ALLAN ATKINSON and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2013] AATA 325
[2013] AATA 325
Division GENERAL ADMINISTRATIVE DIVISION File Number
2013/0325
Re
ALLAN ATKINSON
APPLICANT
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
RESPONDENT
DECISION
Tribunal Mr R G Kenny, Senior Member
Date 22 May 2013 Place Brisbane The Tribunal affirms the decision under review.
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Mr R G Kenny, Senior Member
CATCHWORDS
SOCIAL SECURITY – Pensions, benefits and allowances – Age pension – Assets test – Claim of financial hardship – Claim of unrealisable asset – Objective test to be applied – Decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 11, 44, 1064, 1129, 1130
Veterans’ Entitlements Act 1986 (Cth)
CASES
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Repatriation Commission v Hall [1988] FCA 89
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Mr R G Kenny, Senior Member
BACKGROUND
A claim for age pension, dated 3 July 2012, by Allan Atkinson (the applicant), was rejected by Centrelink on 20 August 2012. At that time, the applicant was advised that he may receive the age pension under the asset test hardship provisions. On 4 October 2012, the applicant lodged a claim for consideration under those provisions. Centrelink rejected that claim on 11 October 2012. That decision was affirmed by an authorised review officer on 14 November 2012 and, in turn, by the Social Security Appeals Tribunal on 11 December 2012.
ISSUES, LEGISLATION AND SUBMISSIONS
Under s 1064 of the Social Security Act 1991 (Cth) (the Act), age pension is calculated using the Pension Rate Calculator. This is found at the end of s 1064-A1 of the Act and operates such that payments of age pension are adjusted by taking account of the income test and the assets test. Age pension is payable at the lower of the rates calculated under those tests.[1] It is not in dispute that, on application of the income test, age pension was payable to the applicant at a level slightly less than the maximum rate of the age pension.
[1] See s 1064-A1, Step 10, of the Act.
The decision under review was based on the value of the applicant’s assets and it is not in dispute that, at the date of the applicant’s claim, the asset limit above which the rate of pension is nil was $696,250. The asset in issue in the applicant’s case is a 17 hectare unencumbered property located at White’s Road, Buderim, of which he is the sole registered proprietor. This has been valued by the Australia Valuation Office (AVO) at $1,950,000.[2] The applicant does not dispute that valuation or that its value exceeds the asset test limit above which age pension is not payable to him. The issue for the Tribunal is whether the financial hardship provisions of the Act are applicable to him. In that regard, s 1129 of the Act reads:
[2] Exhibit 1, T-documents, p. 141.
(1) If:
(a) either:
(i) a social security pension is not payable to a person because of the application of an assets test; or
(ii) a person’s social security pension rate is determined by the application of an assets test; and
(b) either:
(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC, 1126AD and 1126E (so far as section 1126E relates to sections 1126AA, 1126AB, 1126AC and 1126AD) (disposal of assets) do not apply to the person; or
(ii) the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(c) the person, or the person’s partner, has an unrealisable asset; and
(d) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(e) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Secretary must determine that this section applies to the person.
If a person has an unrealisable asset and the person would suffer severe financial hardship if the provision were not applied to him or her, the unrealisable asset may be disregarded.[3] The term unrealisable asset is defined in s 11 of the Act, which, relevantly, reads:
[3] See s 1130(1) of the Act.
(12) An asset of a person is an unrealisable asset if:
(a) the person cannot sell or realise the asset; and
(b) the person cannot use the asset as a security for borrowing.
(13) For the purposes of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:
(a) the person could not reasonably be expected to sell or realise the asset; and
(b) the person could not reasonably be expected to use the asset as a security for borrowing.
CONTENTIONS
The applicant made the following submissions. The White’s Road property was part of a larger parcel of land which had comprised a sugar cane farm that his parents had owned and farmed and which he farmed from 1976 to 2000 when it last produced income for him from the farming of sugar cane. Subdivision of the original farm has resulted in parts being taken over by others, including members of his family, leaving him with the remaining unencumbered 17 hectare block. The applicant resides in his principal place of residence on a neighbouring block of land. A house on the White’s Road property is unable to be rented as it would require substantial repair in order for it to be habitable. Members of his family use the land from time to time for various recreational pursuits. The applicant has a strong emotional attachment to the White’s Road property because of his parents’ and his involvement in farming it and living there. The applicant has been unable to use the White’s Road property as security for a loan as he has no capacity to service loan repayments. He has been advised that, at age 65, he may be eligible to obtain a reverse mortgage by which no periodic repayments are required. The applicant agreed that the White’s Road property could be sold but he submitted that this would be unreasonable because of his connections to it as outlined and because it gave him the living space he required after living in a rural setting for all of his life.
For the respondent, Ms Karen Hamilton submitted that an overall aim of social security law was to ensure that persons utilise assets available to them to provide for their financial support rather than rely upon payments under the Act and that exercising a discretion to treat the White’s Road property as unrealisable did not give effect to that policy. Ms Hamilton referred to provisions of the Guide to Social Security Law (the Guide) for reference to the policy. While she accepted that an exception to that policy is where an asset is unrealisable, Ms Hamilton submitted that this was not the case with the White’s Road property. This was because it could be sold or used as security for a reverse mortgage loan which requires no periodic repayments. She submitted that the discretion to treat the White’s Road property as unrealisable should not be exercised as it was no longer relied upon by the applicant for income and its disposal would not interfere with the enjoyment of his adjoining principal place of residence. She conceded that the applicant had emotional ties to the White’s Road property but submitted that the test of reasonableness was an objective one rather than subjective and that only an objective approach gives effect to the overall purposes of the social security law. In any event, Ms Hamilton submitted that a reverse loan would enable the applicant to continue to derive enjoyment from the White’s Road property without being burdened with ongoing periodic repayments.
CONSIDERATION
I have noted the submissions of the applicant in relation to the White’s Road property but accept the submissions of Ms Hamilton in relation to it. The applicant’s evidence was that he has been given an understanding from his bank that, now that he is 65 years of age, he would be eligible to obtain a reverse mortgage over the White’s Road property.
The Guide is published by the respondent to provide assistance to those who administer the Act. While not bound to apply policy instructions of the kind referred to in the Guide, the Tribunal will usually apply the guidelines unless, unlike the situation here, there are cogent reasons in a particular case for not doing so.[4] The Guide, at 4.6.7.50, provides the following explanation of reasonable treatment of an asset:
[4] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645.
Unreasonable to sell an asset
The hardship rules for pensioners include a test of whether it would be unreasonable to expect the pensioner to sell an asset.
For pensioners accept that it would be unreasonable for them to sell an asset if:
·the asset is a property AND the pensioner has lived there for at least 20 years AND the property cannot be subdivided to allow the pensioner to retain the portion their home is on, OR
· the asset is a farm AND the pensioner has been a farmer for at least 20 years (not necessarily on this farm) AND the pensioner is working the farm AND they could not sell some of the land without affecting the viability of the farm and/or significantly affecting their income from the farm (see exception), OR
·the asset is a farm AND a family member (section 23(14)) is working the farm to capacity AND has been working the farm for at least ten years (a slightly shorter period can be accepted if the family member has worked the property continuously since leaving school) AND the farm is the main source of the family member's livelihood (see explanation and example), OR
·the asset is a farm or some other business AND there is a temporary but substantial reduction in income from the business due to factors outside the pensioner's control, OR
·the asset is a house occupied by a near relative AND the near relative has lived in the house for at least 10 years OR the near relative has previously provided care for the pensioner in the house (which was formerly the pensioner's home) OR the near relative is a handicapped child of the pensioner and the pensioner is providing the house to promote the child's independent living OR the near relative has dependent children and the family income of the near relative does not exceed the FTB income ceiling.
The White’s Road property is no longer a farm or business and the house thereon is not occupied. Only the first of those scenarios has potential relevance to the applicant. He no longer lives on the White’s Road property but did so in the past for at least 20 years. However, I note the reference to retention of “the portion their home is on” and I am reasonably satisfied that the scenario is applicable to a person who is continuing to live there “in their home” at the date of the age pension claim. That is not the case with the applicant. Accordingly, none of the examples of unreasonableness in the Guide is applicable.
I accept Ms Hamilton’s submission that an objective test must underlie the assessment of reasonableness. In Repatriation Commission v Hall[5] (Hall) the Full Federal Court said:
15. In Re Fuller and Repatriation Commission (S95/136 delivered 3 November 1987), an Administrative Appeals Tribunal described the test as subjective rather than objective. However, in our opinion, it is clearly an objective test. Though the test takes account of personal circumstances, it is not dependent upon the personal view of the claimant for a pension as to what should or what should not reasonably be done. As was said by Jenkinson J. in Copping's case, the decision as to what is or what is not reasonable is one for the Secretary, Department of Social Security, or by the Tribunal on review, though it is to be made after taking all relevant circumstances, including personal circumstances, into account. Among the relevant factors to be considered are the purpose or object of the assets test provisions and the aim of the legislation to ensure that pensions are not paid to those who can afford to maintain themselves. The test of reasonableness takes into account the public or community interest as well as the interests of the claimant for a pension and of other persons with whom the claimant is associated.…
[5] [1988] FCA 89
That case was concerned with the test of reasonableness as it arose in relation to the assets test under the Veterans Entitlement Act 1986 (Cth) but I am reasonably satisfied that it has equal application under the Act. Ms Hamilton cited Tribunal cases involving the exercise of discretion at issue in this matter where farming properties were involved. However, I am reasonably satisfied that the White’s Road property is no longer in that category. In evidence was a letter, dated 20 October 2006, from the Project Officer, Sugar Industry Reform Program Rural and Cross Payments Services Branch[6] which stated that the last income from the farming of sugar cane on the White’s Road property was in 2000. It is no longer a farming property and is now the remaining portion of the original farm which has been substantially subdivided.
[6] See attachment A to Exhibit 2.
I have noted the reasons advanced by the applicant for treating the White’s Road property as an unrealisable asset. These do not have the character of objectivity as referred to in Hall. While I understand the subjective nature of the sentiment behind the applicant’s reasons, I am reasonably satisfied that it would be unreasonable for him to be able to quarantine the White’s Road property from his assets in order to enable him to gain access to the age pension. He has the option of selling the White’s Road property or, now that he is 65 years of age, the prospect of obtaining a reverse mortgage over it thereby enabling him to continue to enjoy the use of it. It is not an unrealisable asset and its value must be included in an assessment of the applicant’s assets.
I am reasonably satisfied that the valuation of the White’s Road property, as assessed by the AVO, is $1,950,000. Application of the assets test in this matter results in an age pension rate of nil.[7] That is lower than a rate calculated on the basis of an income test and, in accordance with s 1064-A1 of the Act, is the rate payable to the applicant.
[7] See s 44(1) of the Act.
DECISION
The decision is affirmed.
I certify that the preceding 14 (fourteen) paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member.
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Associate
Dated 22 May 2013
Date of hearing 7 May 2013 Applicant In person Advocate for the Respondent Ms Karen Hamilton, Departmental Advocate
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