Anderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 938

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 938

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/2569

GENERAL ADMINISTRATIVE  DIVISION		)
Re		MRS ANDERSON

Applicant

And SECRETARY, DEPT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Dr P McDermott, RFD, Senior Member

Date21 October 2008

PlaceBrisbane

Decision The Tribunal sets aside the decision of the Social Security Appeals Tribunal, made 20 May 2008, and remits the matter to the respondent for reconsideration in accordance with these reasons.

....................[Sgd]..............................

Senior Member

CATCHWORDS

SOCIAL SECURITY – Assets & Income – valuation of asset – net market value approach considered – importance of a process of reasoning when determining a valuation – insufficient evidence to make a proper assessment of the value of the asset – decision under review set aside and remitted back to the Secretary.

Social Security Act 1991 (Cth) ss 11(1), 1064, 1064-A1, 1064-G1, 1118

Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790

Re Ma and Another and Secretary, Department of Employment and Workplace Relations (2006) 93 ALD 746

REASONS FOR DECISION

21 October 2008 Dr P McDermott, RFD, Senior Member  

INTRODUCTION

1.      I am required to consider whether Centrelink has correctly valued a house owned by Mrs Anderson[1] in calculating her rate of Age pension.

[1] For reasons of privacy in these reasons I do not mention the full name of the applicant.

BACKGROUND

2.      Mrs Anderson owns a house in Warana[2] which I will in these reasons refer to as “the property”.  On 25 January 2008, Mr C Barlow from the Australian Valuation Office (AVO) valued the property at $430,000. That valuation was admitted into evidence before me.[3]  The Secretary has quite properly acknowledged that the valuation provided by the AVO was made by a roadside inspection and without the benefit of entering the property.  However, the AVO has had difficulty in valuing the property because Mrs Anderson would not grant them access to the property.

[2] For reasons of privacy in these reasons I do not mention the address of the property.

[3] Exhibit C.

3.      On 29 January 2008, Centrelink decided to reduce Mrs Anderson’s rate of Age Pension having regard to the valuation of the AVO.  On 7 February 2008, Mrs Anderson sought a review of this decision.  On 14 February 2008, Centrelink was advised that the AVO was denied access to the house to review the previous valuation and that the previous valuation was reinstated.  On 18 February 2008, Centrelink confirmed the original decision to reduce her pension.

4.      On 28 February 2008, Mrs Anderson sought a further review of the decision to reduce her pension by an Authorised Review Officer.  In the process of that review, the Authorised Review Officer advised the Applicant that the AVO could do a full inspection of the property to provide a more thorough valuation. Mrs Anderson advised the Authorised Review Officer that she did not want such an inspection to occur.  On 10 March 2008, the Authorised Review Officer affirmed the original decision.

5.      On 20 May 2008, the Social Security Appeals Tribunal affirmed the decision of the Authorised Review Officer.  Mrs Anderson now seeks review of that decision by this Tribunal.

RELEVANT LEGISLATION

6. Section 1064 of the Social Security Act 1991 (“the Act”) provides that a person’s rate of Age Pension is to be calculated in accordance with the rate calculator which is found at s 1064-A1 of the Act. This rate calculator provides for a person’s rate of Age Pension to be reduced by the assets reduction rate as calculated using Module G of s 1064. Section 1064-G1 provides how to work out the effect of a person's assets on the person's maximum payment rate.

7. Section 11(1) of the Act provides that unless the contrary intention appears, the term "asset" means property or money (including property or money outside Australia).

8.      I am satisfied that Mrs Anderson is the sole owner of the property which I find is an asset of Mrs Anderson. In her evidence, Mrs Anderson confirmed that the property is not subject to any mortgage.

9. For the sake of completeness, I should mention that I have formed the view that the property is not an asset that can be disregarded under s 1118 of the Act in calculating the value of the Applicant’s assets.

VALUING AN ASSET

10.     The Federal Court of Australia in Kirkovski v Secretary, Department of Family and Community Services[4] has confirmed that the Act does not provide how an asset is to be valued and observed the practice of this Tribunal in adopting the net market value approach.

[4] [2004] FCA 790 at [17].

VALUATION EVIDENCE

11.     I certainly accept the submission of the Secretary that the valuation of the Department of Natural Resources Valuation that was relied upon by Mrs Anderson before the Social Security Appeals Tribunal should not be adopted.  The Department of Natural Resources valuation of $245,000 in respect of the year ended 30 June 2007 is a valuation of the unimproved land.  This value certainly does not reflect the market value of the property which has the improvement of a three bedroom dwelling.  Mrs Anderson herself in the hearing before me certainly appreciated that the valuation by the Department of Natural Resources Valuation is not based on the market value of the property.

12.     The Secretary relies upon the valuation by the AVO that was made on 25 January 2008.  As I mentioned earlier, that valuation placed a valuation of $430,000 on the property.  That valuation report is a one page document which mentions a number of details about the property such as the real property description; the fact that on the property is a three bedroom brick building in fair condition with a tile roof; and that the property is a corner block[5].  The valuation report form provides for the area of the land or the date of construction of the home to be inserted: neither of these details were inserted in the report.  The only comparable sale that is listed in the valuation report is a 2007 sale of a property at 2 Narambi Street for $575,000.  Particulars of the Narambi Street property do not appear in the valuation report.

[5] Exhibit C.

13.     Mr Barlow, who gave evidence before me, did mention some comparable properties that he relied upon to make the valuation.  I mention that the Social Security Appeals Tribunal does not appear to have been informed of those comparable properties. Those comparable properties are also not discussed in the report of the AVO.  Because of this, I do not consider that it would be fair to rely upon that report because Mrs Anderson is unable from the report to appreciate how the property was valued. It is fair to mention that Mrs Anderson was offered an inspection from another valuer from the AVO. That second valuer would have undoubtedly prepared a more comprehensive report as an initial valuation was challenged. However, Mrs Anderson would not approve his inspection of the property.    

14.     One comparable sale that Mr Barlow mentioned in his evidence concerned a nearby property at 23 Napoli St which sold for $445,000 in August 2007.  That property was a 1970s brick veneer home which Mr Barlow quite properly mentioned was superior to the property of Mrs Anderson.  Mr Barlow also mentioned that the property at 23 Napoli St had a second lock up garage.  Having regard to the difference in the properties, I make the observation that the AVO valuation of the property does seem to be a high valuation.  On the other hand, that valuation may be entirely justified but the report does not provide such a justification.

15.     Mrs Anderson tendered two real estate agent appraisal reports which were admitted into evidence.[6]  It is fair to say that the real estate agents who prepared the appraisal reports would not be aware that those reports would be tendered in evidence in this application.  Those reports do not reveal any discussion of comparable properties.  They do, however, reveal an opinion about the value of the property.

[6] Exhibit B.

16.     One appraisal report from LJ Hooker that was prepared on 10 September 2008 gives an appraisal price in the range of $380,000 to $400,000.  That appraisal contains a comprehensive property description.  However, that appraisal does not contain a discussion of how the appraisal was determined. Nonetheless, those appraisals are some indication of the market value of the property.

17.     Another appraisal from Remax Property Associates, that was prepared on 1 October 2008, gives an appraisal price in the range of $380,000 to $410,000.  The author of that appraisal (Mr M Knights) was available to give evidence before me.  Mr Knights confirmed the opinion that he expressed in his report.  His appraisal was based on five properties.  It was pointed out by Mr Barlow that three of those properties were on a busy highway, the Nicklin Way.  However, those three properties sold for a lesser price than the highest estimate in the range that was given by Mr Knights.[7]  I consider that Mr Knights endeavoured to provide a genuine estimate of value of the property.  Mr Knights has 16 years experience in the real estate industry and he does provide some assistance to valuers.  However, the inspection of the property was done on a drive-by basis by a colleague of Mr Knights who relied on the description of the property that was provided by Mrs Anderson and not his own observations.

[7] 281 Nicklin Way sold for $370,000 on 11 January 2008; 101 Nicklin Way sold for $355,000 on 12 February 2008 and 89 Nicklin Way sold for $385,000 on 4 March 2008.

CONCLUSION 

18.     I am unable to make a proper assessment of the value of the property on the state of the evidence before me.  I have thought that the appropriate order for me to make would be to remit the matter back to the Secretary to make a further valuation.

19.     I accept the evidence of Mr Barlow that a number of factors are relevant in assessing the value of the property such as the proximity to the Nicklin Way as well as noise levels.  Another factor that Mr Barlow mentioned was any views of the Esplanade.  These factors could be discussed in any further valuation if no agreement is reached.

20.     I also comment that a proper valuation of the property can only occur if Mrs Anderson was to consent to an inspection of the property.  If Mrs Anderson again does not consent to an inspection of the property then the AVO must do the best that it can in making a valuation.  Mrs Anderson at a telephone directions hearing stated that some internal work had been done to the property.  The extent of such renovations is certainly a relevant matter to consider in arriving at a fair valuation of the property.

DECISION

21.     I set aside the decision of the Social Security Appeals Tribunal, made 20 May 2008, and remit the matter to the respondent for reconsideration in accordance with these reasons.

I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member

Signed:  ...................[Sgd].........................................................
               Elizabeth Young, Research Associate

Date/s of Hearing  15 October 2008
Date of Decision  21 October 2008
For the Applicant  The applicant was self-represented     
For the Respondent                  Mr Joe Guthrie, Departmental Advocate