Editors --- "Assets test: meaning of 'homeowner'" [2006] SocSecRpr 5; (2006) 8(1) Social Security Reporter, Article 5

• VANDERPLUYM and SECRETARY TO THE DFaCS
• Background
• The issue
• The law
• Discussion
• Formal decision

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Assets test: meaning of ‘homeowner’

VANDERPLUYM and SECRETARY TO THE DFaCS

(2005/1044)

Decided: 20th October 2005 by D. Muller

Background

Vanderpluym and her husband sold a property in Sydney in 1995 for $200,000. They subsequently moved to Magnetic Island where they rented a property. Mr Vanderpluym started an internet/computing business in July1995 which he registered as Magnetic Magic. The couple bought a block of land on Magnetic Island at the end of 1995 or early 1996 for $50,000.

On 3 February 1999, Mr Vanderpluym incorporated Magnetic Magic Pty Ltd. He was the sole director and shareholder of the company. After incorporation of the company, Mr and Mrs Vanderpluym transferred the ownership of the block of land to Magnetic Magic Pty Ltd. A house was subsequently built on the block. During the construction process, Mr Vanderpluym transferred the sum of $204,056 from his account to the account of Magnetic Magic Pty Ltd. The couple moved in to the home on 14 November 1999. Rent was paid to a real estate agent who then paid it in to the account of Magnetic Magic Pty Ltd. On 30 June 2000, the company owed Mr Vanderpluym $239,526. On 15 April 2001, the house and land were transferred to Mr and Mrs Vanderpluym.

Vanderpluym was in receipt of parenting payment at the partnered rate. The SSAT decided that for the period 14 November 1999 until 15 April 2001, Vanderpluym and her husband were homeowners for the purposes of the Social Security Act 1991(the Act). It further decided that an amount of $204,056 which Mr Vanderpluym had loaned the company was an asset. The Tribunal found that the value of Vanderpluym’s assets exceeded the asset value limit which is allowed when in receipt of parenting payment at the partnered rate. The SSAT decided that Vanderpluym owed a debt of $12, 258.55.

The issue

The AAT considered whether Vanderpluym was a homeowner between 11 November 1999 and 15 April 2001 and whether the loan of $204,056 made by Mr Vanderpluym to Magnetic Magic Pty Ltd should be included in the assessment of total assets.

The law

Section 11(4) of the Act provides:

11(4) For the purposes of this Act:

(a) ..............................

(b) A person who is a member of a couple is a homeowner if:

(i) The person or the person’s partner has a right or interest in one residence that is:

A. the person’s principal home;

B. the partner’s principal home;

C. the principal home of both of them;

(ii) The person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure.

Discussion

The AAT discussed the term ‘homeowner’ and stated that the fact that a person has reasonable security of tenure, does not automatically make them a homeowner. The terms ‘right or interest’ contained in the definition of a ‘homeowner’ must refer to a legal or equitable right or interest in the ownership or the title to the property. It does not refer to a right or interest gained by way of lease or rental agreement.

The AAT found that the house on Magnetic Island was owned by Magnetic Magic Pty Ltd from the date of its construction until 15 April 2001 during which time the Vanderpluyms had no legal or equitable interest in the house. The AAT emphasized the position of companies as legal entities separate from their shareholders and said:

‘It was probably correct to say that Mr Vanderpluym was unlikely to evict his own family while he had control of Magnetic Magic. However, if the company had encountered financial difficulties and had been wound up, a receiver or administrator would probably have evicted the family and sold the home. In such a case Mr Vanderpluym’s loan of $204,000 would make him just another unsecured creditor. It would have done him no good to claim that he was the owner of the home’ (Reasons, para. 26).

The AAT found that although the Vanderpluyms’ leasing arrangement with Magnetic Magic Pty Ltd gave them security of tenure in the home, they were not homeowners. It also found that the value of the loan by Mr Vanderpluym to Magnetic Magic Pty Ltd was an asset of Vanderpluym.

Formal decision

The decision of the SSAT which dealt with the period 14 November 1999 to 10 July 2001 was set aside and the matter was remitted to the Department for re-assessment.

[A.W.]