Awad and Secretary, Department of Social Services (Social services second review)

[2021] AATA 3631

Awad and Secretary, Department of Social Services (Social services second review) [2021] AATA 3631 (8 October 2021)

Division:GENERAL DIVISION

File Number(s):      2019/4513; 2020/4884

Re:George Awad  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:N Gaudion, Member

Date:8 October 2021

Place:Sydney

2019/4513

The decision under review is set aside and in substitution it is decided that the debt amount should be waived in full pursuant to section 1237AAD of the Social Security Act 1991 (Cth).

2020/4884

The decision under review is affirmed.

...................................[sgd].....................................

N Gaudion, Member

CATCHWORDS

SOCIAL SECURITY – aged pension – overpayment of aged pension – administrative errors – special circumstances – decision set aside and substituted – whether applicant has incurred a liability under the pension loans scheme – no basis to waive or write off the pension loan scheme debt  –  decision affirmed.

LEGISLATION

Social Security Act 1991 (Cth)

REASONS FOR DECISION

N Gaudion, Member

8 October 2021

Introduction

1. The Applicant was in receipt of the age pension from 1 April 2013 to 22 February 2019 pursuant to the provisions of the Social Security Act 1991 (Cth) (‘the Act’). The Applicant also received additional payments under the pension loan scheme during this period. In these proceedings, the Applicant seeks review of two reviewable decisions made by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1). They are as follows:

   Application 2019/4513

2. The first application relates to payments of the age pension. The Department of Human Services (the Respondent) considered the Applicant to have been over paid pension amounts as a result of the Applicant not informing the Respondent of changes to the value of his assets, being the value of a number of properties owned by the Applicant. The Respondent raised a debt against the Applicant for repayment of the amount it considered to have been overpaid to the Applicant.

3. The Applicant applied to the AAT1 for a review of the decision regarding the overpayment of pension amounts. The AAT1 set the previous decision aside and remitted the matter for recalculation in accordance with its directions. As a result, the Respondent calculated the debt amount as $56,259.45 for the period 1 April 2013 to 20 February 2019, with $52,657.64 to be waived in accordance with AAT1’s decision.

   Application 2020/4884

4. In respect of the second application, the Applicant applied to the AAT1 for a review of the decision regarding his liability under the pension loan scheme. This matter was heard separately by the AAT1 which affirmed the decision regarding the amounts payable under the pension loan scheme, being that the loan balance as calculated by the Respondent was repayable by the Applicant.

5. The Applicant has applied to this Tribunal for a further review of both these decisions.  

   Background to the review and the current applications

6. The Applicant commenced receiving the disability support pension on 15 October 2010. He continued to receive the disability support pension until he transferred to the age pension on or around 1 April 2013.

7. On 15 October 2012, the Respondent wrote to the Applicant.[1] This letter commenced by stating ‘We are currently reviewing the value of your real estate assets. We will organise for the Australian Valuation Office to update the value of your property/ies, at no cost to you, and advise you of the outcome as soon as possible.’ It also stated ‘We have listed below the information you have previously given us about your real estate assets.’ The letter included a table that listed the values of the properties as follows:

   [1] Exhibit J2, 1393.

Address	Current Value
45 Mulga Rd Oatley NSW 2223	$390,000
12 Liverpool St Ingleburn NSW 2565	$200,000
336 President Ave Gymea NSW 2227	$520,000
7/385-391 Forest Rd Bexley NSW 2207	$125,000

1. On 12 February 2013, the Respondent wrote to the Applicant.[2] The subject line of the letter is ‘Your Income and Asset Statement’. The letter lists the property values as follows:

   [2] Exhibit J2, page 1418.

Address	Current Value
45 Mulga Rd Oatley NSW 2223	$550,000
12 Liverpool St Ingleburn NSW 2565	$187,000
336 President Ave Gymea NSW 2227	$528,000
7/385-391 Forest Rd Bexley NSW 2207	$125,000

1. The updated values would appear to be as a result of the valuations the Respondent advised it was going to undertake.

2. Sometime on or around 1 April 2013, the Applicant transferred from a Disability Pension to the Age Pension.

3. The Applicant applied for payments under the Pension Loans Scheme which was approved on 20 June 2013 with an effective date of 2 April 2013.[3]

   [3] Exhibit J2, 1475.

4. On 14 May 2014, the Respondent wrote to the Applicant.[4] This letter also stated ‘We are currently reviewing the value of your real estate assets. We will organise for the Australian Valuation Office to update the value of your property/ies, at no cost to you, and advise you of the outcome as soon as possible.’ It also stated ‘We have listed below the information you have previously given us about your real estate assets.’  The letter included a table that listed the values of the properties as follows:

   [4] Exhibit J2, 1499.

Address	Current Value
45 Mulga Rd Oatley NSW 2223	$550,000
12 Liverpool St Ingleburn NSW 2565	$187,000
336 President Ave Gymea NSW 2227	$528,000
7/385-391 Forest Rd Bexley NSW 2207	$125,000

1. In respect of the aforementioned properties, 12 Liverpool Street Ingleburn (‘Liverpool St’) and 336 President Avenue Gymea (‘President Ave’) were both residential investment properties. 7/385-391 Forest Road Bexley (‘Forest Road’) is a commercial property, being a retail strata unit. 45 Mulga Road Oatley (‘Mulga Rd’) comprised residential premises in which the Applicant resided and retail premises. The residential investment properties and retail premises were leased by the Applicant at various times. Each of the properties with the exception of Forest Rd were encumbered by mortgages at all relevant times. For asset test purposes, there is an apportionment of the value of the Mulga Road property between that part which is the Applicant’s residence (which is excluded from the asset test) and the retail premises (which is included in the asset test). The calculation also incorporates the mortgage and pension loan scheme balance which is secured of the Mulga Road property.

2. Prior to 28 June 2014 when the Australian Valuation Office (‘AVO’) was disbanded, the AVO provided valuation services to the Respondent, with each pensioner’s assessable real estate undergoing a valuation at time of claim and then being revalued every two years.  The letters sent to the Applicant in October 2012 and May 2014 are understood to be part of that process. However, the Applicant’s properties were never revalued following the May 2014 letter, despite that letter saying they would be revalued.

3. After 28 June 2014, the Respondent introduced a new policy where annual indexation would be applied to the assessed value of houses, units and townhouses. No indexation would be applied to retail and commercial premises. It is understood that the Respondent’s policy was that where indexation cannot occur, the Respondent would determine if it needed to update the value of a property every 2 years.[5] The Respondent’s website at the time of the hearing included the following statement in respect to the valuation of properties ‘We index the value of residential properties each year to keep them up to date. If we can’t index a property’s value, we’ll arrange a valuation when needed.’  It goes on to say:

   If the new valuation affects your payment, we’ll let you know. Normally you won’t have to pay anything back. But you will need to pay us back if we’ve paid you too much because you didn’t tell us about:

   ·significant upgrades that have increased the value of the property, for example adding a pool.

   ·new real estate you own.[6]

   [5] Refer to the letter to the Applicant dated December 2018 at Exhibit J1, 224–227. 

   [6] Exhibit J4, 4.

4. However, the Respondent says there is no evidence that the Liverpool Street and the President Avenue properties (being residential properties) were indexed from 28 June 2014 to the end of the debt period.[7] There also does not appear to have been any valuations of the Mulga Road (being combined retail premises and the Applicant’s residence) and Forest Road (being retail premises) between the letter to the Applicant of 14 May 2014 and January 2019 when the Respondent engaged LMW to perform valuations of the properties.

   [7] Paragraph 3.34 of the Respondent’s Statement of Facts Issues and Contentions dated 18 May 2020.

5. The Centrelink records indicate that on 19 January 2016,[8] a Centrelink Specialist Officer actioned the Applicant’s record for the purpose of a ‘Review of Entitlement for Age Pension’.  The notes indicate that the value of the Mulga Road property was considered, including the apportionment of the value, mortgage and pension loan scheme debt. A similar review was also conducted on 22 March 2017[9] and 13 February 2018.[10] All three of these reviews refer to the last valuation of Mulga Road being $550,000. Another Centrelink record indicates that on 26 March 2018 there was ‘Unearned Income and Asset Intervention started by auto-initiation’. That appears to be the event that initiated requests for further information which ultimately lead to a review and updating of the property valuations.

   [8] Exhibit J2, 1073.

   [9] Exhibit J2, 1076.

   [10] Exhibit J2, 1077.

6. On 26 March 2018, the Respondent wrote to the Applicant. The letter commences ‘We are writing to make sure that you are receiving the correct rate of payment/s’. The letter requests the Applicant to contact the Respondent to discuss the letter. A subsequent letter dated 4 April 2018 requested details of the Applicant’s bank accounts and rental income for the years ended 30 June 2013 to 2017. On 27 April 2018 the Applicant’s age pension was suspended (presumably because all of the information requested had not been provided). On 3 May 2018 the pension was recommenced. The pension was ceased again on 24 May 2018 and recommenced again on 13 June 2018 (presumably because the information requested had been provided as indicated by the Respondent’s Statement of Facts Issues and Contentions).

7. On 15 October 2018 the Respondent wrote to the Applicant[11] and advised the Applicant that the value of his assets was above the allowable limit and as a result he was no longer eligible for the Age Pension.

   [11] Exhibit J2, 1573.

8. On 16 October 2018 the Respondent wrote to the Applicant[12] advising that he had been overpaid pension of $28,671.47. The reason included that the correct value of Liverpool St, President Ave and Forest Rd had not been taken into account. 

   [12] Exhibit J2, 1575.

9. On 2 November 2018 the Respondent wrote to the Applicant[13] and detailed the net values (assessable portion of the property value less mortgage) that had been attributed to the properties for the purposes of the debt that was raised for the pension overpayment. The net values generally change each year for each property with some increasing and some decreasing. In respect of the Liverpool St property, it included the statement that ‘If you were to supply additional information in the form of Mortgage statements for this property for the period 1 July 2014 to current time a reassessment could be done of the overpayment.’

   [13] Exhibit J2, 1577.

10. On 8 November 2018 the Respondent wrote to the Applicant[14] advising that the calculation of the overpayment had been reduced from $28,671.47 to $4,297.17. The letter advised the reason for this as:

    The reduction in the overpayment amount was a result of mortgage documents held with Bankwest you had provided to the Department on 5 November 2018. Updates were made to your Centrelink record to reflect the correct mortgage balance secured over your property at 12 Liverpool Street, Ingleburn. An overpayment still does exist as the correct value of each of your investment properties had not been taken into account. As discussed during our telephone conversation on 8 November 2018 withholdings of $100 per fortnight will be deducted from your Age Pension to repay this overpayment.

    [14] Exhibit J1, 201.

11. On 8 November 2018 the Respondent wrote to the Applicant[15] advising that the Age Pension had been restarted. It is not clear why the pension was recommenced when the Respondent had determined on 15 October that the value of the Applicant’s assets was above the allowable limit and as a result he was no longer eligible for the Age Pension.

    [15] Exhibit J1, 202.

12. The Applicant had requested a review of the decision regarding the overpayment.

13. On 3 December 2018 the Respondent wrote to the Applicant[16]. The subject heading for this letter was ‘Your Centrelink Statement for Age Pension’ and included a summary of pension payments and asset valued. On the third page of that letter under the heading ‘Automatic Updates’ it states, ‘We regularly update some of your income and asset details automatically based on information provided by various sources.’ One of the bullet points states, ‘We use current market value when we assess your property. We apply an indexation amount to houses, townhouses and units each year. This keeps the value current and ensures you get the right payment amount. Where indexation cannot occur, we will determine if we need to update your property value every 2 years.’ Under the heading ‘Real estate and business details’ it lists three of the properties held by the Applicant – Mulga Road is not listed. There are values listed for Liverpool St being $310,000, President Ave being $691,000 and Forest Rd being $151,630. 

    [16] Exhibit J1, 224–227.

14. On 8 January 2019, the Applicant requested the AAT to review of the decision of 16 October 2018.[17]

    [17] Exhibit J1, 240.

15. Despite raising a debt for overpayment of the pension and advising the Applicant he was not eligible for the pension as his assets were above the allowable limit, it would appear that the Respondent continued to pay the Applicant the age pension until 20 February 2019.[18]

    [18] Exhibit J1, 558.

16. In January 2019, the Respondent engaged LMW valuers (‘LMW’) to provide retrospective valuations of the four subject properties at 1 April 2013, 30 June 2014, 30 June 2016, 30 June 2017 and 30 June 2018. These valuations are referred to in the decision of AAT1 at paragraph 41 but are not in evidence in this matter.

17. On 7 March 2019 the Respondent wrote to the Applicant[19] again advising of an overpayment of pension form 1 April 2013. However, the overpayment calculated stated in this letter was $78,223.83. The reason advised for the overpayment was that the Applicant’s assets exceeded the maximum to be eligible for a part pension. On 12 March 2019,[20] the Respondent wrote to the Applicant. This letter states that the Applicant’s assets were calculated to be $912,369 as at 1 April 2013. The letter did not set out how this value had been calculated; however, it presumably took into account the values provided by LMW in January 2019.

    [19] Exhibit J1, 244.

    [20] Exhibit J1, 249.

18. The Respondent engaged LMW to perform updated valuations of the subject properties, possibly as the January 2019 valuations did not include an inspection of the properties.[21]  LMW inspected the properties on 8, 10 and 11 April 2019 and produced valuation reports setting out values as at 1 April 2013, 30 June 2014, 30 June 2016, 30 June 2017 and 30 June 2018.

    [21] Exhibit J2, 14, being paragraph 56 of the decision of AAT1.

19. On 18 July 2019 the Respondent wrote to the Applicant advising an interest charge will be applied to his debt. The letter detailed the debts that the interest would be charged on. The debts included Debt ID X9473529 for the period 1 April 2013 to 20 February 2019 in the amount of $78,223.83 and Debt ID X9462595 for the period 1 July 2013 to 3 October 2018 in the amount of $3,497.17.  It is presumed that the debt of $3,497.17 was the debt originally with a balance of $4,297.17 less $100 payments that had been deducted from pension payments. It is not clear why the Respondent included both debts on this letter as there would appear to be duplication of the periods for which the debts had been calculated.

20. A hearing was conducted by AAT1 and the decision was delivered on 19 June 2019. The decision was that the amount of the debt was to be recalculated using property and mortgage values as directed by AAT1 and that any debt amount not due to the Applicant’s rental income during the period 1 April 2013 to 15 October 2018 was to be waived. The Applicant’s income was found not to result in an overpayment of pension. The value of the Applicant’s assets was found to have resulted in an overpayment. The overpayment for the period 1 April 2013 to 22 February 2019 was calculated as $56,259.45 of which $52,657.64 was to be waived due to special circumstances.[22]

    [22] Exhibit J1, 267.

21. The Applicant has requested a review of the decision of AAT1 which has resulted in the current hearing.

22. The Applicant also requested a review of his pension loan scheme debt. In this respect, the AAT1 delivered its decision on 13 July 2020 affirming the decision that the pension loan scheme debt was correct and recoverable.

    Issues to be determined

    2019/4513

23. In respect to the Age Pension payments, the issues to be determined are:

    (a)Whether the Applicant has a debt arising from overpayment of the Age Pension;

    (b)If the Applicant is liable for such a debt, whether the amount of the debt is $56,259.45 or some other amount; and

    (c)If there is a debt, whether the whole or part of the debt should be written off or waived.

    2020/4884

24. In respect to the Pension Loan Scheme debt, the issues to be determined are whether the debt is correct and recoverable.

    Was the Applicant overpaid pension amount that would give rise to a debt

25. The rate of a person’s age pension is calculated in accordance with s 1064 of the Act and is affected by factors including a person’s income and assets. The Age Pension may be reduced or cancelled if a pensioner’s assets or income exceed certain thresholds. An overpayment of a pension may arise if the pensioner’s assets or income are greater than the amount adopted for the calculation of the pension amount that was actually paid.

26. In respect of the Applicant’s income, the Respondent accepts that his income did not result in any overpayment of pension.[23] Therefore, it is only necessary to consider the asset test.

    [23] Exhibit J1, 267 and lines 23–38 of page 5 of the Transcript.

27. In determining whether or not there was an overpayment, the critical issue is what is the value that should be attributed to the values of the Applicant’s properties at each of the relevant dates during the period that the age pension was paid. In this respect, there are a number of possible alternatives. These include the values that were adopted by the Respondent at the time of each payment, the last valuation performed by the AVO adjusted for indexation and the valuations performed by LMW under instructions from the Respondent.  In addition, the Applicant also engaged a valuer to perform valuations.

28. An opinion of a registered valuer would generally be preferred over an estimated value based on indexation or other factors. In respect of the valuations provided by the Applicant, these were not available for all properties and the Applicant only provided limited pages and not the full reports of the valuer he engaged to complete the valuations. Therefore, the valuations performed by LMW as directed by AAT1 could be the preferred values of the properties for the periods where a contemporaneous valuation had not been obtained by the Respondent. 

29. Adopting the valuations performed by LMW from 1 July 2015 as directed by AAT1, the calculations performed by the Respondent indicate that there has been an overpayment of the pension amounts paid to the Applicant during the period 1 April 2013 to 22 February 2019. While there is the potential for there to be an overpayment, for the reasons noted below, the outcome of this matter is not dependent on a determination of the value of the properties. 

    Whether the overpayment amount is $56,259.45 or some other amount?

1. The decision of AAT1 was to remit the matter for recalculation of the debt in accordance with its directions, which included:

   (d)In respect of the period 1 April 2013 to 30 June 2015, the values to be adopted are the values determined by Centrelink when the Applicant was transferred to the age pension or otherwise determined by Centrelink during that period.

   (e)In respect of the period from 1 July 2015, the values to be adopted for the properties were listed in the directions for the Mulga Road, Liverpool Street and Forest Road properties and were the valuations of LMW. In respect of the President Ave property, its value was to be assessed by an updated report from LMW. The property values were to be reduced by the amounts of the mortgages as set out in the decision of AAT1.

2. The Respondent calculated the debt in accordance with the AAT1 decision to be $56,259.45.[24] The calculation of this amount is based on:

   [24] Exhibit J1, 267, paragraphs 2.9–2.12 on page 318 of Exhibit J1 and pages 320–343 of Exhibit J1.

   (f)schedules at pages 324 to 329 of Exhibit J1 which set out for each fortnightly pension payment period:

   (i)the maximum pension payment;

   (ii)the reduction in pension payment as a result of the application of the assets test (presumably using the amounts prescribed by AAT1); and

   (iii)the resulting fortnightly pension payment that the Applicant was entitled to. 

   (g)schedules at pages 330 to 343 of Exhibit J1 which set out for each fortnightly pension payment period:

   (iv)the amount of pension each fortnightly payment that the Applicant was entitled to (from the previous schedules);

   (v)the amount that was paid to the Applicant; and

   (vi)the amount of the overpayment in each fortnight. 

3. However, there would appear to be two errors in the calculations performed by the Respondent when calculating the amount of $56,259.45.

4. Firstly, the decision of AAT1 is that in respect of the period 1 April 2013 to 30 June 2015, the property values are to be as determined by Centrelink during that period. Therefore, if there is to be no adjustment to the value of the properties during this period, then it would be expected that the calculations would not show any amount of overpayment. However, as set out on pages 330 to 335 of Exhibit J1, the Respondent’s calculations disclose regular overpayments during this period, such as $65.25 each fortnight on page 334. 

5. Secondly, the balance of the pension loan scheme debt was not taken into account to reduce the value of the Applicant’s assets when calculating the overpayment amount of $56,259.45. Page 559 of Exhibit J sets out a summary of the property and mortgage values used to recalculate the overpayment after the AAT1 decision. It was acknowledged by the Respondent during the hearing that the pension loan scheme debt should have but was not taken into account in determining the proportion of the value of the Mulga Street property to be assessed as an asset of the Applicant.[25]

   [25] Line 9 of page 50 to line 37 of page 51 and line 4 of page 53 to line 22 on page 54 of the Transcript.

6. As a result of the abovementioned errors, the amount of the overpayment cannot be the $56,259.45 that was calculated by the Respondent following the AAT1 decision. For the reasons noted below, the outcome of this matter is not dependent on a further recalculation of any overpayment amount and therefore, there is no benefit to setting out a basis on which the overpayment debt might be recalculated again.

   If there is a debt, whether the whole or part of the debt should be written off

7. The Act contains provisions that allow for non-recovery of debts in prescribed circumstances. Section 1236 of the Act provides that a debt may be written off in the following circumstances:

   1236 Secretary may write off debt

   (1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

   (1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:

   (a)the debt is irrecoverable at law; or

   (b)the debtor has no capacity to repay the debt; or

   (c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

   (d)it is not cost effective for the Commonwealth to take action to recover the debt.

8. There is no evidence that the debt is not recoverable at law or that the Applicant does not have capacity to repay the debt. The Applicant’s whereabouts are known and there is no evidence that it would not be cost effective to recover the debt. Therefore, there is no basis on which to write off the debt.

   If there is a debt, should the debt be waived by reason of ‘administrative error’?

9. Section 1237A(1) of the Act provides that a debt must be waived if the debt is solely attributable to an administrative error by the Commonwealth, provided the debtor received the payments in good faith.

10. In respect to whether the debt arose due to sole administrative error, the Respondent asserts that the Applicant was regularly requested to advise if there had been a change in his asset values of more than $1,000. As the Applicant did not advise the Respondent of changes in the value of his properties, the error cannot be solely attributed to administrative error.

    If there is a debt, should the debt be waived by reason of ‘special circumstances’?

11. Section 1237AAD of the Act provides the circumstances in which the Tribunal may waive the right to recover all or part of a debt:

    1237AAD Waiver in special circumstances

    The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

    (e)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, the Administration Act or the 1947 Act; and

    (f)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

    (g)it is more appropriate to waive than to write off the debt or part of the debt.

12. The Respondent asserts that in order for there to be a waiver of any overpayment debt, the first element to be satisfied is that the Applicant did not ‘knowingly’ fail to comply with his reporting obligations. In this respect, the Respondent appears to argue that as a result of the general increase in property prices, the Applicant would have known that the value of his assets had increased and therefore knew that the property values being relied on by the Respondent were understated.

13. However, in the circumstances of this matter, it does not appear to be as simple as the Respondent asserts. This is because of a combination of factors:

    (h)The value of the Applicant’s assets for the purpose of the assets test is not the gross value of his assets, but the net value of the assets. Therefore, consideration needs to be given to both the gross value of the assets and the balance of any liabilities that should be taken into account.

    (i)The Respondent’s policies during the period the overpayments are asserted to have occurred where initially that it would undertake a valuation every two years and subsequently that indexation would be applied (to residential properties) and an alternative approach to non-residential properties. It would have been reasonable for the Applicant to assume that the Respondent was updating the value of his properties in accordance with the Respondent’s policies.

    (j)The property in which the Applicant resided comprised his residence and retail premises. Therefore, there was a calculation to be performed that would determine the proportion of the value of that property that would form part of his assets for the asset test and the proportion of the mortgage that should be allowed to reduce the assessable portion of the value.

14. The Respondent regularly provided in correspondence a single amount that was described as Total Assets, such as:

(a) on 29 June 2014 at T32/1502, with total assets stated as $448,767.90;

(b) on 8 July 2014 at T32/1507, with total assets stated as $448,767.90;

(c) on 26 September 2014 at T32/1514, with total assets stated as $448,767.90;

(d) on 12 May 2015 at T32/1520, with total assets stated as $448,767.90;

(e) on 13 May 2015 at T32/1522, with total assets stated as $448,767.90;

(f) on 8 July 2015 at T32/1524, with total assets stated as $448,767.90;

(g) on 18 July 2016 at T32/1527, with total assets stated as $423,915.40.

1. It would appear that the Respondent did not provide the Applicant with a clear summary of the value of each of the assets, and in particular, the value of the properties. The Income and Asset Statement provided to the Applicant in the letter from the Respondent dated 12 February 2013[26] set out the value of the properties as opposed to a single value. The letter from the Respondent to the Applicant dated 14 May 2014 listed the property values prior to the valuation that was going to but ultimately did not take place. The Tribunal was not taken to any evidence of the Applicant being advised by the Respondent of the gross value of his after the letter dated 14 May 2014 and the letter from the Respondent dated 3 December 2018.[27] Therefore, the Applicant would not have been aware of the values the Respondent was adopting for his properties. The Tribunal accepts the Applicant had a genuine belief that the Respondent was regularly adjusting the value of his properties in accordance with the Respondent’s policies. However, the individual property values were not communicated to him and therefore he could not have known whether or not the gross values of the properties were different to his expectations of the value of the properties.

   [26] Exhibit J2, 1418.

   [27] Exhibit J1, 226.

2. To consider if it was reasonable to expect the Applicant to know the make-up of the Total Assets expressed as a single amount, during the hearing the Respondent was requested to do the calculation of what comprised the Total Assets in their correspondence to the Applicant. An adjournment was allowed for the Respondent to do the calculation. The Respondent selected the Total Assets of $524,315.18 on page 1462 of Exhibit J2. The Respondent’s calculation arrived at $498,840 which was asserted to be ‘in the ball park’.[28] This demonstrates to the Tribunal that determining the property values adopted in determining the single Total Assets provided to the Applicant is not necessarily a simple calculation. Further, property values are often expressed as being within a particular range of values, rather than a single value, which may make the task even harder for the Applicant to compare what his expectations might be to the single value being provided by the Respondent.

   [28] Line 34 of page 117 of the Transcript.

3. The Respondent appears to be asserting that all properties would have increased in value because Sydney property prices increased generally. However, the Applicant did not always believe that his property values increased. For example, he inferred a change in parking restrictions reduced the value of one of his properties[29] and asbestos being identified in another property.[30] It is worth noting that the AVO valuation of Liverpool Street decreased from $200,000 to $187,000 when the valuation was performed in or around February 2013.  Further, the Respondent obtaining a valuation report setting out the value of a property is not evidence that the owner knew that was the value of the property. In the circumstances of this matter, even having been provided with the LMW valuations, the Applicant genuinely does not believe that the values set out in those reports were the values of his properties at the relevant dates. 

   [29] Line 1 of page 168 of the Transcript.

   [30] Line 43 of page 9 of the Transcript.

4. Whilst the properties increased in value over the whole of the debt period, so too were the balances of the mortgages of the Applicant, both the bank mortgages and the pension loan scheme debt. In response to the question of why the Total Asset values in the Centrelink letters were decreasing, the Applicant asserted that the reason for the single numbers going down was that the balance of his mortgage was increasing.[31] This would appear to be possible as a schedule prepared by the Respondent setting out the property and mortgage values to recalculate any overpayment arising from the AAT1 decision notes that the President Ave mortgage increases from $353,000 on 1 July 2015 to $560,000 on 1 July 2016.[32]

   [31] Line 30 of page 93 of the transcript.

   [32] Exhibit J1, 559.

5. Therefore, in the circumstances where Applicant had a genuine belief that the Respondent was adjusting the value of his properties, he had reason to believe that the value of his properties may not have been increasing as much as other properties, the balances of his mortgages were increasing and the Applicant was not advised the individual property values being used each year by the Respondent, the Tribunal finds that the Applicant did not knowingly fail to advise of a change in the value of his Total Assets, being the single value being provided to him by Centrelink on which he was questioned about. It was also considered that the Applicant had correctly disclosed all of his assets. Further, when requested to provide documentation, the Applicant did so. Whilst there may have been some delay in providing information requested in 2018, given the information being requested related to a number of prior years, some delay is not unreasonable. 

6. It is therefore appropriate to consider if there are ‘special circumstances’ that would make it desirable to waive the debt. ‘Special circumstances’ is not defined but must be more than financial hardship alone. The circumstances to be considered is sometimes referred to as the ‘constellation of factors’. In the circumstances of this matter, it is appropriate to give weight to both the significance of the administrative errors, both in terms of the number of the administrative errors and in respect to the extent to which they contributed to the overpayment even if the overpayment was not solely attributable to the administrative error or errors. It is also appropriate to give consideration to the extent to which the Applicant may have contributed to or could have prevented the overpayment.

7. In considering the Applicant’s actions, he did not knowingly do anything that contributed to the error.  It is possible that the Applicant could have prevented or reduced the overpayment if he had contacted the Respondent to seek to understand what property values the Respondent was using in its calculations and then comparing those values to his own expectations. However, this would have meant taking action that was not expected of a pensioner given the Respondent’s own policies in updating property values. Therefore, the action that the Applicant could have had to take to prevent the overpayment could be considered unusual. 

8. It is noted that a pensioner may be expected to take action to prevent an overpayment where the potential for overpayment might be more obvious to the pensioner. However, the reporting to the Applicant of only Total Assets as a single value (being assets less relevant liabilities), the Applicant’s perceptions that there were negative factors effecting the value of some of his properties, his increasing mortgage balances, the increasing pension loan scheme debt and a calculation to exclude the value attributed to the Applicant’s residence from the total value of the Mulga Road property, meant that an understatement of the value of the Applicant’s assets was not obvious to the Applicant.

9. The Applicant’s failure to take action regarding something he was not aware of, is in stark contrast to the number and significance of the administrative errors of the Respondent. Set out below is a summary of the administrative errors that have been noted by the Tribunal.

10. Despite writing to the Applicant on 14 May 2014 and advising that a valuation of the properties would be obtained, the Respondent did not obtain a valuation of the property at around that time. This administrative error significantly contributed to the overpayment because if the property values had been increased, any overpayment would have been less (assuming a contemporaneous property valuation would have increased the values, which is what is asserted by the Respondent).

11. It is noted that the decision of the AAT1 in respect of the period 1 April 2013 to 30 June 2015 was that any overpayment was to be calculated using the values determined by Centrelink when the Applicant was transferred to the age pension or otherwise determined by Centrelink during that period. Therefore, if there was to be no change to the property values that Centrelink had used during this period, then the expectation is that there should have been no overpayment during this period. However, there appears to be an administrative error in respect of the period 1 April 2013 to 30 June 2015 because the calculation of the current overpayment debt amount of $56,259.45 includes overpayment amounts for this period.

12. Also, when calculating the overpayment amount of $56,259.45, there was another administrative error in that for the whole of this period the Respondent did not take into account the balance of the Applicant’s pension loan scheme debt in determining the value of his Total Assets.

13. That there were administrative errors on or around each of 30 June 2015, 30 June 2016, 30 June 2017 and 30 June 2018, in that the Respondent failed to index or otherwise adjust the value of the Applicant’s properties in accordance with its own policies. This is not one administrative error, but an administrative error each time the Respondent should have but did not adjust the value of the Applicant’s properties in accordance with the Respondent’s own policies. These administrative failures contributed significantly to the overpayment of the pension.

14. The Respondent wrote to the Applicant on 15 October 2018 and advised the Applicant that the value of his assets were above the allowable limit and as a result he was no longer eligible for the Age Pension.[33] However, the Respondent continued to pay the Applicant a part pension until 20 February 2019. The administrative error in continuing to pay the Applicant after having advised the Applicant he was above the allowable asset limit contributed significantly to the overpayment during this period.

    [33] Exhibit J2, 1573.

15. The Respondent was primarily responsible for implementing its own policies. If the Respondent had followed its own policies with respect to the Applicant and revalued or adjusted the value of the Applicant’s properties, the overpayment would not have occurred.

16. The Respondent’s policy published on its website at the time of the hearing was:

    We index the value of residential properties each year to keep them up to date. If we can’t index a property’s value, we’ll arrange a valuation when needed.

    If the new valuation affects your payment, we’ll let you know. Normally you won’t have to pay anything back. But you will need to pay us back if we’ve paid you too much because you didn’t tell us about:

    significant upgrades that have increased the value of the property, for example adding a pool.

    new real estate you own.

17. In the Applicant’s case, there is no allegation by the Respondent that the Applicant did not advise it that there was a significant upgrade to a property and there are no allegations that assets that were not disclosed. In circumstances where a pensioner has disclosed all properties owned and there were no significant upgrades to those properties, a pensioner would have a reasonable basis not to expect to have to pay back an overpayment if there was an issue with the valuations adopted by the Respondent, given the information published by the Respondent. However, in this matter, the Respondent went and obtained retrospective property valuations for six years and sought to substitute and rely on those values, including replacing contemporaneous property valuations obtained by the Respondent from the AVO. The conduct by the Respondent in this respect would appear to be contrary to its stated policy and does not assist with building confidence in the overall integrity of the social security system – in particular where the retrospective valuations replaced contemporaneous valuations that the Respondent had obtained.

1. The Tribunal considers that the administrative errors in this case are significant (both in terms of the number of errors and the contribution of the errors to the overpayment) such that whilst the errors may not be solely responsible for the debt, the circumstances of this matter should be considered to be a special circumstance and make it desirable to waive the whole of the debt.  As noted above, there is no basis to write off the debt.  Therefore, it is preferable to waive rather than write off the debt.

   Pension loan scheme reasons and decision

2. The Applicant’s explanation of why he believes that the decision regarding the pension loan scheme debt is wrong, appears to be that the pension loan amount is tied or linked to the pension amount, and if the pension amount is wrong because it was overpaid then the pension loan amount is also wrong. 

3. It is understood that the pension loan scheme would allow a pensioner on a part pension to request that their pension payments be increased to the full pension amount with the top up payment to be a loan secured over a property or similar. Therefore, if the full pension was $700 and the pensioner was entitled to a part pension of $400, they could borrow $300 per pension payment – effectively receiving payments equal to the full amount of the pension even though part of the payments constituted a loan. The loan would accrue interest and be repayable if the property on which the loan was secured was sold. It is understood that this is how the Applicant believes the pension and the pension loan scheme debt are linked.

4. It is possible that the Applicant’s concern was that if he was topping up a part pension with a loan amount, and he would have continued to top the pension up with the loan amount to the full amount of the pension, regardless of the amount paid to him as a part pension.  Following this, if the pension amount was wrong, then he may have borrowed a different amount than he did. However, the Respondent is asserting that the pension was overpaid, i.e., the pension payment should have been less than what was actually paid. Therefore, if the Applicant had been paid a lower amount as a pension, then his fortnightly loan amount would have been higher and the loan balance also higher. If the Applicant’s pension had been underpaid, then the Applicant may have a basis on which he could assert that he borrowed more than he otherwise would have. However, that is not the case as it is asserted that the Applicant was overpaid the pension. 

5. The Respondent asserts that the loan was made to the Applicant which was secured over the property in which he resides and that the Applicant has not repaid the principal or the interest on the loan. Further, there are no provisions for special circumstances to waive or write off the debt.

6. The Applicant does not appear to dispute the amounts that he received. The Applicant, via the interpreter, stated during the hearing ‘Well, I have taken a loan, but the loan linked directly to the Age Pension. That’s my understanding’.  And ‘If I owe something, I would pay it off.  If not, it should be removed’.[34] The Applicant acknowledged that the loan commenced on 1 April 2013.[35] The Applicant acknowledged receiving the loan payments.[36] The Applicant also acknowledged that he would need to repay the loan payments at some stage.[37]

   [34] Lines 21 to 29 of page 125 of the Transcript.

   [35] Lines 28 to 47 of page 133, lines 22 to 27 of page 137 and line 43 of page 43 to line 3 of page 138 of the Transcript.

   [36] Lines 14 to 17 of the Transcript and line 6 of page 141 to line 43 of page 142.

   [37] Lines 13 to 17 of the Transcript.

7. The Tribunal notes that there are no provisions in accordance with social security law to waive recoverable loans under the pension loans scheme. Given the Applicant did not assert he did not have capacity to repay the pension loan debt and that the Applicant’s assets exceed the threshold for payment of an age pension, the pension loan scheme debt would appear to be recoverable and there is no basis to waive or write off the pension loan scheme debt.

8. Therefore, the Tribunal is satisfied that the Applicant has incurred a pension loans scheme liability and the decision under review is affirmed in respect of the pension loan scheme debt.

I certify that the preceding 80 (eighty) paragraphs are a true copy of the reasons for the decision herein of N Gaudion, Member

...................................[sgd].....................................

Associate

Dated: 8 October 2021

Date(s) of hearing:	15 & 16 March 2021
Date final submissions received:	19 March 2021
Applicant:	Self-Represented
Solicitors for the Respondent:	Dr Stephen Thompson, Services Australia