Brownsey and Secretary, Department of Social Services (Social services second review)
[2015] AATA 660
•11 August 2015
Brownsey and Secretary, Department of Social Services (Social services second review) [2015] AATA 660 (11 August 2015)
Division
GENERAL DIVISION
File Number(s)
2015/0792
Re
Brownsey
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member Bernard J McCabe
Date 11 August 2015 Date of written reasons 1 September 2015 Place Brisbane The decision under review is affirmed.
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Senior Member Bernard J McCabe
Catchwords
SOCIAL SECURITY – aged pension – asset test – determining rate at which pension is paid – market value – best use to which asset could be put – decision under review affirmed.
Legislation
Social Security Act 1991, s 1064
Cases
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Evans and Secretary, Department of Social Security (1993) AATA 497
REASONS FOR DECISION
Senior Member Bernard J McCabe
1 September 2015
The applicant commenced proceedings in the Tribunal. A decision was made and oral reasons were provided at the end of the hearing on 11 August 2015. The reasons below were distilled from the transcript of that hearing.
Mr Brownsey, the applicant, applied for the aged pension. As part of that process, Mr Brownsey was required to provide information about his income and assets for the purpose of determining his entitlements under section 1064 of the Social Security Act1991 (Cth) (the Act). The value of Mr Brownsey’s assets is important for determining the rate at which the pension is paid. Once the assets are valued at more than a particular amount, the rate at which the pension is paid will fall. If the assets are valued at higher than the cut-off amount, the pension will not be payable.
Importantly, some assets are exempt from this means testing process. At the time, the applicant’s principal place of residence was one such asset. The property in question, however, is number 36 Gibb Street Kelvin Grove (the property), which, until Mr Brownsey subsequently moved into it, did count as an asset to be assessed as part of the process of determining his aged pension entitlements.
For the purposes of these proceedings, the relevant time under consideration is 7 April to 25 August 2014 (the relevant time). During this period of time the Authorised Review Officer affirmed a decision to value the property at $700,000.00. For the current purposes, it is important to look back at the relevant time and take a snapshot of the value as it stood then, as opposed to what has happened now or what may have happened before that.
While the Act requires that assets be valued for the purposes of the assets test, it does not define or specify the valuation process. There are different ways of valuing different assets. When we are talking about residential property like this, it is usually the market value which is relevant. This was the approach adopted in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790. It follows the Tribunal must consider the market value having regard to the ‘best use to which the asset could be put’.[1]
[1] Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 at [17].
This requires us to consider not just the use to which the land is currently put, but the best use for which the land could be put. The consideration is framed in terms that reflect what price a ‘desirous buyer would pay to a willing but not anxious seller.’[2] We look hypothetically at what the best use of the property might be, and what would be agreed by reasonable buyers and sellers who are motivated but not desperate. An important factor here is that this particular property is large. It is substantially bigger than a property Mr Brownsey previously sold on the same street at a lower price, and about twice the size of other properties on the same street.
[2] Re Evans and Secretary, Department of Social Security (1993) AATA 497 at [7].
Mr Brownsey argues the property was worth less than $700,000.00, which is the price the respondent said it was worth at the relevant time. Among other things, Mr Brownsey referred to an Annual land valuation notice issued by the Department of Natural Resources and Mines which is used for the assessment of land tax. That tax is levied on the unimproved value of the land. Mr Brownsey’s property has some improvements on it, but nonetheless I accept this as a rational starting point for the applicant. The respondent relied upon a more detailed valuation by Mr Malcolm Malone of Hely & Associates. Mr Malone was at the hearing and able to talk the Tribunal through his property valuation in detail.
Mr Malone agreed there are a couple of defects in his valuation. For instance, the report lists the property as a two-bedroom dwelling when in fact it is a three bedroom dwelling. I accept that Mr Malone said he did actually take the correct number of bedrooms into account and the error was a mere typographical oversight. Mr Malone was also unaware of issues that surrounded the hot water system and the fact the property was not connected to electricity.
In cross-examination the applicant provided Mr Malone with an extensive list of questions and pointed out specific issues that, in the applicant’s view, were not adequately considered in the valuation. However, Mr Malone maintained the view that the correct price at the time was $700,000.00; he did that in particular because, he said, the real value in the property lay in its development value. The fact it is possible for a developer to construct a new dwelling at the rear of the property, regardless of what they do to the front of the house, is the basis for that valuation.
Mr Malone then went through a number of comparable sales. For example, he talked about the sale of the applicant’s previous house at number 46 Gibb Street, and made reference to a sale of 9 Gibb Street, Kelvin Grove. Mr Malone said those other properties might have sold for less generous prices because the land size – and thus the potential for development - was notably smaller. Mr Malone also compared a property adjacent to number 36 Gibb Street, which had been recently sold. That house, admittedly a better house, was also on a large block and sold for a much higher price.
Mr Malone noted the property, at the time of valuation, was in relatively poor condition. He mentioned it was not habitable upon valuation and would require restoration before it could be brought to habitable standard. He acknowledged that if additional renovation work was done, it might make the property even more valuable. But Mr Malone insisted he performed his valuation on the property in its current state at the relevant time, which was a fairly poor state. Ultimately, Mr Malone maintained $700,000.00 was an accurate valuation.
At the end of the day, the evidence points to a result that is consistent with that conclusion. It appears probable that Mr Brownsey could, at the relevant time, in a strengthening but not galloping market, receive in the order of $700,000.00 for his property - perhaps even more.
We know the property is not currently heritage listed, although I take Mr Brownsey’s point about the streetscape being subject to regulation. Mr Malone took that into account and accepted there might be some limitations on how the property might be developed, but it was not heritage listed at the time, and any regulatory restrictions would not be insurmountable nor discount the overall valuation.
Even allowing for the very poor state of the property, and the restrictions that Mr Brownsey referred to, I prefer the valuation of Mr Malone. Mr Malone is, after all, an experienced property valuer who was able to justify his valuation with reference to other property sales in the street and in the area. Mr Malone was able to identify factors to explain why some other properties in the area sold around the relevant time at a lower price. On that basis, I think $700,000.00 is the right number for the purposes of this exercise.
That is not to say the price has not changed since. I am not in a position to comment on that, but when we take the snapshot of the relevant time all the evidence seems to point to the conclusion that $700,000.00 is the right figure, notwithstanding Mr Brownsey’s criticisms. Of course that does not change Mr Brownsey’s position after August 2014 when the property became his principal private residence and he became entitled to claim an exemption for the property from that point.
Therefore, in respect of the relevant period and for the reasons outlined above, I affirm the decision under review.
17. I certify that the preceding 16 (sixteen) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
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Associate
Dated 1 September 2015
Date of hearing 11 August 2015 Applicant In person Advocate for the Respondent Mr R McQuinlan, Department of Social Services
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