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Social Security Reporter |
Rent assistance: whether homeowners; 'yearly sum' payable to retirement village
(2013/434)
Decided: 26th June 2013 by P. Wulf
Mr and Mrs Charlish had been homeowners living in their own property at Murgon. The family decided they should move into a unit at Sundale Garden Village, a retirement village. They signed the agreement to move in on
20 October 2011; they sold their property for $205,000 in March 2012. There were various options to move into the unit - including a one-off payment of $279,000. The family would have needed a loan to obtain the additional money even if their property had sold at that time and they opted instead to pay an initial entry payment of $13,950 for one year’s rent, and thereafter $13,950 annually. The annual amount was calculated onr esiding in the unit for 20 years and the total amount to be paid would be $279,000. The agreement appeared to state that they would reside in unit 54 for the ingoing contribution of $279,000. The Department decided to pay age pension at a rate that did not include rent assistance. The SSAT affirmed the decision that Mr Charlish was paid at the correct rate for a person living in a unit as a homeowner.
The critical issue was whether the Charlishs were homeowners or whether the ‘yearly sum’ should be treated as rent for the purposes of the Social Security Act 1991(the Act).
Legislation
Section 11(4)(b) of the Act defines that 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; or
(b) the partner’s principal home;
or
(c) the principal home of both of them; and
(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 in the home.
Section 12C of the Act defines a retirement village as a ‘special residence’ and a person who resides in a retirement village as a ‘special resident’. The ‘entry contribution’ for living in a retirement village is defined in s.1147:
(1) A special resident’s entry contribution is:
...
(b) if the resident is a member of a couple, shares the resident’s principal home with the resident’s partner and is not a member of an illness separated couple—an amount equal to 50% of the resident’s individual residence contribution and of the partner’s individual residence contribution; or
...
(1c) For the purposes of this Division, the individual residence contribution is:
(a) for a retirement village resident—the total amount paid, or agreed to be paid, for the resident’s current right to live in the retirement village; and
...
(2) An amount that is rent for the purposes of this Act is to be disregarded in applying subsections (1), (1A) and (1B).
Rent in a retirement village is defined by s.13(2):
(a) the amounts are payable by the person:
(i) as a condition of occupancy of premises, or of a part of premises, occupied by the person as the person’s principal home; or
...
(ii) for services provided in a retirement village that is the person’s principal home; or
...
(iv) for lodging in premises that are the person’s principal home; ... and
(b) either:
(i) the amounts are payable every 3 months or more frequently; or
(ii) the amounts are payable at regular intervals (greater than 3 months) and the Secretary is satisfied that the amounts should be treated as rent for the purposes of this Act (emphasis added).
The AAT found that the Public Information Document (PID) representing the agreement had many inconsistencies. For example, it appeared there were options for residing in the retirement village including:
(1) Freehold accommodation tenure;
(2) Leasehold accommodation tenure;
(3) Licence accommodation tenure; and
(4) Other forms of accommodation tenure.
The AAT found that any potential resident could only have a licence over a property and, based on this, a resident could never gain freehold. The PID covered some freehold and leasehold units but unit 54 was only available under licence.
The AAT found that the amount of $13,950 was payable each year on the anniversary of the date of the Residence Agreement until the Residence Agreement is terminated. And further, cl 4.3 of the agreement stated: 'This right is granted to you under this agreement, is personal to you and is by way of licence only. No other right is given to you under any lease or by way of any other estate or interest in the unit.'
The AAT found that the retirement village could terminate the agreement on 14 days’ notice and that the applicants would not be entitled to any refund or exit compensation.
The AAT considered the conflicting cases of Secretary, DSS and Cowan [1997] AATA 987 and Secretary, DSS and Montgomery [1996] AATA 749. On appeal to the Federal Court in Secretary, Department of Social Security v Montgomery (1996) 44 ALD 291 the Court found that the full ingoing sum had been paid and that there was an entitlement to repayment on termination of the licence, so rent assistance was not payable.
In this case the AAT found the facts were closer to DSS v Knight [1996] FCA 1177; (1996) 44 ALD 283 and Secretary, DSS and Knight [1996] ATAA 101 where it was found that there was an obligation to make periodic payments and a direct nexus between the occupancy of the premises and the obligation to make payments. In Knight the Federal Court found that the periodic payments could be considered rent.
In this case the AAT found that there was no sizeable initial contribution, that there was an obligation to make an annual payment of $13,950, and that the provisions of the Act allowed payment to the applicants of rent assistance for the yearly payments prescribed under the terms of the licence agreement consistent with s.13(2)(b)(ii) of the Act. The AAT also noted that the Department termed the Charlishs homeowners and at the same time assessed the term deposit that contained the proceeds of the sale of their original home at Murgon (which would have been the monies used to pay the larger in-going contribution) as an asset. The AAT found that the Charlishs had been impacted twice. The AAT held that the applicants were not home owners within the definition of s.11(4) of the Act, but were making an annual contribution of $13,950 for a licence to occupy and that they should be paid rent assistance based on the decision of Knight.
The AAT set aside the decision of the SSAT and substituted a decision finding that the Charlishs were not home owners and that they should have been paid rent assistance.
[M.R.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2013/22.html