Barba and Secretary, Department of Social Services (Social services second review)
[2016] AATA 425
•24 June 2016
Barba and Secretary, Department of Social Services (Social services second review) [2016] AATA 425 (24 June 2016)
Division
GENERAL DIVISION
File Numbers
2013/1211
2013/1212
Re
Michael Barba
Elizabeth Barba
APPLICANTS
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Regina Perton, Member
Date 24 June 2016 Place Melbourne The Tribunal affirms the decisions under review.
[sgd]........................................................................
Regina Perton, Member
Catchwords
Social security – assets – value of assets underestimated when recipient of newstart allowance, partner allowance and disability support pension respectively – refusal of age pension due to value of assets - validity and source of valuations – debts 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
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Di Masi and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 270
Re Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Spence v The Commonwealth of Australia (1907) 5 CLR 418
REASONS FOR DECISION
Regina Perton, Member
24 June 2016
Michael Barba and his wife, Elizabeth Barba, applied for age pension on 8 August 2011. Their applications were rejected on 29 November 2011 on the basis that the value of their assets was over the limit for entitlement to age pension.
Mr and Mrs Barba have been paid various pensions over the years. Mr Barba was paid job search allowance and newstart allowance between 15 July 1993 and 10 August 1993 and again from 28 July 1994 to 21 February 2000. He was paid disability support pension (DSP) from 22 February 2000 to 24 April 2002.
Mrs Barba was paid partner allowance between 12 September 1994 and 31 December 2001.
In 2005, Centrelink raised a number of debts against Mr and Mrs Barba dating back to 1998 after examining their financial affairs and undertaking valuations of properties they owned. An authorised review officer (ARO) of Centrelink affirmed the decisions to raise and recover debts on 18 October 2005 lowering some and lifting others.
On 24 February 2012 Mr and Mrs Barba lodged applications with the Social Security Appeals Tribunal (SSAT) in relation to the refusal of the claims for age pension deemed to be lodged on 8 August 2011 and for review of the ARO’s decisions made in 2005 concerning the debts. The SSAT dealt with both matters in a decision dated 13 February 2013. In relation to the debts, the SSAT decided to:
Affirm the decision to raise and recover a debt of $12,884.75 from Mr Barba being newstart allowance paid in respect of the period 25 June 1998 to 21 February 2000.
Set aside the decision to raise and recover a debt of $14,551.50 being disability support pension paid in respect of the period 22 February 2000 to 24 April 2002 and send the matter back to the Chief Executive Centrelink for reconsideration in accordance with the following directions:
That Mr Barba was entitled to a reduced rate of disability support pension from 22 February 2000 to 29 June 2000 in accordance with the Tribunal’s findings as to his assets for this period as set out at paragraphs 44 and 45 of this statement of reasons for decision;
That Mr Barba was not entitled to disability support pension from 30 June 2000 to 19 September 2000 under the assets test;
That Mr Barba was entitled to a reduced rate of disability support pension from 20 September 2000 to 29 June 2001 in accordance with the Tribunal’s findings as to his assets for this period set out at paragraphs 46 and 37 [sic] of this statement of reasons for decision;
That Mr Barba was not entitled to disability support pension from 30 June 2001 to 24 April 2002 under the assets test;
Affirm the decision to raise and recover a debt of $12,634.34 from Mrs Barba being partner allowance paid in respect of the period 25 June 1998 to 16 February 2000.
Affirm the decision to raise and recover a debt of $13,275.12 from Mrs Barba being partner allowance paid in respect of the period 17 February 2000 to 31 December 2001.
Paragraph 44 of the SSAT decision concerned the assets and liabilities of Mr and Mrs Barba’s farm derived from the financial records of their primary production enterprise. In paragraph 45 the SSAT determined that the assets of Mr and Mrs Barba totalled $335,686 as at February 2000, which did not exceed the upper limit for payment of DSP of $387,500 but significantly reduced the amount payable. Thus the SSAT concluded that Mr Barba had been overpaid DSP from 22 February 2000 to 29 June 2000 and directed that Centrelink recalculate the debt for that period based on its findings.
Paragraphs 46 and 47 of the SSAT decision concern the asset limits from 30 June 2000 to 29 June 2001.
On 15 March 2013 Mr and Mrs Barba lodged applications for review of the SSAT decision with this Tribunal. This effectively left the assessments requested by the SSAT on hold as there was now a request for a different decision by this Tribunal. The reasons given for applying to this Tribunal were given as:
(1) Valuation of the properties are too high
(2) Barba’s debts not fully taken into account
(3) Farm exemption not fully applied
This dispute goes back over more than 20 years. There are over 1,300 pages in the T documents which the respondent provided to the Tribunal. The respondent’s Statement of Facts and Contentions numbers some 246 paragraphs and the applicants’ response, the same number.
Initially Mr and Mrs Barba were represented before the Tribunal by a barrister who also represented them before the SSAT. He moved interstate in January 2014 and advised the respondent’s representative that he was no longer acting for Mr and Mrs Barba. At a conference held before a conference registrar on 20 March 2014, Mr and Mrs Barba were represented by a different barrister as well as an instructor. By the date of the fifth conference on 29 May 2014, their daughter was representing them stating that her parents could no longer afford legal representation. Mr and Mrs Barba’s comments dated 31 March 2015 in response to the respondent’s Statement of Facts and Contentions were framed in legalistic language. They told the Tribunal that they have been assisted by a friend who is a retired judge.
The issues for the Tribunal are:
·whether the value of Mr and Mrs Barba’s assets exceeded the asset limit in relation to their applications for age pension lodged in August 2011;
·whether Mr Barba was overpaid newstart allowance and DSP;
·whether Mrs Barba has been overpaid partner allowance;
·whether Mr and Mrs Barba owe debts to the Commonwealth; and
·if they do, should some or all of the debts be waived or written off.
HOW IS THE RATE OF PENSION CALCULATED?
A person’s income and assets are taken into account in assessing that person's eligibility for various types of 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 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.
The term asset is defined exhaustively 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 provides a long list of what are considered to be financial assets. This includes available money and investment properties whether in the person’s own name or where they are shareholders in a company which owns the asset or as potential trust recipients in certain circumstances.
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 Barba, was their home in an area outside Melbourne in a rural setting.
ASSETS AND VALUATIONS
Mr and Mrs Barba are challenging the values attributed to various properties over the years, particularly a property in Kerr Street, Fitzroy (Kerr Street). They submit that the Tribunal should prefer the valuations provided by the local municipality in their rate notices over the values attributed to properties by the Australian Valuation Office (AVO). Mr and Mrs Barba also object to valuations that were made without internal inspection of the property concerned.
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. The Federal Court in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 endorsed the Tribunal’s approach to valuation of property.
The approach towards valuation of property has been consistent for more than a century since the High Court’s decision in Spence v The Commonwealth of Australia (1907) 5 CLR 418 where the valuation process (at 432) was described as:
…the test of value of land is to be determined, not by enquiring what price a man desiring to sell could actually have obtained for it on a given day ie whether there was in fact on that day a willing buyer, but by enquiring ‘what would a man desiring the land have had to pay for it on that day to a vendor willing to sell it for a fair prince but not desirous to sell?’…
In Re Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468, Deputy President Forgie pointed out that valuations can be prepared for different reasons. She went on to state:
…
[89] Valuations can be prepared for different reasons. Taking that by the Valuer-General, it is clear that the valuation has been prepared under the Valuation of Land Act 1960(Vic) (VL Act). Section 13DA(1) provides that a Council may appoint a person or persons to make valuations under that Act for the purposes of the Local Government Act 1989 (Vic) (LG Act). Part 8 of the LG Act is concerned with the rates and charges on rateable land. Subject to exceptions specified in s 154(2), all land is rateable… Section 157 of the LG Act provides that the Council may use the site value, net annual value or capital improved value system of valuation and may change its system provided it publishes notice of its decision to do so. Section 13DC of the VL Act makes specific provision for the matters to which regard is had in valuing for the purposes of the LG Act. It follows that the valuation by the Valuer-General was not prepared for the purposes of the SS Act.
[90] More importantly, the basis on which the Valuer-General was required to value the land was not necessarily on the basis of market value that was the basis of the AVO’s valuation. The AVO had adopted as its basis the market value as determined in accordance with the International Valuation Standards 2001:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”…
[91] Market value is the basis that accords with the principles underlying payments of NSA and DSP under the SS Act. Those payments are income maintenance payments. A purpose of the assets and income tests must be to determine the extent to which a person is regarded by the law at least as requiring income maintenance. That extent is determined by reference to the means that a person has at his or her disposal to support him or her self. Those means take the form not only of money but of assets that can be converted to money. In view of that, it seems logical that the value of a person’s assets must be assessed on the basis of the amount that they would bring if sold by a willing seller to a willing buyer in an arm’s length transaction after proper marketing.
[92] On that basis, I prefer the value of the AVO to that of the Valuer-General once the AVO’s valuation was received by Centrelink. It was prepared on the basis of the only comparable sale at the time and according to market value. A wider basis of comparable sales would have been preferable but sales cannot be conjured up if they do not exist…
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 was the organisation that Centrelink usually commissioned to undertake valuations. The valuations provided by the AVO that the Tribunal has seen over the years have been provided by professional sworn valuers. As indicated above, the Tribunal has generally preferred the AVO’s valuations to other opinions such as those provided by local estate agents or in rate notices. However, there are exceptions. In Re Di Masi and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 270, this Tribunal preferred the opinion of another independent sworn valuer, a local, to that of the AVO’s valuer.
HISTORY OF DEALINGS WITH CENTRELINK
Mr Barba was paid job search allowance and newstart allowance from 15 July 1993 to 10 August 1993 and again from 28 July 1994 to 21 February 2000, and DSP from 22 February 2000 to 24 April 2002. Mrs Barba was paid partner allowance from 12 September 1994 to 31 December 2001.
On 23 July 1993 Mr Barba lodged a document with Centrelink in which he indicated he was a builder who traded in conjunction with his wife but without a registered business name. He stated that the assets he and his wife owned were two houses in Wallan with an estimated market value of $190,000; a unit in Wallan with an estimated value to $85,000; a house in Wandong with a value of $130,000, a farm property in Wallan with an estimated market value of $250,000 and the Kerr Street property valued at $115,000. Mr Barba indicated that he had an outstanding loan of $472,000 with the National Australia Bank (NAB), Kilmore.
On 30 July 1993 Mr Barba advised that the properties he and his wife owned were two adjacent houses in Wallan with an estimated market value of $100,000 each with mortgages over the properties. He stated that he received $160 rent per week for each property. Mr Barba estimated that the unit in Wallan was valued at $100,000 for which he received $140 in weekly rental and that there was a mortgage over the property. He stated that Kerr Street was worth $100,000 and that no income was received from that property.
On 19 July 1994 Mr Barba applied for job search/newstart allowance. On the application form, Mr Barba stated that he and his wife received no income and owned no assets. Mr Barba’s explanation for this response before the Tribunal was that he answered the question in the negative because the rental income was being directed to mortgage and overdraft payments and therefore, he and his wife derived no income from the properties.
On 22 February 2000 Mr Barba lodged his claim for DSP. Centrelink wrote to him advising that he must inform the agency within 14 days if the combined assets of his wife and himself were more than $181,750. Mrs Barba was sent a similar notice on the same day in relation to her partner allowance.
On 31 January 2001 Centrelink wrote to Mr Barba advising of changes to the assessment of private trusts and private companies as from 1 January 2002. Mr Barba was asked to complete and return forms concerning his involvement with Barba Holdings Pty Ltd. A booklet explaining forthcoming changes was included.
On 28 March 2001 Centrelink wrote to Mrs Barba advising of the amount she was receiving in partner allowance. She was advised that she needed to let Centrelink know within seven days if her assets, and those of her husband, exceeded $189,500.
On 3 September 2001 Mr Barba lodged a private company form in relation to Barba Holdings Pty Ltd. Mr Barba advised the Tribunal that his accountant had prepared that form and other earlier and later forms on behalf of himself and his wife. The document indicated, amongst other things, that the company was incorporated on 8 March 1996; Mr Barba was the director; there were two shareholders, namely Mr and Mrs Barba; the company had assets of $2.00; it owned no real estate and had no loans or liabilities. Personal income tax returns were provided as were details concerning the Barba Family Trust.
The balance sheet for the Barba Family Trust as at 30 June 1999 indicated that the trust was involved in property investment. Its fixed assets of $137,319 included land valued at $136,000 and its deferred liabilities included an unsecured loan of $137,319 from Mr and Mrs Barba. For the year ending 30 June 1999, the Barba Family Trust received income in the form of rent of $22,896; its net profit was $22,800 and distributions of $11,400 each were made to Mr Barba and Mrs Barba. In the statement, a site value of $138,000 was given for Kerr Street. The trustee of the Barba Family Trust was Barba Holdings Pty Ltd; the appointor was Mr Barba who had power to veto a trustee’s decision, replace the trustees or change the trust deed. Fifteen beneficiaries were listed including Mr and Mrs Barba. The trust as at that date had assets, other than real estate, of $821 in equipment and $23,887 in cash. The trust owed $70,603 to Mr Barba and the same amount to Mrs Barba. The trust owned Kerr Street with a value estimated to be $150,000.
On 24 September 2001 Centrelink advised Mr Barba that his newstart allowance was cancelled from 1 July 1999 as his combined income was above the allowable limit and that his DSP rate was based on an annual combined income of $28,142.30. He was informed that he needed to let Centrelink know if his combined assets other than financial investments were more than $210,432 in relation to his then current DSP entitlement. On the same day, Mrs Barba was informed that her partner allowance was cancelled from 1 July 1999 due to her and her husband’s combined income.
On 4 October 2001 Centrelink received an AVO valuation for Kerr Street of $300,000 based on a kerbside inspection. Mr and Mrs Barba have submitted to the Tribunal that the valuation was too high and should not have been based on a roadside inspection. They also submitted that the Tribunal should have ascribed the value given in their council rate notice.
With changes due to methods of calculations of assets and income for private companies and trusts to commence on 1 January 2002, Centrelink wrote to Mr Barba on 5 October 2001 advising him that as the controller of the Barba Family Trust that he would be attributed with 100 per cent of the income and assets of the trust when the amendment came into effect almost two months later. The applicants agreed that this appeared appropriate in their submission to the Tribunal.
On 29 November 2001 Centrelink received a copy of the 1998/1999 income tax return for the partnership of Michael and Elizabeth Barba. The form indicated that the main business activity of the partnership was primary production – cattle. There were interest and rental deductions. Total assets were $388,146 and total liabilities were $276,580.
Centrelink arranged for Mr Barba to receive advice from specialist staff in relation to his financial circumstances in late 2001 and also communicated with his accountant. On 23 November 2001 a complex assessment officer of Centrelink wrote to Mr Barba seeking several documents in relation to the trust in an effort to ensure that his DSP entitlement was correct. In particular, the 2000 financials were sought. On 26 November 2001 Mr Barba’s accountant provided a profit and loss statement for the year ending 30 June 2000 and a balance sheet for that year. Distributions from the trust were made to eight beneficiaries with $5,962 to Mr Barba; $5,963 to Mrs Barba and $643 each to six other individuals with the Barba surname.
On 26 November 2001 Mr Barba was issued with a notice advising him of his current rate of DSP and that this was based on a combined annual income of $18,461.24 He was told of the obligation to let Centrelink know within 14 days if his combined assets were over a certain amount. Mrs Barba was also issued with a notice that day concerning her rate of payment of partner allowance which was based on a fortnightly income of $355.01 and advised that she had to inform Centrelink if the rate of her combined assets were over a specified amount.
On 10 December 2001 Centrelink sent a notice to Mrs Barba advising that her partner allowance would be cancelled as from 1 January 2002 as the value of her and her husband’s assets were above the then allowable limits. Mr Barba was advised of a reduction to his rate of DSP from 1 January 2002 because the value of his assets and those of his wife had increased.
On 14 March 2002 Centrelink wrote to Mr Barba asking him to provide completed forms and copies of council rate notices and mortgage documents. A follow up request was made on 3 April 2002.
On 6 May 2002 Centrelink issued a notice to Mr Barba advising that his pension was suspended as he had failed to provide requested documents. On 11 July 2002 Mr Barba was advised that his DSP had been cancelled as he had also failed to provide requested documents.
On 5 August 2002 Centrelink advised Mr Barba that a decision had been made to raise and recover a debt of $10,451.32 being newstart allowance paid from 9 July 1998 to 16 February 2000. On the same day, Centrelink advised Mrs Barba that a debt had been raised for $15,971.46 being partner allowance paid for the period of 9 July 1998 to 12 September 2001.
Mr and Mrs Barba challenged the decision to impose the debt. They are maintaining that stance before the Tribunal as they do not agree with the AVO’s valuations. They also submitted that because the rent from the properties was applied directly to the mortgage, it was not income that they received.
On 4 September 2002 Centrelink sent separate letters to Mr Barba and Mrs Barba demanding payment of the debts in full as our records indicate that you have sufficient savings and/or assets to fully repay the monies owing. They were warned that legal proceedings would be initiated if they failed to pay within a week. Centrelink sent reminders on 10 September 2002 with a request that:
…Please phone us straight away, so we can sort this matter out and avoid the need to take further action.
Further reminders were sent on 1 October 2002 as no arrangement has been made with us to extend the time for payment of this account.
On 8 September 2003 a complaint was lodged in the Magistrates’ Court of Victoria by solicitors instructed by Dun and Bradstreet, the collection agents used by Centrelink. On 17 October 2003 the solicitors advised Centrelink that Mr and Mrs Barba had filed a defence through their solicitor denying the allegations that they had debts specified in the documentation. A pre-hearing conference was listed for the Melbourne Magistrates Court on 24 February 2004 for 2 June 2004.
On 22 October 2003 Centrelink received a copy of the 1999/2000 income tax return for the Barba Family Trust which showed gross rent of $15,264, total assets of $167,719, total liabilities of $167,709 with proprietors’ funds of $10.
On 5 December 2003 a complex assessment officer of Centrelink wrote to Mr and Mrs Barba advising that the debt had been reviewed and had been increased because the original calculation did not include the deemed income from the beneficiary loans held by the Barba Family Trust. Mr Barba’s debt was increased to $17,929.27. Mrs Barba’s debt was increased to $20,420.93.
Mr Barba sought review by an ARO on 5 December 2003. Mr and Mrs Barba supplied copies of documents to Centrelink on 9 December 2003. These included personal tax returns for a number of relevant years, financial statements for Mr and Mrs Barba’s partnership, and financial statements and tax returns for the Barba Family Trust. Total assets for the partnership of Michael and Elizabeth Barba were $388,146 with total liabilities of $276,580. There were loan accounts of $69,095 for Mr Barba and $69,091 for Mrs Barba.
On 16 February 2004 Centrelink determined that a claim by Mr Barba for payment of DSP pursuant to the hardship provisions of the assets test should be rejected. The hardship provisions allow an asset to be disregarded if a person is unable to sell or borrow against the asset or where it would be unreasonable to expect them to do so and the person would suffer severe financial hardship if the asset is not disregarded. The delegate took into account that there would still be in excess of $360,000 in assets made up of beneficiary loans and attributed assets from the Barba Family Trust.
On 29 March 2004 a Centrelink complex assessment officer sought copies of amended tax returns and financial statements for Barba Holdings Pty Ltd and amended personal returns for Mr and Mrs Barba for the financial years 1997-98, 1998-99 and 1999-2000. Centrelink received these on 17 January 2005.
In the meantime during 2004, the case in the Magistrates’ Court did not progress. A pre-hearing conference scheduled for 2 June 2004 was postponed as Centrelink was recalculating the debts. The hearing, which had been set for 6 August 2004, was also adjourned because a new figure was yet to be determined. Mr and Mrs Barba provided the Tribunal with a document showing that a consent order was made on 31 August 2005 which stated that the proceedings against Mr Barba be struck out and that both parties should bear their own costs to that date. Submissions were made to the Tribunal that this consent decision resulted in the respondent cancelling the debt. However, there is no evidence to suggest that is so. It appears to the Tribunal that this consent order merely terminated the Magistrates’ Court proceedings.
On 24 January 2005 Mr and Mrs Barba’s accountants forwarded a company tax return for Barba Holdings Pty Ltd for the financial year 2000-2001 accompanied by a Detailed Statement of Financial Performance for that financial year.
On 14 February 2005 Centrelink was provided with profit and loss statements concerning property investments for the financial years ended on 30 June 1997 and 30 June 1998. The liabilities included loans from the NAB.
On 23 February 2005 Centrelink advised Mr Barba that a decision had been made to raise a debt of $12,864.75 being Newstart allowance paid for the period 25 June 1998 to 21 February 2000. On the same day, Mrs Barba was informed that she had a debt of $12,634.34 being partner allowance paid between 25 June 1998 and 16 February 2000. On 24 February 2005 Mrs Barba was informed that she also had a debt of $10,937.06 for partner allowance paid between 2 March 2000 and 4 July 2001.
On 2 March 2005 Mrs Barba sought review of the debts imposed. Her husband had already sought such a review more than a year earlier.
On 18 October 2005 an ARO advised Mr Barba that the newstart allowance debt had been varied. The dates for which he was overpaid changed to 1 July 1997 to 21 February 2000 and the amount of the debt increased to $19,219.15. The DSP debt was increased to $14,551.50 for the period 22 February 2000 to 24 April 2002.
In late September 2007 Mr and Mrs Barba lodged claims for age pension but these were refused on 7 November 2007 on the basis that their combined assets were above the allowable limit.
In August 2011 Mr and Mrs Barba lodged claims for age pension. They provided details of the properties they had an interest in. Centrelink asked the AVO to undertake valuations. Mr and Mrs Barba advised that the Barba Family Trust had been vested which was confirmed by Centrelink as it was no longer registered for GST and its ABN was cancelled. On 29 November 2011 Mr and Mrs Barba were advised that their claims for age pension were rejected because of the value of their assets. Centrelink calculated that the value of their combined assets was over $1.7 million. An ARO affirmed the decision to refuse the pension claims on 15 February 2012.
The SSAT’s decision on both the debts and the refusal of age pension is set out in the fifth paragraph of these Reasons for Decision.
AGE PENSION CLAIMS DATED 2 AUGUST 2011
Mr and Mrs Barba contacted Centrelink on 2 August 2011 and lodged written claims within 14 days of that contact. Their claim is therefore deemed to have been made on 2 August 2011 (as per s 13 of the Social Security (Administration) Act 1999 (the Administration Act)). They are both well over the qualifying age for age pension.
In working out the value of Mr and Mrs Barba’s assets, Centrelink sought details from them of property ownership and relevant financial statements. The AVO was asked to value the properties.
At the date of claim, Mr and Mrs Barba declared household and personal effects of $3000, a 28 year old car worth $1000 and $28,671 in a NAB FlexiPlus mortgage account. They also advised that they owned or had an interest in three properties, namely their home in Wallan East which sat on a number of acres; a farm property on Epping-Kilmore Road Wallan and the property in Kerr Street.
On 7 September 2011 the AVO ascribed a value of $1,200,000 for Kerr Street; $550,000 for the property in Wallan East and $500,000 for the property on Epping-Kilmore Road. Mr Barba continued to maintain his view that council valuations should be preferred to AVO assessments. The values Mr Barba put forward were $472,000 for their home in Wallan East, $585,000 for the property on the Epping-Kilmore Road and $705,000 for Kerr Street.
For reasons already set out, the Tribunal accepts the valuations of the AVO as the values to be attributed at certain dates. There were no contradictory valuations provided by independent sworn valuers to rebut those provided by the AVO. Council valuations for rate purposes are not sworn valuations.
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, for example, the person’s private residence.
At earlier stages in the lengthy dispute about debts incurred by Mr and Mrs Barba, they claimed that they were primary producers in relation to one of the properties. There are special provisions set out in the Act that allow for differential treatment in relation to liabilities and assets where a person or company is a primary producer. However, in their claim for age pension deemed lodged on 2 August 2011, Mr and Mrs Barba stated that they are no longer operating a primary production business so those provisions are not relevant to the assessment as at August 2011.
As from 1 July 2011, the applicable asset limit for a couple without any impact on their age pension entitlement was $265,000. As at August 2011 the asset test reduced the rate of pension by $1.50 per fortnight for every $1000 above the relevant asset limit. The rate of pension was reduced to nil when the value of assets exceeded $928,000
Mr and Mrs Barba’s principal home sits on 1.9 hectares and on one title. Section 11A(6) of the Act allows for not more than two hectares to be considered part of the private residence. Mr and Mrs Barba indicated that their principal home was a 33 square brick property that was six years old at the time of the claim in August 2011. Therefore the principal home and the land surrounding it were exempt from the assets test in relation to the August 2011 pension claim.
Mr and Mrs Barba stated that the Epping-Kilmore Road property comprises 186 hectares of which 103 hectares had been developed as pasture. The rest was described as dense bushland. A 60 year old house in poor condition was described the only building on the property. Mr and Mrs Barba claimed a value of $585,000 at the relevant date and stated that they each had a 50 per cent interest in the property. However the AVO ascribed a value of $500,000. The Tribunal accepts the lower value given by the AVO as the appropriate value for assets test purposes.
The Kerr Street property was valued at $1.2 million at the relevant date by the AVO. At one stage there had been permission sought to redevelop the land as five apartments but that had not proceeded as at August 2011. There is no evidence of any mortgage against that property. The property had been held in the name of Barba Holdings Pty Ltd, of which Mr and Mrs Barba were each 50% shareholders. Mr and Mrs Barba have not contradicted that finding. Even if the company has been deregistered, the title still remained in the company’s name. The Tribunal accepts the respondent’s submission that as the company’s sole shareholders, they should be considered as attributable stakeholders and attributed with 100% of its assets. The Tribunal accepts the AVO’s valuation of Kerr Street and determines that it is a combined asset of Mr and Mrs Barba.
The Kerr Street property, on its own, without adding in the other assets, is sufficient to result in Mr and Mrs Barba exceeding the assets test upper limit.
Prior to refusing the claim, Centrelink sought further documents from Mr and Mrs Barba during August and September 2011 including updated information on Barba Holdings Pty Ltd and the Barba Family Trust. By that time, Centrelink discovered that the family trust had been vested. Documents from the NAB provided in February 2012 confirmed that Mr and Mrs Barba had a NAB Choice Package Flexiplus Mortgage for $260,000 as at 1 July 2009 with their home as security.
The Tribunal finds that neither Mr Barba nor Mrs Barba was entitled to age pension when they made their claims in August 2011. The Tribunal therefore affirms the decision under review.
THE DEBT TO THE COMMONWEALTH
The Tribunal accepts the respondent’s contention that Mr and Mrs Barba received payments to which they were not entitled due to the value of their assets and their amount of income being higher than they had declared it 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.
The Tribunal accepts that Mr and Mrs Barba relied on a complex structure of their finances based on their accountant’s creation of various entities and the reporting of those entities’ assets, liabilities and financial situations at the end of each financial year during the debt periods. Mr and Mrs Barba were affected during the debt periods on both the income and value of assets fronts. Mr Barba was in control of the family trust and as the appointor, he was attributed with 100 per cent of the assets of the trust.
Mr and Mrs Barba submitted that they did not have the levels of income and assets that the respondent stated they had. They submitted, for example, that rent from properties owned by them or by their partnership, company or trust which went towards repayment of advances by the NAB was not income they received. However, the Tribunal finds that it is still income in terms of the definitions in the Act. The Barba’s choice to directly pay the moneys received as rental to the bank as repayments without it passing through their hands does not mean it was not their income for the purpose of calculating their entitlements to social security benefits.
The respondent’s representative provided extensive details of the basis for the calculations of Mr and Mrs Barba’s assets and their debts. The calculations have been done and redone many times over the years since they arose as more information about the assets and income of Mr and Mrs Barba personally, the Barba Family Trust and Barba Holdings Pty Ltd has been forthcoming. There were also legislative changes that came into effect on 1 January 2002 that impacted on asset calculation.
The respondent has also provided detailed facts and submissions in its Statement of Facts and Contentions dated 5 August 2014 taking into account the AVO valuations. As indicated earlier, the Tribunal supports AVO valuations ahead of those in council rate notices.
The debt period commences on 25 June 1998 for both Mr and Mrs Barba. At that time, the value of Kerr Street at $180,000 as at 30 June 1998 and $225,000 as at 30 June 1999, without including any of their other assets, was sufficient of itself to deny entitlement to newstart allowance for Mr Barba from that date until 21 February 2000 and Mrs Barba to partner allowance to 16 February 2000. The Tribunal accepts the calculations undertaken by the respondent’s delegates and finds that Mr Barba has a debt of $12,864.75 for the above period and Mrs Barba a debt of $12,634.34 for the above cited period.
The financial circumstances between 22 February 2000 to 29 June 2000 are such that both the SSAT and the respondent concurred that that Mr Barba may have been entitled to a low level of DSP payments during that period. The respondent’s representative suggested that the Tribunal should set aside the current amount of debt incurred during that period and remit the matter to the Secretary for recalculation of Mr Barba’s entitlement during that period. Similar representations were made about the period from 20 September 2000 to 29 June 2001 when both the SSAT and the respondent’s representative concurred that Mr Barba was entitled to a reduced rate of DSP rather than having no entitlement.
The analysis undertaken by the SSAT and the respondent was that Mr Barba was not entitled to any DSP payments between 30 June 2000 and 19 September 2000. The Tribunal accepts, and adopts that finding.
The methodology and asset limits for partner allowance for Mrs Barba are not identical to those of DSP. The Tribunal accepts the respondent’s and the SSAT’s analysis that Mrs Barba was not entitled to partner allowance during the period when Mr Barba may still have been entitled to some DSP payments.
However, the Tribunal notes that a recalculation of Mr Barba’s entitlements will not mean the elimination of any debt. There will still be a debt arising being the difference between his entitlement and what he actually received in DSP payments.
Looking at the period from 1 July 2001 to 31 December 2001, the Tribunal notes that the valuation of Kerr Street as at 30 June 2001 was $290,000. The respondent listed Mr and Mrs Barba’s assets as at 1 July 2001 as totalling $459,491 which included shares in Barba Holdings Pty Ltd of $173,389; primary production assets of $174,511 and a loan to Barba Holdings Pty Ltd of $107,591. The allowable asset limit from 1 July 2001 was $200,500 and the pension rate was reduced to nil when the value of assets increased to nil when the value of assets exceeded $431,000. As their assets exceeded the permissible amount, Mr Barba was not entitled to DSP payments at that time.
As indicated earlier, there were changes made to the rules involving companies and those holding an interest in them on 1 January 2002. However, taking those into account still resulted in Mr and Mrs Barba exceeding the upper limit of assets in relation to DSP. So they were not entitled to social security benefits during the period from 1 January 2002 to 24 April 2002 when Mr Barba’s lack of entitlement was recognised by Centrelink.
The respondent’s Statement of Facts and Contentions sets out in detail the Secretary’s rationale and calculations for the various periods. The Tribunal accepts the respondent’s analysis and calculations.
Whilst the Tribunal has been presented with submissions by the applicants that many of the calculations are incorrect, it has not been provided with alternative calculations except to suggest that the AVO figures should not be relied on but that the Tribunal should prefer the council valuer’s assessments. However, to be fair, given the complexity of the calculations, the applicants are not really in a position to undertake a detailed alternative calculation.
The Tribunal finds that Mr and Mrs Barba have incurred debts to the Commonwealth as the result of overpayments due to the nature and amount of their assets and income.
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 Mr and Mrs Barba failing to provide a comprehensive, timely and accurate picture to Centrelink of their financial affairs. The Tribunal is not suggesting that they deliberately set out to provide incorrect or misleading information. For example, the Tribunal accepts that they genuinely believed that the rental from properties that was applied to the moneys owed to the NAB was not income they had received. They also linked the value of properties to council valuations rather than market value resulting in most circumstances to significant undervaluation.
Whilst it is unfortunate that the overpayments were not identified earlier in the process, the Tribunal is not satisfied that the situation that Mr and Mrs Barba found themselves has arisen due to error only on the part of Centrelink. The Tribunal finds that the debts are not attributable solely to administrative error on the part of the Commonwealth.
Section 1236 of the Act provides for a write off of the debt under certain circumstances. However, their debts are not irrecoverable at law. Mr and Mrs Barba have interests in properties and also appear to have access to funds through their bank. 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 Tribunal is not satisfied that Mr and Mrs Barba knowingly made false statements or representations or that they did not knowingly fail to comply with the Act. There were a number of forms that contained incorrect information but the Tribunal is prepared to accept that Mr and Mrs Barba did not deliberately put down incorrect information.
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) 100 ALD 9 Besanko J stated, in respect of special circumstances (at17-18):
… 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 in one go may cause some difficulties for Mr and Mrs Barba. However Mr and Mrs Barba have been aware of the debts for more than a decade. They have had ownership of a property in Kerr Street that has risen significantly in value in what is now a “trendy” area as well as other assets.
The applicants’ migrant background, their native language not being English, a relative lack of sophistication and reliance on their accountant to set up their finances have been put forward as constituting special circumstances. The Tribunal is not satisfied that the situation that Mr and Mrs Barba find themselves is vastly different from the situation of other social security recipients who have incurred debts because they have misunderstood the assets tests and have had arrangements in place that their accountants may well have set up to minimise taxation but where those structures were not in their best interests when it comes to social security benefits. 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.
The reviewable decision before the Tribunal is that of the SSAT. However, it is the original decision that the Tribunal is reviewing. Nonetheless, the respondent has submitted that the Tribunal follow the decisions of the SSAT and affirm the decision under review. The Tribunal thinks it is appropriate to do so.
DECISION
The Tribunal affirms the decisions under review.
100. I certify that the preceding 99 (ninety-nine) paragraphs are a true copy of the reasons for the decision herein of Ms Regina Perton, Member
[sgd]...........................................................
Associate
Dated 24 June 2016
Date of hearing 1 June 2015 Advocate for the Applicant Joanne Maiolo Advocate for the Respondent Ms Ailsa Bramley Solicitors for the Respondent Department of Human Services
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