Andreas Iliopoulos Giannoula Iliopoulos and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2012] AATA 243
•30 April 2012
[2012] AATA 243
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2010/1335
2010/1338
Re
Andreas Iliopoulos
Giannoula Iliopoulos
APPLICANTS
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Regina Perton, Member
Date 30 April 2012 Place Melbourne The Tribunal affirms the decisions under review.
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Regina Perton, Member
Catchwords
Social security – disability support pension and age pension – assets undervalued – valuation – debt to Commonwealth – decisions affirmed
Legislation
Social Security Act 1991 ss 9, 11, 23, 55, 117, 1064-G2, 1064-G3, 1118, 1121, 1223, 1236, 1237A, 1237AAD
Cases
Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
REASONS FOR DECISION
Regina Perton, Member
30 April 2012
Andreas Iliopoulos and his wife, Giannoula Iliopoulos, have, since 2004, been recipients of disability support pension (DSP). They subsequently received the age pension. Their residential home is in a Melbourne suburb. They also own a holiday home in Dromana, a seaside town. The holiday home was purchased in 1986 with Mr Iliopoulos’s brother and his wife. Mr and Mrs Iliopoulos originally owned a 25 per cent share each, as did his brother and brother’s wife. Unfortunately, Mr Iliopoulos’s brother died soon after the purchase but his widow inherited his share and therefore had a 50 per cent share for some time. In March 2004 the market value of the holiday home was estimated to be $150,000. The property was not rented out or mortgaged. The families made regular use of the holiday home.
Mr and Mrs Iliopoulos were also members of a private superannuation fund which held property. Mr and Mrs Iliopoulos’ interests in their superannuation fund were irrelevant in 2004 for the purpose of the assets test, as neither had reached the age pension age. The value of the assets held by Mr and Mrs Iliopoulos, including their interests in the holiday home, was determined to be $254,020.
In April 2007 Mrs Iliopoulos transferred to the age pension. She gave the value of the holiday home as $230,000. In documents lodged at that time, Mrs Iliopoulos stated that she and her husband continued to own a total share of 50 per cent of the property. Centrelink continued to list the property at the same value with the same percentage share in documents sent to Mrs Iliopoulos in June 2007, December 2007, March 2008 and May 2008. Mrs Iliopoulos did not advise Centrelink of any changes to the value of the property or her share of it.
In January 2009 Centrelink sent a document to Mr Iliopoulos, prior to his transfer from DSP to age pension. In the document, Mr Iliopoulos indicated that he had money invested in superannuation funds and provided details. He also stated that the value of the holiday home was $180,000 and that he and his wife each had a 50 per cent share of the property, rather than the 25 per cent each which had been recorded until then.
On 12 May 2009 Centrelink cancelled the pensions of Mr and Mrs Iliopoulos, on the basis that their total combined assets were $1,288,550 and hence they exceeded the permissible level for payment of any pension.
On 3 June 2009 Mr and Mrs Iliopoulos lodged a combined claim for the age pension. They provided details of the allocated pensions they received from their superannuation fund; advised of bank account balances; the values of their cars; and the like. They stated that the estimated value of the holiday home was $264,000 and that the balance of the mortgage taken out to fully own the holiday home was $125,322. The family home was used as security for the loan. They provided additional information a few days later about the superannuation fund. The information had been prepared by their accountants and stated that they had not yet started to receive the allocated pensions.
On 17 June 2009 Centrelink advised Mr and Mrs Iliopoulos that their applications for age pension were rejected because their total combined assets of $1,166,674 exceeded the maximum limit for any entitlement.
On 30 June 2009 Centrelink received a valuation of the holiday home from the Australian Valuation Office (AVO), valuing the property at $275,000.
On 14 July 2009 Centrelink decided that Mr Iliopoulos had been overpaid $23,876.46 between 1 May 2007 and 30 April 2009 due to the value of his assets in that period. It raised a debt of $23,876.46 against Mr Iliopoulos. .Centrelink also raised a debt for an identical amount against Mrs Iliopoulos for the same period and for the same reason.
On 21 September 2009 Mr and Mrs Iliopoulos’s accountant provided Centrelink with a statement for an investment home loan showing an opening balance at 1 January 2007 of $215,069.16 and a closing balance at 30 June 2007 of $213,267.32.
On 20 October 2009 Mr Iliopoulos requested a review of the 14 July decision by a Centrelink authorised review officer (ARO). Mr Iliopoulos believed that Centrelink had overvalued the holiday home and that the amount of the loan should have been deducted from the value of the property.
On 29 October 2009 Centrelink obtained a title search of the holiday home. A Transfer of Land lodged on 8 June 2005 showed that the property was transferred from Helen Iliopoulos, Mr Iliopoulos’s sister-in-law, to Mr and Mrs Iliopoulos for $210,000. The document showed that stamp duty had been paid and that there were no encumbrances.
On 5 November 2009 the ARO advised Mr and Mrs Iliopoulos that the overpayment had commenced on 8 June 2005 (rather than 1 May 2007) and ended on 30 April 2009. As a result, Mr Iliopoulos’s debt had been increased to $40,811.25 and Mrs Iliopoulos’s debt had been increased to $40,901.12. The reasons given by the ARO for the increase were the value of the holiday home to Mr and Mrs Iliopoulos after 8 June 2005, and the value of the superannuation accounts on the dates each qualified for the pension, namely 1 May 2007 for Mrs Iliopoulos and 16 February 2009 for Mr Iliopoulos.
On 30 November 2009 Mr and Mrs Iliopoulos sought review of the ARO’s decision by the Social Security Appeals Tribunal (SSAT). They provided further documents to the SSAT including correspondence from the Commonwealth Bank that the holiday home should have been the security for the loan when it was first funded. Centrelink also obtained a full valuation report from the AVO including an on-site inspection. On 9 March 2010 the SSAT affirmed the decision of the ARO.
On 6 April 2010 Mr and Mrs Iliopoulos lodged applications for review of the SSAT decision with this Tribunal.
The issues for the Tribunal are:
·the value of the holiday home at the relevant dates;
·whether the loan taken out to pay out Mr Iliopoulos’s sister-in-law can be held against the holiday home despite the mortgage being on the residential home;
·whether Mr and Mrs Iliopoulos owe debts to the Commonwealth; and
·if they do, should be waived or written off.
HOW WAS THE RATE OF PENSION CALCULATED?
A person’s income and assets are taken into account in assessing that person's eligibility for DSP and age pension. Section 55 of the Social Security Act 1991 (the Act) provides that the rate of age pension is worked out according to a rate calculator in s 1064 of the Act. Section 117 provides that the rate of DSP is worked out according to the same rate calculator as age pension.
Section 1064-G2 provides that if the person is a member of a couple the value of their assets is 50 per cent of the total of the value of the combined assets of the person and the person’s partner.
Section 1064-G3 provides for the relevant assets value limit, namely the amount at which the person becomes subject to the assets test. The amount is adjusted annually. For a married homeowner, the limit was $223,000 on 1 July 2005 and $243,500 on 1 July 2008.
The term asset is defined in s 11(1) of the Act as property or money (including property or money outside Australia). Value is defined in s 11(2) and s 11(3) as the value of the person’s interest in the asset where it is owned by the person in common with another person.
Section 9 of the Act describes what are considered to be financial assets. This includes available money and an investment in a superannuation fund (as from the person reaching pension age). The section spells out a long list of financial assets.
Section 23 sets out when a person qualifies for age pension. Under s 23(5A) it was 65 years for Mr Iliopoulos and under s 23(5C) it was 63 years for Mrs Iliopoulos. That meant that Mrs Iliopoulos’s superannuation was included in the assessment of the value of her assets from 1 May 2007 and Mr Iliopoulos’s superannuation was included in the assessment of the value of his assets from 16 February 2009.
Section 1118 of the Act allows for certain assets to be disregarded for the purposes of the assets test. This includes the principal place of residence, which for Mr and Mrs Iliopoulos was their Melbourne suburban home.
THE VALUATION OF THE HOLIDAY HOME
Mr and Mrs Iliopoulos owned 50 per cent of the Dromana property between them before they bought out Helen Iliopoulos’ 50 per cent share of the property on 8 June 2005. After the transfer, they obtained joint ownership of the entire property. Mr Iliopoulos told the Tribunal that they had only taken over the whole property because his sister-in-law wished to help her son purchase a residential home. Mr and Mrs Iliopoulos had agreed and had taken out a loan to enable them to do so.
Mr Iliopoulos is challenging the value attributed to the holiday home. There is no statutory provision in the Act setting out the method to be used for valuing property. In past cases, the Tribunal adopted the net market value approach based on comparable sales and the best use to which the assets could be put (for example, Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474). The Tribunal is satisfied that it is appropriate to adopt the net market value approach which, to the Tribunal's knowledge, is the standard mode of valuation adopted by valuers in assessing the value of property for statutory purposes.
The AVO undertook an on-site inspection of the holiday home on 9 January 2010 and prepared a report dated 15 January 2010. The AVO had conducted a previous assessment but that was without an internal inspection. The estimated market value as at 9 January 2010 was $340,000. The AVO pointed out that house values in that area had shown a steady increase between June 2005 and January 2010. The property is about 250 metres from the beach. While the property was built in the 1950s with a timber frame and asbestos-clad external walls, the zoning allows for the construction of a new home or two units, subject to council approval. Based on comparable sales, the AVO made the following estimates of the property's value:
·8/6/2005 $250,000
·8/6/2006 $260,000
·8/6/2007 $280,000
·8/6/2008 $300,000
·8/6/2009 $320,000
·9/1/2010 $340,000
The Tribunal accepts the valuations of the AVO as the values to be attributed at certain dates. There was no contradictory evidence. Council valuations for rate purposes are not sworn valuations.
As indicated earlier, Mr and Mrs Iliopoulos and their accountant submitted that Centrelink should take into account the mortgage obtained to enable the couple to buy out their sister-in-law, to reduce the value of the holiday home as an asset. In support of their submission, they provided a letter dated 25 November 2009 from Mr Glen French, Manager, Personal Lending at the Dallas Branch of the Commonwealth Bank. Mr French stated that the security for the loan should have been the holiday home when the loan was first funded. He stated that the bank was now in the process of substituting the holiday home for the couple’s residential home as the security. Mr Iliopoulos described how they had originally wanted to transfer the holiday home into their superannuation fund but that had not occurred. Their accountant also attended the hearing and explained that the loan was taken out to fund the purchase of the other 50 per cent of the holiday home and other aspects of their financial situation.
Section 1121(1) of the Act allows the assessable value of an asset to be reduced by a charge or encumbrance over that asset. However, s 1121(3) stipulates that an encumbrance over an asset that is disregarded under s 1118 is not to be taken into account. Regardless of why and how it happened, the evidence is clear that the mortgage during the relevant period was on the couple’s residential home. The Tribunal has no option but to find that the loan taken out does not reduce the value of the holiday home as an asset for pension purposes. Therefore, the holiday home must be given its market value at the relevant period for the purposes of the assets test.
THE DEBT TO THE COMMONWEALTH
The respondent’s representative provided extensive details of the basis for the calculations of Mr and Mrs Iliopoulos’s assets and their debts. The Tribunal accepts that Mr and Mrs Iliopoulos received payments to which they were not entitled due to the value of their assets being higher than they had been declared to be. Section 1223 of the Act states that where a person received a social security payment to which they were not entitled for any reason, the amount of the payment is a debt owed to the Commonwealth.
SHOULD THE DEBT BE WAIVED OR WRITTEN OFF?
Section 1237A of the Act provides for the possibility of waiving a debt where it is attributable solely to administrative error made by the Commonwealth. This debt has arisen due to a failure by Mr and Mrs Iliopoulos to update Centrelink with details of their ownership of the holiday home and the superannuation entitlements of Mrs Iliopoulos after she changed to age pension. Therefore, the debt has not arisen due to any error by Centrelink.
Section 1236 of the Act provides for a write off of the debt under certain circumstances. However, the debt is not irrecoverable at law. Therefore, there are no grounds to write off the debt.
Section 1237AAD of the Act provides for waiver of the debt in special circumstances:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive;…
The term special circumstances has been considered in many Federal Court and Tribunal cases. In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 Branson J stated (at paragraph 26) that the circumstances of a particular case must give rise to hardship or unfairness sufficient to justify departure from the general rule. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 Besanko J stated, in respect of special circumstances (at paragraph 33):
… I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances… It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case…there must be something that distinguishes the case from the ordinary or usual case ….
The Tribunal accepts that repaying a large amount of money will cause difficulties for Mr and Mrs Iliopoulos. However, the Tribunal is not satisfied that the situation that they finds themselves is vastly different from the situation of other social security recipients who have incurred debts because they have misunderstood the assets tests and placed a mortgage on their residential home rather than their investment home. The Tribunal is not satisfied that the circumstances in this case constitute special circumstances (other than financial hardship alone). Hence, the Tribunal finds that the waiver provisions of s 1237AAD of the Act should not be invoked.
DECISION
The Tribunal affirms the decisions under review.
37. I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for the decision herein of Regina Perton, Member.
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Associate
Dated 30 April 2012
Date of hearing 2 February 2012 Applicants Mr Andreas Iliopoulos
Mrs Giannoula IliopoulosRepresentative for Applicant Mr Costa Iliopoulos Representative for the Respondent Ms Ailsa Bramley, Centrelink Program Litigation and Review Branch
Key Legal Topics
Areas of Law
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Social Security Law
Legal Concepts
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Social Security Benefits
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Assets Valuation
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Debt to Commonwealth
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