Editors --- "Farm household support: financial hardship; exceptional circumstances" [2009] SocSecRpr 4; (2009) 11(1) Social Security Reporter, Article 4

• KEAIN and SECRETARY TO THE DFHCSIA
• Background
• The law and issues
• Discussion
• Formal decision

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Farm household support: financial hardship; exceptional circumstances

KEAIN and SECRETARY TO THE DFHCSIA

(2008/1296)

Decided: 13th November 2008 by R. W. Dunne

Background

Keain ran a farming property in South Australia, which enterprise was controlled through two family trusts (the ‘Trusts’). Due to difficult years on the farm and to support his family, Keainal so worked from 1998 on the Port Pirie wharf, but estimated that he spent 65%of his working time at the farm. In the 2006-2007 year the Trusts made a loss and Keain received no distribution from it, but did receive drawings from the Trusts of $6354 and had various household expenses totalling $15,000 paid by the Trusts.

Between 2005 and 2008 Keain sold various public company shares, his share of the proceeds of which($43,220) had been paid to the Trust to meet farm expenses. The Trusts ‘financial statements for 2006-2007 showed a total negative amount in Keain’s name of $142,169, which was agreed to be a loan to the Trusts for which there was no expectation of repayment.

Keain applied for drought assistance, and was assessed by Centrelink for exceptional circumstances relief payment, but was refused payment on the basis that he did not meet the criteria for ‘farmer’, discussed below, a decision later affirmed by the SSAT.

The law and issues

The Farm Household Support Act 1992 (the Act) provides, in setting out the object of exceptional circumstances relief payment, that the payment is to be provided to ‘farmers’, and in particular:

Object of exceptional circumstances relief payment

6(1) The object of exceptional circumstances relief payment is:

(a) to provide financial assistance to persons who:

(i) are farmers; and

(ii) are in exceptional circumstances; and

(iii) are experiencing difficulty in meeting living expenses; and

(b) to provide financial assistance to persons who:

(i) carry on a small business, gross income from which has been significantly reduced because of the effect of exceptional circumstances on farm enterprises in the area from which the income of the business is normally derived; and

(ii) are experiencing difficulty in meeting living expenses.”

Section 8A of the Act further provides that exceptional circumstances relief payment is to be available to a “farmer" who -

8 (B) contributes a significant part of his or her labour and capital to the farm enterprise; and

(C) derives a significant part of his or her income from the farm enterprise; and.....

(ii) an exceptional circumstances certificate issued in respect of the person has effect.

The questions for the Tribunal were, therefore, whether Keain contributed a significant part of his capital to the farm enterprise and whether he derived a significant part of his income from that enterprise.

Discussion

In relation to his contribution of capital to the farming enterprise, the Tribunal noted the decision in Re Herrick and Secretary, Department of Family and Community Services [2002] AATA 91, that the term ‘contributed’ meant to give, whether in common with others or for a common purpose; that the term ‘significant’ should be interpreted to mean not insignificant or negligible on the one hand, and noteworthy or of considerable amount or importance, on the other; and that ‘capital’ should be understood as being ‘...produced wealth as distinguished from land and other natural resources used productively for gain’ (Incorporated Interests Pty Ltd v Federal Commissioner of Taxation [1943] HCA 1; (1943) 67 CLR 508 at519). On this basis, noting that Keain had contributed $43,220 in share proceeds to the Trust, the Tribunal determined that he had made a significant contribution of capital to that farm enterprise.

In relation to the issue of income received from the farm enterprise, the Tribunal noted that Keain had received a total of $21,234 in drawings and expenses from the Trusts in2006-2007, and concluded that these amounts were ‘monies that Mr Keain “derived” in the same way that he would have received them had they been distributions or the payment of wages to him from the Trust’ (Reasons, para. 13). The Tribunal also noted that, but for drought, Keain would have received a significant part of his income from the farm enterprise.

In summary, the Tribunal concluded that Keain had contributed a significant part of his capital to the farm enterprise, and that he had he derived a significant part of his income from that enterprise.

Although an ‘exceptional circumstances certificate’ had not been issued in respect of Keain (s.8A(1)(c)),the Tribunal concluded that there was no reason why such a certificate should not be issued.

Formal decision

The Tribunal set aside the decision under review and remitted the matter for reconsideration in accordance with its findings.

[P.A.S.]