

(b) the charge does not arise under section 1138; and

(c) the assets consist of assets whose value is to be disregarded under section 1118 and other assets;

the amount to be deducted under subsection (1) is:

value of the charge or encumbrance X value of the other assets

1121.(6) This section has effect subject to sections 1145A to 1157 (special residences)."

The applicant borrowed $35,000 for renovations to his home. His home is security for the debt. He received the money some time between 25 and 28 February 2002. It would appear that the moneys were expendable solely at the applicant's discretion. Although the moneys are said to have been borrowed for home renovations (this is reflected in the letter from the Commonwealth Bank dated 13 November 2003 (T9/34)), there was no express obligation on the applicant to use the moneys for that purpose.

The applicant stated that the moneys had not been spent because he was not in a hurry to do the house renovations, he had been sick and he was waiting for some approvals. The applicant stated he has been using the money to make repayments on the loan itself.

Under cross-examination he confirmed that he had left work on or about 28 October 2003.

The representative for the respondent, Ms Hamilton, submitted that the Tribunal would accept that the date of termination of employment was 28 October 2003 and that the LAWP had therefore been properly applied from 28 October 2003 to 26 January 2004, being the maximum 13 weeks waiting period. The Tribunal was referred to section 598 of the Social Security Act 1991 ("the Act") with respect to the calculation of this period. Ms Hamilton also referred the Tribunal to section 14A which defines the term "liquid assets".

The Tribunal was referred to the decision of Re Williamson and Secretary, Department of Family and Community Services [2003] AATA 652 which adopted the reasoning in Re Jacobson and Secretary, Department of Social Security (AAT 7846, 20 March 1992) and Re Biddlecombe and Department of Family and Community Services [1999] AATA 528. The Tribunal was also referred to the decision of Re Berry and Secretary, Department of Social Security (AAT 10378, 28 August 1995) with reference to the provisions of section 1121 of the Act.

In submissions, Mr Morales referred to the departmental guidelines and said that the Tribunal was not bound to follow the guidelines.

Adopting the reasoning set out in the decision of Williamson, the Tribunal accepts in this case that the borrowed moneys do represent liquid assets as defined in section 14A. The test established by that case was that the term "liquid assets" meant no more than assets which are capable of ready conversion into cash and that the provision did not include the prospect of taking the existence of liabilities into account.

On one level it is easy to see why the applicant is upset that the borrowed amount should be regarded as an asset when he still has to repay the amount in any event. However, it seems clear from the legislation, the guidelines and the decided cases that, in this case, the moneys borrowed by the applicant for home renovations have been properly regarded as a liquid asset in the applicant's hands. As in the case of Williamson I am satisfied in this case that "the moneys were available to the applicant to use at his discretion".

In respect of section 1121 the applicant contended that as the debt was secured against his home that its value should not be taken into account.

It seems clear, having regard to the reasoning as set out in the decision of Berry that, as the applicant's home is a disregarded asset, the value of any debt is not offset. Accordingly, the debt on the home cannot be offset against the assets. In those circumstances, the Tribunal is satisfied that section 1121 does not operate in this case to reduce the value of the applicant's assets.

The Tribunal is satisfied that the applicant finished work on or about 28 October 2003. The Tribunal is also satisfied that the appropriate maximum waiting period has been properly calculated and applied. Accordingly, the Tribunal is satisfied that the formula as set out in subsection 582(2A) has been correctly applied in this case and that the liquid assets waiting period, based on the applicant's liquid assets of $35,000, exceeded his maximum reserve of $5,000 and that a liquid asset waiting period of 13 weeks was correctly calculated.

The Tribunal affirms the decision under review.

I certify that the 16 preceding paragraphs are a true copy of the reasons for the decision herein of Mr O Rinaudo, Member

Signed: Sarah Oliver

Associate

Date of Hearing 10 May 2004

Date of Decision 29 June 2004

The Applicant appeared in person

For the Respondent Ms J Hamilton, Departmental Advocate