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

[2007] AATA 1313

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1313

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No T2006/186

GENERAL ADMINISTRATIVE  DIVISION		)
Re		BRIAN DOUGLAS HANNAH

Applicant

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

Respondent

DECISION

Tribunal Associate Professor B W Davis AM (Part-Time Member)

Date8 May 2007  

PlaceHobart

Decision The decision under review is affirmed.

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

Part-Time Member

CATCHWORDS

Social Security - benefits - age pension - asset test - Ringwood property - principal residence? - rented out - applicant residing in Italy - cancellation of pension - Social Security Appeals Tribunal (SSAT) - decision affirmed

Social Security Act 1991 and Amendments ('the Act'), Sections 11, 55, 1064 and 1118. 1237A

Social Security (Administration) Act 1999

Social Security (International Agreements) Act 1999

Agreement on Social Security between the Governments of Australia and Italy

Miezitis and Secretary DFCS [2005] AATA 1063 (24 October 2005)

Re Secretary DSS and Langton (1993) 31 ALD 579

Attard and Secretary DFCS [2000] AATA 120 (22 November 2000)  

REASONS FOR DECISION

8 May 2007 Associate Professor B W Davis AM (Part-Time Member)   

Decision Under Review:

1.      The decision under review is a decision made by a delegate of Centrelink on 20 July 2006, subsequently affirmed by the Social Security Appeals Tribunal (SSAT) on 24 November 2006, to cancel payment of Mr Brian Hannah’s age pension, due to the value of his assets.

Issues:

2.      (a)       what is the value of his assets?;  and  (b)           given the value of the applicant’s assets, is he entitled to receive age         pension?

Standard of Proof:

3.      The standard of proof is on the balance of probabilities and to the reasonable satisfaction of the Tribunal.

Decision on the Papers:

4.      The applicant confirmed on 12 February 2007 that he sought a decision on the papers.

Background:

5.      The applicant, Brian Douglas Hannah, seeks reinstatement of his age pension which was cancelled on 20 July 2006.  Mr Hannah initially applied for age pension on 2 May 2003, stating that he was temporarily residing in Italy, having left Australia in September 2000 and was expecting to return in 2003.  He also indicated he owned a property at Ringwood North, but it was rented out and he received monthly income from it.  The applicant was granted Australian age pension from 19 March 2003.

6.      On 18 July 2006 the property was valued by the Australian Valuation Office (AVO) as worth $350,000 and on 25 July 2006 a Centrelink Complex Assessment Officer decided that as the property had been rented out from 14 August 2000, it could no longer be regarded as Mr Hannah’s principal residence and must be treated as an asset in assessing eligibility for welfare payments, such as age pension.

7.      As a result of the increased value of his assets, Mr Hannah’s age pension was cancelled from 25 July 2006.

8.      On 23 August 2006 the original decision-maker decided the applicant had been overpaid $23,797.02 in benefits, due to retrospective cancellation of age pension which he had been receiving since March 2003, but waived the debt under Section 1237A of the Social Security Act 1981, as the applicant had received his pension payments in good faith.

9.      The applicant requested a review of the situation and on 5 September 2006 the decision to cancel his pension was determined to be correct and he was sent a letter to that effect.  This decision was affirmed by an Authorised Review Officer (ARO) on 18 September 2006 and further affirmed by the SSAT on 24 November 2006.  A second valuation of the property by the AVO in August 2006 confirmed its valuation at that time as $315,000.

10.     In reaching its conclusion the SSAT accepted that the property at 9 Montanus Court, Ringwood North, was Mr Hannah’s principal residence until rented out in August 2000 and that the applicant had not resided at the property since, although he had indicated he might return to the house at some future date.  The term ‘principal house’ is not defined in the Act, however its meaning and interpretation are clarified in Subsections 11(5), (6), (7) and (8) of the Act and especially in 11(7)(a) which provides that a residence should not be regarded as a principal house if the owner is absent for periods exceeding 12 months.  The SSAT accordingly affirmed the decision under review, ie that Mr Hannah was not entitled to age pension from the time the review commenced.

11.     Mr Hannah did not accept this decision and applied on 29 November 2006 for review by the Administrative Appeals Tribunal (AAT).  In subsequent correspondence he indicated that the issue as he saw it was:

“... is a pensioner disqualified from the age pension if he cannot occupy his house from unavoidable reason of having to make a living elsewhere, and the house is rented out, not for speculation or profit, but to offset the rent the pensioner must pay for alternate accommodation near the pensioner’s workplace?”.

12.     The respondent’s contention is different:  although Mr Hannah claimed he would return to Australia in 2003, the reality is that he has lived in Italy since September 2000, with only brief visits to Australia each year, during which time his property at Ringwood North has been continually rented out and cannot be regarded as his principal home, but must be treated as an asset earning him income.

Analysis:

13.     The Tribunal is required to conduct a de-novo review, examining all available evidence, as well as statutory and policy provisions and any relevant prior case determinations.

14.     Mr Hannah’s application for age pension was based on provisions of the Social Security (Administration) Act 1999, which require the applicant to be an Australian citizen, but permit an individual residing in Italy to apply for Australian social security benefits via the International Agreement between Italy and Australia (Schedule 2 of the Social Security (International Agreements) Act 1999).

15.     Mr Hannah is to be treated as an Australian citizen under Australian law, thus the relevant Australian legislation is the Social Security Act 1991 and Amendments, especially Sections 11, 55, 1064 and 1118, also provisions of the Social Security (Administration) Act 1999.

16. Section 11(1) of the Act defines assets as follows: “asset” means property or money (including property or money outside Australia);  however a persons ‘principal home’ is outside this definition (Section 1118(1) of the Act).

17. The term ‘principal home’ is clarified and determined by Sections 11(5) to (7) of the Act:

“Section 11(5)(a) specifies that a principal home is a dwelling house, the private land adjacent to the dwelling house to the extent that the private land, together with the area on the ground floor of the dwelling-house, does not exceed 2 hectares”.

18. Sections 11(5) to (8) outline scenarios in which a property can continue to be regarded as a person’s principal home even though they may be absent from it. This includes situations arising from illness or going into care but not exceeding 12 months without further review. Clearly, sustained periods of absence overseas do not meet this criterion, as the judgement in Attard and DFCS [2000] AATA 1020 (22 November 2000) demonstrates:

“... In analysing the intent of subsection 11(7)(a), the Tribunal concludes that when the period exceeds 12 months of temporary absence, the residence of a person, which was previously the principal home of the person, does not continue to be the principal home.  Further it would appear to the Tribunal that the particular circumstance nominated (exceeding 12 months) is both definitive and exhaustive, as it is for all the circumstances defined in subsection 11(7) of the Act.  A contrary interpretation would in the Tribunal’s view create a nonsense, and defeat the intention of subsection 11(7) of the Act to create clearly defined circumstances in which continuance of principal residence exemption status can be maintained despite the absence of residence.  Such a contrary interpretation could in the Tribunal’s view create a situation in which it would be argued that a person’s principal home remains the principal home for this Act no matter how long the person remains non resident in the home, and this could in itself lead to situations which would be obviously inconsistent with the purposes and objectives of the Act”.

19.     Records from the Department of Immigration show the applicant entered and departed from Australia on various occasions between August 1999 and 2006, but continues to reside in Italy:

Arrived	Departed
10 August 1999
24 July 2000	2 September 2000
9 August 2001	23 August 2001
21 July 2002	30 July 2002
24 July 2003	5 August 2003
28 July 2004	10 August 2004
22 July 2005	2 August 2005
26 July 2006	8 August 2006

20.     The applicant’s taxation returns demonstrate that the property at 9 Montanus Court has been rented out 52 weeks per year since 14 August 2000.  The Secretary DFCS contends this is clear evidence the applicant has not resided at the property since 2000.  Mr Hannah has not challenged this assessment, but views the rental income as necessary to meet his accommodation costs in Italy, where he continues to reside.  In the view of the Tribunal this is a somewhat false analogy, if Mr Hannah resided somewhere in Australia, having rented his house out for several years, it would not be regarded as his principal home within the meaning of the Act, but rather as an investment asset yielding income to the owner (Section 11(1) of the Act). 

21.     Having considered all available evidence, including other case authorities, the Tribunal is of the view on the balance of probabilities Mr Hannah’s house at 9 Montanus Court, Ringwood North, should not be treated as his principal home for social security benefit calculation, but as an asset yielding income.  This means that Centrelink’s decision of 20 July 2006 is now partially affirmed, but it is necessary to determine whether the overall value of his assets exceed the permissible limit in his case and cancellation of age pension from 24 November 2006 was justified.

22.     Mr Hannah’s property has been valued a number of times during the relevant period, but always within the range $300,000 to $350,000.  He also possesses other assets including a vehicle, bank accounts and superannuation investments, a Family Trust and loan to Directors and owns a registered company called Icor Pty Ltd.  The Tribunal is not in a position to accurately calculate the total value involved, but taking into consideration the house and all other items, Centrelink’s valuation of assets of $487,134 does not appear unreasonable given that standardised calculation and periodic review by the Commonwealth is involved.  The question is whether the scale of assets is so large as to render Mr Hannah ineligible to receive age pension and validate its cancellation from 20 July 2006.

23. In calculating age pension Section 55 of the Act has two provisions:

(a) if the person is not permanently blind – using Pension Rate Calculator A at the end of Section 1064; or

(b)      if the person is permanently blind – using the Pension Rate Calculator       B at the end of Section 1065.

Mr Hannah fits category (a).

24. Section 1064 of the Act is somewhat complex, since it involves the application of a series of steps and conditions, while Pension Rate Calculator A involves a series of modules:

Module A – overall calculation process  

Module B – maximum basic rate ( a daily rate)

Module BA – pension supplement

Module C – pharmaceutical allowance

Module E – ordinary income test

Module G – assets test

Module H – remote area allowance

There are 12 steps overall.

25. The respondent contends that in relation to Step 1 and 1A of Section 1064-A1 of the Act, the applicant’s maximum basic rate of pension, in accordance with Modules B and BA would be $12,429 per annum. The applicant is not entitled to pharmaceutical benefits as he resides outside Australia, similarly he is not entitled to rent assistance, hence the maximum age pension he could receive in a year would be $12,529, but that sum is subject to a number of further tests, including assets.

26.     If the value of the applicant’s assets are of the order of $487,134, an assets value limit of $270,000 would apply (Section 1064-G3), giving an asset excess of $216,500 (Sections 1064-G5 and 1064-G7).  Hence the reduction of pension due to assets would be $16,887, well in excess of the pension limit of $12,529.  The asset reduced rate of pension would be minus $4,358, ie no age pension would be payable.

27.     Even if the asset total was well below the respondent’s claimed figure of $487,134, it is clear that the pension rate would be zero.  The Tribunal therefore considers that on the balance of probabilities Centrelink is correct in asserting Mr Hannah does not qualify for age pension.  This situation might, of course, be amended if Mr Hannah decided to return to Australia or rearrange his assets, but that is his personal choice and not a matter for the Tribunal.

Decision:

28.     For the reasons previously stated, the decision under review is affirmed.

I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor B W Davis AM (Part-time Member)

Signed:  R Hunt (Administrative Assistant)

Date/s of Hearing  Hearing on the papers
Date of Decision  8 May 2007