Editors --- "Pro?ts from share dealings: whether 'income'; treatment of loans" [2009] SocSecRpr 25; (2009) 11(3) Social Security Reporter, Article 3

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Profits from share dealings: whether 'income'; treatment of loans

GOH and SECRETARIES TO THE DFHCSIA and DEEWR

(2009/527)

Decided: 16th July 2009 by J. Handley

Background

Mr and Mrs Goh applied for review of Centrelink decisions about an overpayment of newstart allowance to Mr Goh and age pension paid to Mr and Mrs Goh. The basis of the decisions was that Mr and Mrs Goh’s assets exceeded the asset value limits.

The assets in question were amounts recorded in Mr and Mrs Goh’s private company financial statements showing shareholder loans of $127,666, $126,820 and $130,795 for the 2006, 2007 and 2008 income years. Also an amount of $14,425 recorded as income of the company in the 2007 income year.

The decisions were affirmed by the SSAT.

Submissions

Mr Goh argued that the income, being profit from sale of shares, should be considered as capital profits, which should be offset against previous losses.

In relation to the other sums, Mr Goh argued that the alleged loans did not arise by way of payments to the company, but rather as a result of making a profit when the domestic house was sold and a mortgage was discharged. In his view, it was arguable whether or not the loans, if any, were recoverable.

Conclusion

The Tribunal found that the $14,425 from profit on sale of shares was ‘income’ because the monies were ‘earned, derived’ or ‘received’ for the company’s use or benefit. It was also found that this sum was an asset.

In relation to the alleged loans, the Tribunal found that representations made to the Australian Tax Office and ASIC described the monies as liabilities and the loans were recorded as shareholder funds. In contrast, the Tribunal found that Mr Goh’s explanation to the Tribunal was not plausible and that these sums were monies held by the company for the benefit of Mr and Mrs Goh.

The sums were held to be assets, the fact that they had not been repaid was considered irrelevant as the value of the loan is the amount that remains unpaid (Boyd and Secretary Department of Social Security [1994] AATA 580).

The Tribunal also found that the loans were a ‘financial investment’ as they were ‘a loan that has not been repaid in full’

(s. 9(1)(e)).

The Tribunal concluded that the loans could be considered when assessing whether Mr and Mrs Goh’s combined assets exceeded the allowable limit.

Formal decision

The decision of the SSAT was affirmed. [R.P.]