Chris Lourandos and and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2013] AATA 182

[2013] AATA 182  

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2012/3974
Re	Chris Lourandos
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

File Number	2012/3976
Re	Pania Lourandos
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

DECISION

Tribunal	Mr S. Webb, Member
Date	28 March 2013
Place	Canberra

The decision under review is affirmed.

........................[sgd].......................................
Mr S. Webb, Member

SOCIAL SECURITY – Age Pension – members of a couple – rate of pension – investment property – valuation – encumbrance – assets test – rates of pension affected by value of asset less encumbrance – no error in calculations – no discretion to waive assets test – decisions affirmed

Social Security Act 1991(Cth) ss 4, 11, 55, 1064, 1121

REASONS FOR DECISION

Mr S. Webb, Member

28 March 2013

1. Chris and Pania Lourandos are paid the Age Pension. They reside in their own home and they jointly own an investment property. Over time, the value of the investment property has increased significantly. Following re-valuation in 2012, Centrelink determined that the rates of Age Pension payable to Mr and Mrs Lourandos should be reduced to reflect the increased value of their investment property. Mr and Mrs Lourandos were not happy with this. The matter has been reconsidered and reviewed by the Social Security Appeals Tribunal on 31 July 2012. Mr and Mrs Lourandos are not satisfied with the outcome and have applied for review of that decision.

2. I have heard the parties and acceded to their request for the matter to be heard on the papers.

3. The key facts are not in dispute and may be shortly stated. Mr and Mrs Lourandos are married and living together in their own home. They were granted Age Pension in 1998. They jointly own an investment property at McLachlan Crescent, Weetangera in the Australian Capital Territory. The value of this property increased from $230,109 in September 1998 to $450,109 in July 2007. It appears that, on 8 September 2011, the Australian Valuation Office provided an “automatic roadside valuation of $700,000”[1]. Even though this valuation is not in evidence, it appears that Centrelink acted upon it and determined to reduce the rate of Mr and Mrs Lourandos’ Age Pension as the value of their investment property exceeded the applicable ‘assets value limit’ under the Social Security Act 1991 (Cth). Mr and Mrs Lourandos requested review by an Authorised Review Officer. A further valuation was requested with a full property inspection.

   [1] T10 folio 72.

4. The evidence establishes that on 15 November 2011, Mr Jack Quaid of the Australian Valuation Office provided the Department of Human Services with a valuation report prepared by Mr Ian Robertson, in which the Lourandos’ McLachlan Crescent investment property was valued at $750,000 plus $109 for contents. Mr Robertson’s report is dated 8 September 2011[2]. Thus it appears that on 8 September 2011 the Australian Valuation Office valued the property at $700,000 (although there is no direct evidence before me to support this) and $750,000. No explanation has been provided by the Australian Valuation Office, Mr Quaid or Mr Robertson for this curious state of affairs. Close examination of Mr Robertson’s valuation report reveals that even though the “Inspection Date” and the “Valuation Date” are recorded as “8 September 2011”, the “Request Date” is recorded as “12 October 2011”[3]. If the valuation request was made on or about 12 October 2011, it is difficult to understand why the property inspection and valuation would pre-date the request by several weeks. Without evidence from Mr Quaid or from Mr Robertson, I can go no further on this point other than to point out the unsatisfactory nature of this aspect of the valuation evidence. Nonetheless, I understand that Mr and Mrs Lourandos do not dispute the valuation amount, and I will proceed on that basis.

   [2] Exhibit 1 – Attachment A to Secretary’s Statement of Facts & Contentions, 13 March 2013.

   [3] Ibid. Valuation Report, page 1.

5. The Authorised Review Officer decided that from 8 September 2011 to 22 November 2011 the value of the investment property was $700,000 and from 23 November 2011 it was $750,000[4]. The SSAT appears to have found this to be correct[5] and affirmed the decision.

   [4] T7 folio 43.

   [5] T2 folios 10-11.

6. From 1998, the investment property has been encumbered under a mortgage. It appears that Centrelink determined that the outstanding mortgage balance on 8 September 2011 was $124,579[6]. On the present materials I am unable to determine whether this is correct. It appears that on 13 October 2011 the mortgage balance was $139,249.83[7] and it was $137,455 on 23 November 2011[8]. Mr Lourandos informed me that the outstanding balance on 5 March 2013 was $142,466.24[9]. I understand that there is no dispute about the amount of the mortgage at relevant times.

   [6] T10 folio 69; T21 folio 86.

   [7] T5 folio 32.

   [8] T10 folio 70 and T21 folio 86.

   [9] Letter of Mr Lourandos dated 5 March 2013.

7. I note that Mr Lourandos cares for his wife and he is paid Carer Payment.

   Issues

8. Mr and Mrs Lourandos do not dispute the correctness of the rate calculations, although they consider the result to be grossly unfair to them. The sole issue for determination concerns the operation of s 1064 of the Social Security Act and the applicability of the assets test under s 1064-G2 of that Act.

   Consideration

9. Mr Lourandos says that he worked hard as a public servant of the Commonwealth for over 28 years. He says that he does not receive any superannuation and that he and his wife have a small income, primarily in the form of Age Pension payments. He asserts that the reduction in Age Pension payments has been a cause of stress –

   […] making our life very difficult and unable to cope with paying our bills and food etc. Whilst home prices in the ACT have risen over the years in a ridiculous manner we are unable to survive, we cannot eat bricks and assets. We still owe a large debt on this property that was valued, and with a reduction in our pension cannot cope with all the bills.[10]

   [10] T1 folio 4.

10. Mr Lourandos argues that it is unfair that politicians and public servants are paid pensions without being subject to the assets test that penalises pensioners who have worked hard and paid taxes all their lives, such as him and his wife.

11. The matter is to be decided by application of the Social Security Act. In Mr and Mrs Lourandos’ circumstances, under s 55 of this Act, the rate of Age Pension is to be determined by application of the Pension Rate Calculator A, set out in s 1064. Under that section and having regard to ss 4 and 11, the extent to which the assets of a person and the person’s partner (other than their principal home or excluded assets under s 1118) exceeds their ‘assets value limit’ (their ‘assets excess’) is to be taken into account when applying the rate calculation Module G, set out in s 1064-G2. If the asset is encumbered, s 1121 provides that the amount of the encumbrance is to be deducted from the value of the asset.

12. It is quite clear that the net value of Mr and Mrs Lourandos’ investment property, once the mortgage balance is deducted, exceeds the assets value limit by a substantial amount. As of 8 September 2011, on the basis of a valuation of $700,000 plus $109 for contents, the assessable value is $575,530. When the 13 October 2011 mortgage balance of $139,249.83 is applied, the assessable value is $560,859.17. The assessable value on 23 November 2011 is $612,654, based on the $750,000 valuation (plus $109 for contents) and the mortgage balance of $137,455.

13. The applicable ‘assets value limit’ on 1 July 2011 is $400,000 for a home-owning couple. This increased on 1 July 2012 to $412,500.

14. As can be seen, the net value of Mr and Mrs Lourandos’ investment property exceeds the applicable assets value limit from 8 September 2011.

15. It follows that the ‘assets excess’ amount must be taken into account when calculating the rate of their respective pensions under s 1064. This has the effect of reducing the rates of their Age Pension payments by application of s 1064-G4.

16. As there is no dispute about the accuracy of the specific calculations of Mr and Mrs Lourandos’ Age Pension amounts, I have not examined these in any detail. Nevertheless, it appears to me that the valuations and mortgage balances on 8 September 2011, 16 October 2011 and 23 November 2011 were applied correctly.

17. For this reason the decision under review must be affirmed.

18. Before concluding, however, it is appropriate to observe that this Tribunal does not exercise unfettered power – it does not set policy and it must apply the law as it stands. The primary complaint brought by Mr Lourandos is directed to policy. It may be accepted that the Age Pension assets test policy in respect of investments may cause pensioners such as Mr and Mrs Lourandos some difficulty juggling cash flows from time to time, or difficulty paying bills from time to time while retaining their investment property. But the legislation does not confer discretion on the Tribunal to excuse operation of the assets test in such circumstances – the assets test applies to all Age Pensioners with investments. Mr and Mrs Lourandos’ Age Pensions are calculated in the same way as the Age Pension of any other person claiming such a pension under the Social Security Act.

19. The complaint that it is unfair to render the Age Pension subject to an assets test when politicians and public servants can obtain pensions without such a test being applied may readily be understood, but it is like comparing chalk and cheese. The Age Pension is a social welfare provision that is payable under the Social Security Act, subject to the various limits and criteria determined by the legislature from time to time in the regulation of the social security scheme. This cannot properly be compared to superannuation pensions that may be calculated and paid under different enactments or schemes.

20. As to the complaint that the increase in property values should not result in any reduction to pensions, this is a matter of policy. I simply observe that the usual purpose of making an investment in property is to obtain a positive return, whether this is realised on the sale of the property or it is accrued in the balance of the assets and liabilities of the investor from time to time. It is a matter for Government, not this Tribunal, to determine the appropriate assets value limits that are to apply under the social security scheme from time to time.

    Conclusion

21. In sum, Mr and Mrs Lourandos are not being treated differently or unfairly with respect to others in similar circumstances. Their Age Pension payments are to be calculated under the Social Security Act, taking into account the value of their assessable assets. I have found no error in the calculations based on the agreed asset values and encumbrances. It follows that there is no basis to set aside the decision under review.

22. The decision under review is affirmed.

I certify that the preceding 22 (twenty-two) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member

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

Associate

Dated 28 March 2013

Date of hearing on the papers	25 March 2013
Applicants	Self-represented
Advocate for the Respondent	Biljana Salaji
Solicitors for the Respondent	Department of Human Services, Program Litigation and Review Branch