Editors --- "Age pension: attributable trust assets" [2009] SocSecRpr 21; (2009) 11(2) Social Security Reporter, Article 10

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Age pension: attributable trust assets

SECRETARY TO THE DFHCSIA and SAUNDERS

(2009/193)

Decided: 20th March 2009 by B. McCabe

Background

Saunders’ claim for age pension made in 2007 was rejected on the basis of the assets and income of two trusts that Centrelink had attributed to him. The Department appealed against the decision of the SSAT that the assets of the second trust should not be attributed to Saunders because the trustee was independent.

The second trust had been established pursuant to a will left by Saunders’ late father. The trustee of the trust was Perpetual Trustees. The trustee included several sub-trusts. Relevantly, under the first trust an amount of $400,000 was set aside. The terms of this sub-trust provided for payment of the income to Saunders. The terms also gave the trustee the discretion to make payments to Saunders from the corpus. The trustee was not obliged to accede to any request for payment. As a matter of practice Saunders needed to convince the trustee that the payment should be made for a particular purpose. Under the second sub trust, Saunders had a 4/20th share in the remainder of the trust assets and income.

Issue in dispute

Saunders accepted that the amount of income paid under the terms of the trust should be taken into account for the purposes of assessing his entitlement to the age pension.

His contention however was that the trust should not be attributable to him because Perpetual Trustees were clearly in control of the trust and its assets. This in turn, depended upon whether the trust was a ‘controlled private trust’ within the meaning of s.1207V of the Social Security Act 1991 (the Act).

The law

Part 3.18 of the Social Security Act 1991 (the Act) contains the relevant legislative provisions that regulate the treatment of assets and income held on trust.

Relevantly, pursuant to s.1207V a trust is considered to be a controlled private trust in relation to the individual if the individual passes a ‘control test’ (referred to in s.1207V(2)). Section 1207V(2) identifies several ways in which the control test may be satisfied. For example, the test will be satisfied in relation to an individual if the individual is the trustee of the trust or an associate of one of the trustees (s.1270V(2)(a)) or if the individual or any associates collectively hold more than 50% of the beneficial interest in the corpus or income of the trust (s.1270V(2)(d). Section 1207C defines the expression ‘associate’ to include ‘relatives’ of the individual, a term that is broadly defined in s.1207B.

Consideration

After considering s.1207V(2)(d), the AAT held that it applied. The AAT reasoned that this provision applied because most of the individuals named as beneficiaries under the will of Saunders’ late father were relatives of his and therefore associates. The AAT found that between them, they were entitled to more than 50% of the interest in the corpus or income of the sub trust.

Accordingly, the AAT concluded that these sub trusts created under the will were controlled private trusts in relation to Saunders. As a result, Saunders was an attributable stakeholder of the trust meaning that the entire value of the assets held within the two sub trusts of the trust must be attributed to him in the course of calculating his entitlement to age pension.

Formal decision

The AAT set aside the decision under review and remitted it back to the Department for reconsideration in accordance with the reasons for decision.

[G.B.]