Bryce and Secretary, Department of Families, Community Services and Indigenous Affairs

[2006] AATA 805

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 805

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          A2006/122 & 168

GENERAL ADMINISTRATIVE  DIVISION		)
Re		ROBERT BRYCE & LORNA BRYCE

Applicants

And SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr S. Webb, Member

Date21 September 2006

PlaceCanberra

Decision The decisions under review are affirmed.

..............................................

Mr S. Webb, Member

CATCHWORDS

SOCIAL SECURITY - age pension - assets test – combined asset value limit - market valuation - decisions affirmed.

SOCIAL SECURITY ACT 1991 ss 11, 44, 55, 1064, 1118

Re Reynolds and Secretary, Department of and Social Security (1986) 11 ALN N193

Re Evans and Secretary, Department of Social Security (1993) AAT 8710

Maurici v Chief Commissioner of State Revenue (2002) 212 CLR 111 at 121

REASONS FOR DECISION

21 September 2006 Mr S. Webb, Member         

1.      Robert and Lorna Bryce are age pensioners.  They own their principal place of residence in Narrabundah, ACT.  They also own a property at 17 Ranger Rd, Croydon, New South Wales.  In 2004 Centrelink recorded the value of the 17 Ranger Road property as $350,000. The value of the property was reassessed for pension purposes in September 2005, and a value of $573,000 was recorded.  As it was a value that exceeded the upper asset value limit for age pension for a couple, Mr and Mrs Bryce had their age pension payments cancelled.  Mr Bryce complained that the valuation was wrong.  Subsequently the Australian Valuation Office estimated the value of the property to be $610,000.  Mr Bryce objected to this valuation and a further valuation was undertaken, with the result that the property was valued at $640,000.  The decision to cancel Mr and Mrs Bryce's age pension has been affirmed at each level.  Mr and Mrs Bryce are unhappy about the decision and have asked this Tribunal to review it.

2.      The issue for the Tribunal to determine is whether the decisions to cancel Mr and Mrs Bryce’s age pensions were correct.  Essentially, it is the value of the Ranger Rd property that is in issue.

3.      Mr and Mrs Bryce assert that the decisions to cancel their age pensions were incorrect because the value of the Ranger Rd property was inflated.  In their view the value of that property in September 2005 was less than $480,000.  On that basis the value of their assets, excluding their principal home, would not exceed the applicable asset value limit at that time.  Mr and Mrs Bryce noted that Centrelink recorded the value of the Ranger Rd property in November 2004 as $350,000.  In their view it was inconceivable that the property increased in value from $350,000 to $573,000 in the period from November 2004 to September 2005.  He rejected the subsequent higher valuations on the basis that they were ill-founded and designed to make him “go away”.  Mr Bryce asserted that the Ranger Rd property was in very poor condition, in all likelihood with asbestos tiles on the roof (which leaked) and termites in the woodwork.  In his view it is not appropriate to compare the property to other properties which have been renovated or are in better condition.

4.      Under the Social Security Act 1991 the rate of a person's age pension is to be calculated using a rate calculator.[1]  If the rate of the person's pension is nil, pension is not payable.[2]  The rate calculator includes an income and assets test.[3]  Assets are defined to include real property.[4]  The Act does not set out how the value of a person's assets is to be determined.  If a qualified valuer is relied upon for this purpose, the experience and impartiality of the valuer and the quality of the methodology used are relevant factors to have regard to.[5]  It is necessary to consider the highest and best use of the property when assessing the price that a reasonable buyer could fairly be expected to pay a reasonable seller if the buyer and seller are acting freely and without duress.[6]  If a comparative sales methodology is employed it is important to ensure that the sales used for purpose of comparison are truly comparable, that is they are relevant to the subject property, possessing similar characteristics, and are sufficient in number to avoid unreasonable bias.[7]

[1] ss.55 and 1064.

[2] s.44.

[3] s.1064-G1 to G7.

[4] s.11.

[5] Re Reynolds and Secretary, Department of and Social Security (1986) 11 ALN N193.

[6] Re Evans and Secretary, Department of Social Security (1993) AAT 8710.

[7] Maurici v Chief Commissioner of State Revenue (2002) 212 CLR 111 at 121.

5.      The Act specifies the asset value upper limit to be applied in the case of a couple for the purpose of calculating the rate of age pension.  The asset value upper limit is adjusted by a factor annually.  In September 2005 the applicable asset value upper limit for a couple was $497,500.  Thus, if the combined assets of a couple (excluding their principal home) was greater than $497,500 in September 2005 the rate of age pension would be nil and no pension would be payable to them.

6.      As I understand it, in 2004 Centrelink initiated a review of the value of properties owned by Social Security recipients who were subject to an assets test.  Mr and Mrs Bryce were included in that review.  At that time they were in receipt of age pension payments.  Qualification for age pension is not in issue in these proceedings.  Mr Camilleri, a certified practising valuer employed by the Australian Valuation Office, gave evidence that the Ranger Rd property was valued at $350,000 in 2000 by the Australian Valuation Office.  That valuation was not reviewed until September 2004.  Mr and Mrs Bryce were given the opportunity to provide information to Centrelink about the value of the Ranger Rd property prior to September 2004.  They chose not to do so.  Subsequently an updated valuation of the property of $573,000[8] was obtained from the Australian Valuation Office computer system.[9]  As I understand it, that valuation was based on regional information and did not address the particular characteristics of the property in question.  A further valuation was obtained from the Australian Valuation Office in the amount of $610,000.[10]  This valuation was apparently based on an inspection from the roadside as well as some comparative market data.  A further valuation was obtained from the Australian valuation office in the amount of $640,000.[11]  This valuation involved the detailed inspection of the property and a greater number of comparative sales.  It was conducted by Mr Kevin Camilleri and Mr Alex Cable, a trainee valuer also employed by the Australian Valuation Office.  As can be seen each of the valuations for the Ranger Rd property is substantially greater than the age pension combined asset value upper limit that was applicable in September 2005. 

[8] T6 folio 21.

[9] T5 folio 17.

[10] T13 of A2006/122, and T10 of A2006/168

[11] T23 of A2006/122, and T12 of A2006/168

7.      Were the valuations incorrect to the extent that the actual value of the property was less than $497,500 in September 2005?  I am satisfied that they were not.

8.      Mr Camilleri is a certified practising valuer with more than one year experience as a senior valuer in the employment of the Australian Valuation Office.  I accept that he is a qualified valuer.  Mr Camilleri and Mr Cable inspected 17 Ranger Rd in the company of Mr Bryce.  Careful examination of Mr Camilleri's valuation report[12] indicates that Mr Camilleri took into account deficiencies in the property that were drawn to his attention by Mr Bryce.  Mr Camilleri reported that the property consisted of 645 square metres of land, an unimproved two-bedroom brick timber and tile dwelling with many original features in fair to poor condition, and a brick and iron lock-up garage.

[12] T23 of A2006/122 and T12 of A2006/168

9.      Mr Bryce gave evidence that there may have been asbestos in the roof tile material (recently replaced) and that there may be termite damage to elements of the woodwork.  I accept Mr Bryce's evidence that the roof was in very poor condition and that there was water damage to the ornate plaster ceilings, especially in the kitchen.  I also accept his evidence that there was termite damage to the floorboards in the living room.  However there is no evidence that that there was asbestos in the roof tile material or that there was an active infestation of termites in 2004.  Nonetheless Mr Camilleri, understandably, reported that he would revise his valuation if evidence of these matters came to hand.  His oral evidence was that if such evidence came to hand the valuation may be reduced.  He was not able to estimate the amount of any such reduction.  However he offered the opinion that any resultant variance would be substantially less than $100,000.

10.     Mr Bryce gave evidence that he and his son had replaced the roof recently.  He estimated the total actual cost of that activity was in the vicinity of $7,500.  On that basis, and accepting that a professional roof replacement would cost more than Mr Bryce expended, I am prepared to accept Mr Camilleri's opinion in relation to the potential reduction of his valuation.

11.     Were the comparative sales that Mr Camilleri used truly comparable to the property at 17 Ranger Rd as it stood in September 2004?  I accept that they were.  Mr Camilleri gave evidence that he selected properties on the basis of the location of the property in Croydon, the type of dwelling, the nature of improvements and the date of sale.  These base selection criteria are not controversial.  It is true that only five properties were used for the purposes of comparison.  That is not a great number.  However I am satisfied that it is a sufficient number to reasonably represent sales of similar properties in the Croydon locality over a six-month preceding period without bias.  I accept that there are substantial variances and diversities in the values of real property in the Sydney area, and that the value of a property in one locality may not reasonably be reflected or represented by the value of a property sold in a different locality.  Furthermore it is well understood that the value of a particular property may be affected by a plethora of factors within its locale, such as its proximity to a busy shopping centre or a busy thoroughfare, as well as the passage of time in a volatile real estate market.

12.     Plainly enough Mr Camilleri's researches were limited by the sales data he obtained in relation to the Croydon locality.  I have carefully considered the properties Mr Camilleri selected as comparable to 17 Ranger Rd.  I am satisfied that the properties he selected were truly comparable to the property at 17 Ranger Rd.  Plainly enough there are differences between these properties and the subject property.  When selecting properties for the purpose of comparison it is important not to limit the selection to properties that share identical characteristics but to select properties that are sufficiently similar, on the base selection criteria, to be truly comparable.  The exercise of comparative valuation involves weighing up similarities and differences between selected properties that are of relevance to the market value.  Thus if the subject property does not have an improved kitchen but one of the comparable properties does it would be reasonable to expect that the value of the subject property would be lower in certain degree than that of the property with the improved kitchen, all other factors being equal.  Similarly if the subject property comprised a larger area of land than one of the comparable properties then it would be reasonable to expect that the value of the subject property would be in some degree greater than that of the comparable property.  These are matters of fact and degree that must be carefully weighed in the balance of comparative value.  That is what Mr Camilleri did.

13.     Mr and Mrs Bryce did not produce any evidence concerning comparable property sales.  Their cases rest on distinguishing 17 Ranger Rd, and in particular the defects and deficiencies identified by Mr Bryce, from the properties selected as comparable by Mr Camilleri.  However I am satisfied that the distinguishing features of those properties were properly and appropriately considered and taken into account by Mr Camilleri when assessing the value of 17 Ranger Rd.

14.     Mr Bryce's assertion that the value of 17 Ranger Rd could not conceivably have increased from $350,000 to $640,000 in the space of one year is not made out.  The $350,000 valuation originated in 2000.  It is common knowledge that the Sydney real estate market since 2000 has been volatile and substantial increases have been publicly reported in some areas.  I note that the rateable value of 17 Ranger Rd in 2005 was $447,500.[13]  I also note that the dwelling at 17 Ranger Rd is of principally brick construction and is inhabited in an arrangement of convenience, rent-free, by Mr Bryce's son.  It was on that basis that Mr Camilleri judged the condition of the property as fair to poor.  Plainly enough on that evidence the dwelling is habitable and not derelict.  The dwelling is apparently 80 or so years old.  Wear and tear, low levels of maintenance, the effects of passing time and the absence of significant improvements all contribute to the condition and the value of the property.  However the extent to which potential purchasers may be attracted by the unimproved character of the property and the presence of period features such as ornate ceilings and tongue and groove floorboards, albeit in original or damaged condition, are also relevant factors to consider for the purposes of valuation.

[13] T9 folio 25 of A2006/122 and T8 folio 24 of A2006/168

15.     I am satisfied that the initial re-valuation of the 17 Ranger Rd property, in the amount of $573,000 was neither reasonable nor reliable.  It was based on generalised data without reference to the specific characteristics of the subject property.  Furthermore, I am satisfied that the second re-valuation was not reliable.  It was based on a cursory inspection from the roadside that was not detailed and did not take into account the specific deficiencies identified by Mr Bryce.  I am satisfied that Mr Camilleri’s valuation in December 2005 was reasonable and reliable for the purposes of the age pension asset test.  His valuation was conducted in a detailed manner and it appropriately took into account the deficiencies of the property that Mr Bryce identified.  Thus I find that the property at 17 Ranger Rd, Croydon was appropriately and reasonably valued at $640,000 in December 2005.

16.     I note that even if I accepted Mr Bryce's assertions concerning asbestos in the roof tile material and termite damage, on Mr Camilleri's evidence his valuation may be reduced by an amount that will be substantially less than $100,000.  If his valuation was reduced by $100,000 the value of 17 Ranger Rd would then be $540,000.  That amount is substantially greater than the combined asset value limit for the age pension at the time, which was an amount of $497,500.  Thus Mr and Mrs Bryce would be precluded from receiving age pension payments as the value of their combined assets exceeded the applicable combined asset upper limit.

17.     It follows therefore that Mr and Mrs Bryce’s age pension were correctly cancelled and the decisions under review must be affirmed.

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member

Signed:       Peter Edwards
  Associate

Date of Hearing  18 September 2006
Date of Decision   21 September 2006
Applicant  Self-Represented
Advocate for the Respondent                Susan Mantaring