Editors --- "Newstart allowance: assets test: beneficiary and trustee of estate; whether attributable stakeholder: calculation of percentage of attributable assets" [2008] SocSecRpr 19; (2008) 10(2) Social Security Reporter, Article 1

• SECRETARY TO THE DEEWR and EARL
• Background
• The issues
• Discussion
• Formal decision

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Newstart allowance: assets test: beneficiary and trustee of estate; whether attributable stakeholder: calculation of percentage of attributable assets

SECRETARY TO THE DEEWR and EARL

(2008/367)

Decided: 6th May 2008 by J. W. Constance

Background

Earl was a beneficiary and one of three trustees of the estate of the late Patricia Keenan. Pursuant to the terms of Ms Keenan’s will, Earl:

1. had the right to occupy and use the deceased’s real property (a farm), including use of the plant, machinery, equipment and household contents for as long as he wished, provided he kept the property and equipment in good tenantable condition; and

2. received regular monthly instalments of $1000 from the proceedings of the deceased’s superannuation policies.

The will provided for a fund to be created, which was to consist of:

1. the balance of the estate (excluding the real property, plant, equipment and household contents) after the payment of just debts and funeral expenses;

2. the proceeds of the superannuation policies; and

3. any income added to the fund from time to time.

The rates, insurance, repairs and maintenance of the real property was to be paid out of this fund. The will also provided the trustees with the absolute discretion to use the balance of the fund for the ‘maintenance, advancement or benefit of’ Earl.

The beneficiaries of the residuary estate were the siblings of Ms Keenan, one of whom was a trustee of the estate.

Since the deceased’s death, Earl had resided on the farm and received monthly instalments of $1000 pursuant to the terms of the will. He had also received some reimbursement from the fund for expenses relating to repairs and maintenance of the property.

Earl lodged a claim for newstart allowance. A delegate of the Secretary refused the application on the basis that Earl was an attributable stakeholder of the trust established by the will and the assets of the trust were to be attributed to him.

Earl appealed the decision to the SSAT. The SSAT set aside the decision and substituted a decision that Earl was not an ‘attributable stakeholder’ and consequently none of the trust assets were attributable to him.

DEEWR applied to the AAT for a review of this decision.

At the time of hearing the appeal, the trust’s fund consisted of the following amounts:

a) a wealth-e-account held by the trustees and administered by BT Portfolio Services Limited with a balance of $110,185.34;

b) a term deposit held by the trustees at the South West Slopes Credit Union with a balance of $3777.25; and

c) funds in the solicitor’s trust account in the amount of$979.58.

At the time of the hearing, the trust also held shares valued at $5947 and the real property, which had been valued in 2006 at $260,000.

The issues

The issues for determination by the AAT were whether Earl was an ‘attributable stakeholder’ and, if so, how much (if any) of the assets of the trust should be attributed to him for the purposes of determining his eligibility for.

Discussion

Before the AAT, the parties agreed that:

1. the trust created by the will was a ‘designated private trust’ and a ‘controlled private trust’ in relation to Earl; and

2. Earl passed the control test in relation to the trust as he was a trustee of the trust. The AAT also found that Earl passed the control test as his beneficial interest in the income and assets of the trust was 50%or more.

Having regard to these concessions, Earl would be an ‘attributable stakeholder’ unless one or more of the circumstances set out in the Social Security (Attributable Stakeholders and Attribution Percentage) Principles 2000 (‘the Principles’) provided a sufficient basis on which to determine that the individual was not an attributable stakeholder of the trust.

The AAT concluded that, having regard to all of the relevant Principles, it was not appropriate to make a determination under section 1207Xof the Act that Earl was not an attributable stakeholder. The AAT placed particular weight on Principles 6, 9 (past benefit of distributions from the trust, in particular the monthly payments of $1000), 10 (future benefit of distributions by the trust, in particular the ongoing payments of$1000 per month and the clause of the will giving the trustees absolute discretion to make further provisions for Earl) and 11 (benefit from assets and income of the trust, in particular the substantial benefit enjoyed by Earl from the right to occupy and use the real property).

The AAT then considered the percentage of the assets of the trust which should be attributed to Earl. The AAT concluded that the asset attribution should be less than 100%, as it considered that Earl did not have the benefit of the entire assets of the trust. In particular, the AAT found that Earl did not have the benefit of shares held by the trust or that part of the trust fund which was referable to money obtained from sources other than the superannuation policies.

The AAT was satisfied that the past and likely future benefit to Earl from the shares and the non-superannuation component of the fund was of such a limited extent that a 100% attribution of assets was not appropriate. However, the AAT was not in a position to determine the asset attribution percentage as it was unable to determine, at that time, the value of that part of the fund that represented the proceeds of the superannuation policies. The AAT therefore remitted the matter to the Secretary for assessment of the attribution percentage in accordance with the reasons for decision.

Formal decision

The AAT set aside the decision under review and remitted the matter to the Secretary for determination of the attribution percentage in accordance with the AAT’s reasons for decision.

[S.O.]