Galanis and Secretary, Department of Family and Community Services

[2004] AATA 1388

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1388

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2004/1080

GENERAL ADMINISTRATIVE  DIVISION

Re:         TRIANTAFYLLOS GALANIS AND

DESPINA GALANIS

Applicant

And:       SECRETARY,
  DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       Regina Perton, Member

Date:             23 December 2004

Place:            Melbourne

Decision:The Tribunal affirms the decision under review.

(sgd) Regina Perton

Member

SOCIAL SECURITY – age pension – assets test – reduced rate of payment - property valuation disputed – rejection of claim – decision affirmed

Social Security Act 1991 ss 11, 55, 1064

Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474

REASONS FOR DECISION

23 December 2004  Regina Perton, Member

1.      This is an application by Triantafyllos Galanis and Despina Galanis (the applicants) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 26 August 2004.  The SSAT affirmed a decision of a delegate of the Secretary to the Department of Family and Community Services (the respondent) dated 28 April 2004 to revalue a rental property owned by the applicants at a higher value, thereby lowering the rate of age pension (AP) payable to the applicants. 

2.      At the hearing on 15 December 2004, Mr Galanis represented himself and his wife.  Ms K Navarro, a Centrelink advocate, represented the respondent.  An interpreter in the Greek language facilitated communication.

3. The Tribunal received into evidence the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T1‑T29).  

BACKGROUND

4.      Mr Galanis, who was born on 27 July 1931, has been receiving AP since he turned 65 in 1996.  Mrs Galanis, who was born on 16 November 1941, was granted AP when she became eligible on 16 May 2004. 

5.      On 16 April 2004, at Centrelink’s request, Mr and Mrs Galanis provided details of their income and assets, including an investment property in Wheelers Hill, the value of which they initially estimated at $165,000 in an Income and Assets Review Transfer to Age Pension Form lodged on 16 April 2004.  Centrelink wrote to Mrs Galanis on 19 April 2004 asking for the municipal council’s most recent valuation of the investment property.   Mrs Galanis provided a Rate & Valuation Notice for 2003/2004 issued by the Monash City Council which gave a Capital Improved Value to the property of $230,000.   In her claim form for AP, lodged on 28 April 2004, Mrs Galanis initially provided a value of $165,000 for the investment property but amended its value to $230,000. 

6.      On 22 April 2004, Centrelink sought a valuation of the investment property by the Australian Valuation Office (AVO).  On 28 April 2004, the AVO valued the property at $285,000.  The valuation was based on sales of comparable properties.  On 5 May 2004, the applicants advised Centrelink that they disputed the AVO’s valuation.   

7.      Prior to a revaluation taking place, Mrs Galanis was granted AP from 16 May 2004 at a rate calculated on the basis of her husband’s and her combined assets which valued the investment property at $285,000.  Centrelink also reduced Mr Galanis’s rate of AP as from 14 May 2004 on the basis that the value of his and his wife’s assets had increased. 

8.      On 22 June 2004, the AVO provided a valuation report to Centrelink prepared by a certified practising valuer who had inspected the property on 2 June 2004.  The AVO maintained that the estimated market value of the property was $285,000.  On 23 June 2004, Centrelink informed the applicants of the fresh valuation.

9.      On 19 July 2004, the applicants sought review of the respondent’s decision to value the investment property at $285,000 and the consequent decrease in their pension payments.   On 29 July 2004, an authorised review officer of the respondent affirmed the decision that the property’s value was $285,000.

10.     On 3 August 2004, the applicants sought review by the SSAT.  On 26 August 2004, the SSAT affirmed the decision under review.  The applicants filed an application for review of the SSAT decision with this Tribunal on 21 September 2004.

11.     The issue before the Tribunal is whether the applicants’ property was given an appropriate market value. 

EVIDENCE

12.     Mr Galanis told the Tribunal that the investment property’s value was less than the AVO’s estimate.  He pointed out that property market has gone down during the current year.  He questioned whether the AVO had chosen appropriate properties to compare with his.  He said that the property, which had been bought in 1989, was originally in the suburb of Mulgrave; but the local council had renamed the area in which it was located to Wheeler’s Hill, a more upmarket area, that resulted in a higher value being placed upon it.  He said that he had not arranged for an estimate of market value or valuation by local agents because of the cost and because they had told him that they would use the same comparable properties as the AVO.  He said that the investment property needs modernising but he cannot afford to do so. 

13.     Mr Galanis told the Tribunal of the financial difficulties he had faced when the clothing firm he had been employed by for 30 years was declared bankrupt and his superannuation contributions and payout were lost.  He said that he had suffered a breakdown, the effects of which still affect him.  He described the difficulty he and his wife had in living on their present income.   He also stated that it was unfair that the market value of the property was the basis for the respondent’s assessment of his assets.  He pointed out he and his wife would not receive $285,000 if the property was sold, as capital gains tax, estate agent’s commission, solicitor’s fees and the like would reduce the amount they would receive. 

14.     Under cross-examination Mr Galanis stated that he and his wife receive approximately $180 per week in rental for the property, less expenses. 

CONSIDERATION OF THE ISSUES

15. Sections 55 and 1064 of the Social Security Act 1991 (the Act) set out the way in which the rate of AP is calculated. Module G of s 1064 specifically relates to the impact of a person’s assets on their rate of AP. Persons whose assets are over a certain threshold may still receive AP, but the rate is progressively reduced as the value of the assets increases, until a cut-off point which the applicants have not reached.

16.     Subsection 11(1) of the Act defines asset as follows:

"asset" means property or money (including property or money outside Australia);

17.     Subsections 11(4) – 11(10) of the Act provide that a property owned by an AP recipient does not constitute part of the assets test if the recipient lives in that property or is living away from the property in certain prescribed circumstances. The  applicants purchased the property for investment purposes and therefore the property forms part of the applicants’ assets test. 

18.     There is no statutory provision in the Act setting out the method to be used for valuing property.  Ms Navarro cited past cases in which the Tribunal adopted the net market value approach based on comparable sales and the “best use” to which the assets could be put including Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474. Mr Galanis did not suggest that a different approach be adopted beyond asserting that the properties cited as comparable by the AVO were not necessarily appropriate. He did not offer any alternatives. 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.

19.     The AVO valuation, undertaken by a certified practising valuer dated 22 June 2004, was that the estimated market value of the property at the time that Mrs Galanis was granted AP and Mr Galanis’s rate of payment of AP was reduced, was $285,000.   The AVO report provides details about the nature and condition of the property, a market analysis and comparable sales.  The applicants did not provide any alternative valuation.   Mr Galanis asserted that the net value of the asset to him and his wife should be assessed taking into account capital gains tax and other expenses payable on the sale of the property.  However, there is no legislative provision allowing the Tribunal to take such deductions into account in assessing the value of the property.

20.     The Tribunal finds that the value of the investment property at the time of grant of AP to Mrs Galanis and the reduction of Mr Galanis’s rate of AP was $285,000.

DECISION

21.     The Tribunal affirms the decision under review.

I certify that the twenty-one [21] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

(sgd)       Catherine Lake

Clerk

Date of hearing:  15 December 2004

Date of decision:  23 December 2004
Applicant:  Self-represented
Advocate for respondent:            Ms K Navarro, Centrelink