Finley and Secretary, Department of Family and Community Services
[2005] AATA 18
•11 January 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 18
ADMINISTRATIVE APPEALS TRIBUNAL )
)N2004/713
GENERAL ADMINISTRATIVE DIVISION ) Re CLARE FINLEY Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Robin Hunt, Senior Member Date11 January 2005
PlaceSydney
Decision The Tribunal affirms the decision of the Social Security Appeals Tribunal that:
· the value of the Applicant’s real estate must be taken into account for the purpose of the age pension asset test thereby reducing her age pension; and
· the Applicant’s real estate is not an unrealisable asset entitling her to consideration under the hardship rules.
[sgd]Robin Hunt
Senior Member
CATCHWORDS
SOCIAL SECURITY – Age pension – Assets test for homeowners – Valuation of assets –Real estate holding subject to caveat – Caveat does not reduce value of asset – Simply a protective device – Real estate not an unrealisable asset – Hardship provision does not apply - Rejection of claim to increase amount of age pension
Legislation
Social Security Act 1991 ss 11(1),(12),(13), 44(1), 55, 1064, 1121(1), 1129, 1130
Case Law
Spencer v Commonwealth of Australia (1907) 5 CLR 418
Keremelevski and Secretary, to Department of Social Security (AAT 11247, 17 September 1996)
REASONS FOR DECISION
11 January 2005 Robin Hunt, Senior Member summary
1. Mrs Finley, the Applicant, claimed that she was entitled to the age pension and that Centrelink had wrongly rejected her claim for payment. Mrs Finley in fact currently receives a very small pension payment affected by valuation of her assets. The Social Security Appeals Tribunal (SSAT) affirmed the decision of Centrelink that Mrs Finley’s real estate holdings reduced her entitlement to the age pension as her assets exceeded the value limit on 25 November 2003. Mrs Finley owns her own home as well as another property in Iluka. Mrs Finley said she and her husband inherited the second property from her mother after she passed in away in 1996 and it was an unrealisable asset because of a caveat placed by her sister and other factors related to selling it in the current market. Mrs Finley disagreed with the valuation of her real estate holdings, arguing that the value of the second property was reduced by the caveat. On the evidence before me, the Tribunal has found that the value of the property must be taken into account in estimating Mrs Finley’s right to the age pension, that the Secretary correctly considered Mrs Finley’s assets, including the real estate valued at $300,000, and that Mrs Finley is not entitled to special consideration on the basis that she has an unrealisable asset. This means that her application has not been successful.
issue
2. The first issue before the Tribunal was whether the value of all the assets of Mrs Finley, for the purposes of calculation of her entitlement to the age pension, reduced her entitlement. Mrs Finley said she received no pension and the Secretary said that Mrs Finely currently receives a fortnightly pension of $5.80. Centrelink calculated that the value of all her assets, not taking into account the house where she resided, amounted to $301,200. This valuation included the second property in Charles Street, Iluka, valued by the Australian Valuations Office (AVO) at $300,000, and household and personal effects valued at $1,200. Mrs Finley claimed that the Charles Street property should not disentitle her to the full pension rate as it was encumbered by a caveat.
3. The Tribunal considered whether the second property was an asset belonging to Mrs Finley, whether its value should be taken into account, whether the value attributed to the second property was appropriate and whether the caveat over the second property on which the house was situated was an encumbrance or charge which reduced its value or prevented sale, making the property an unrealisable asset. The Tribunal also considered whether the financial hardship rules should apply to Mrs Finley.
evidence and submissions
4. Mrs Finley was unrepresented before the Tribunal and gave sworn oral evidence by telephone supported by telephone evidence of witnesses. Mrs Finley told the Tribunal that she had only a few dollars per week on which to survive and that she was experiencing severe hardship. She said that she had always worked hard for the community and did not deserve to suffer deprivation of the pension. Witnesses who gave evidence on her behalf confirmed that she lived in difficult circumstances and could not understand why she did not receive more assistance from Centrelink.
5. Mrs Finley further gave evidence that she had been left the property in Charles Street under her mother’s will. Mrs Finley claimed that her sister had placed a caveat on the property as she was claiming a half share in their mother’s estate. Mrs Finley told the Tribunal that she had not placed the property on the market as she thought it might be difficult to sell. She wrote in her hardship claim dated 12 December 2003, that she was waiting for the best time to sell. She also acknowledged in the hardship claim that her sister “owns half the house as per caveat”. She did not mention any other encumbrance on the property. After the hearing, Mrs Finley wrote to the Tribunal on 31 December 2004 that it was her intention to give her sister half of the value of the property upon sale.
6. The Secretary produced to the Tribunal documents that show Mrs Finley and her husband were the registered joint owners of the Charles Street property in 1992 and that it was then unencumbered. A title search undertaken in 1993 shows that Mrs Finley and her husband continued as the registered joint owners of the Charles Street property but by then it was subject to various encumbrances. According to the reasons for decision of the SSAT which are before the Tribunal, only the caveat placed by Mrs Finley’s sister remains.
7. The Secretary produced to the Tribunal other documents that show the Charles Street property was valued in 2003 in the vicinity of $320,000. The Australian Valuation Office (AVO) placed this value on the property on 18 December 2003 according to the decision of the review officer who decided that Mrs Finley’s pension should be reduced on 5 February 2004. Further, a local real estate agent estimated in writing on 20 November 2003 that “an achievable market price” for the property “could be somewhere in the area of $320,000”. The Secretary actually used the lower estimate of value of $300,000 in calculating Mrs Finley’s entitlement. Mrs Finley provided the Tribunal with no other estimate of value but expressed an unwillingness to sell in the present climate.
legislation
8. Section 55 of the Social Security Act 1991 (the Act) sets out how to calculate an entitlement to the age pension. Paragraph (a) refers to the Pension Rate Calculator A (the Calculator) attached to section 1064 of the Act. The Calculator contains a statement explaining the rates including maximum payment rate. The value of assets affects the maximum payment rate under section 1064-G1. Section 11(1) of the Act defines the term “asset” to mean property or money. The value of Mrs Finley’s interest in the property in Charles Street, therefore, must be taken into account as an asset to determine any pension entitlement.
9. Section 1118 of the Act contains provisions that reduce or increase the amount of an asset. Subsection (1) takes in the value of real estate including investment property. Subsections (1)(a) and (b) exclude a person’s “principal home” from the asset test. Subsection 1121(1) provides that the value of an asset is reduced by deduction of any mortgage debt. Subsection 1118(3) adds the value of personal effects and household property to the deemed value of $10,000 unless the person demonstrates his or her assets are worth less.
findings and reasons
10. The Respondent has not included the value of the property in which Mrs Finley resides in the calculation of her assets. Mrs Finley has also not disputed the value of $1,200 placed on her personal effects and household goods. Mrs Finley has taken issue only with the value of the property in Charles Street in her assets. She claims that the house may be difficult to sell because of the caveat placed on the land and that, therefore, her entitlement to the pension continues.
11. Before the Tribunal is evidence that the Charles Street property is actually worth $320,000, that is, more than the value used by Centrelink in calculating Mrs Finley’s pension entitlement. Mrs Finley has not produced any other evidence as to the value of the property. Mrs Finley also did not dispute that she is now sole owner of the property since her husband passed away in 2001 although there is no documentary evidence before the Tribunal that either Mr Finley or Mrs Finley’s mother have passed away.
12. I am satisfied that the Secretary has properly included in Mrs Finley’s assets the value of the property in Charles Street. As the property has not been put on the market, no better estimate of value can be reached. As Mrs Finley has not submitted any report by an expert or valuer to compare with the Secretary’s valuation, the Tribunal must rely on the evidence of value before it. In these circumstances, the High Court held in Spencer v Commonwealth of Australia (1907) 5 CLR 418 that the appropriate value is the price which might be paid by a desirous buyer to a willing but not anxious seller. In the Tribunal matter of Keremelevski and Secretary, to Department of Social Security (AAT 11247, 17 September 1996), Senior Member Lewis and Member Way held on the facts of that matter that at all material times the valuations of property provided by the AVO are to be used in calculating the rate of pension payable. As Mrs Finley has not submitted any report by another expert or valuer to compare with the AVO’s valuation and consistent with the approach of previous Tribunal decisions, I rely on the property valuations provided by the AVO.
13. I am therefore satisfied, on balance, that the valuation before the Tribunal reflects an accurate value of Mrs Finley’s real estate asset. The Secretary has further reduced the value used to calculate Mrs Finley’s entitlement. The result by the Tribunal’s calculation is:
Calculation of effect of assets on maximum payment rate as per section 1064-GI:
$301,200 Asset value
$149,500 Asset value limit at 25/11/03
$151,700 Assets excess
Calculation as per section 1064-G4:
151,700 x 19.50 = 11,832.6 Annual reduction for assets
250
Maximum age pension for a single person at 25/11/03 is $11,772.8 annually.
Mrs Finley’s reduction for assets therefore exceeds the maximum pension payable.
14. Mrs Finley has not disputed the method of calculating the effect of the asset values on the payment rate under the Act. Accordingly, I am satisfied, on balance, that the Respondent is correct in reducing her entitlement.
15. I have further considered whether the caveat on the property prevents its sale or reduces its value. Mrs Finley has given evidence that her sister placed the caveat as she is seeking half the value of the property. Title records show her sister lodged the caveat on 22 March 1996.
16. The SSAT went into some detail about this aspect of the case in its reasons and I agree with its conclusions. A caveat is simply a device to protect an interest claimed. Mrs Finley has not demonstrated to the Tribunal that she has contested the caveat and sought its removal. There is a readily available process available to land owners to request the Registrar General to remove a caveat from a property title and Mrs Finley has provided no evidence that she has followed this process. This suggests that she accepts that her sister has a legitimate claim to a share in the property. In addition, Mrs Finley has conceded that she intends to give her sister half the proceeds. However, until Mrs Finley takes formal steps to place the property on the market to test its value or enters into an enforceable agreement with the sister giving her a half share, there is no basis on which the Secretary or the Tribunal can treat Mrs Finley’s interest in the Charles Street property as any less than the value to her of $300,000.
17. As the caveat on the Charles Street property is not an encumbrance which prevents the sale of the property and does not of itself create a right to any payment to the caveator, it is not a charge or encumbrance the value of which can be deducted from the value of the property. This means that the whole of the value of the property must be attributed to Mrs Finley. As it is entirely within Mrs Finley’s power to deal with the property and to either request the Registrar General to remove the caveat or to come to a formal arrangement with her sister, I do not find that Mrs Finley is the owner of an unrealisable asset as contemplated under section 1129(1)(c). The financial hardship she is suffering at the moment is the result of her lack of action about the Charles Street property. It is entirely attributable to her failure to attempt to dispose of the property or to reach some other resolution of the problem it poses in respect to her assets test for the pension. As this problem rests in her own hands, it is not appropriate for the Tribunal to take note of any financial hardship which has resulted to Mrs Finley.
18. For these reasons, the Tribunal will affirm the decisions of the SSAT under review.
I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Robin Hunt, Senior Member.
Signed: .....................................................................................
Associate: Reuben MansourDate of hearing 2 December 2004
Date of decision 11 January 2005Advocate for the Respondent Mr G Richardson
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