HAYES And REPATRIATION COMMISSION

[2006] AATA 201

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 201

ADMINISTRATIVE APPEALS TRIBUNAL          № V2005/236

VETERANS'      APPEAL        DIVISION

Re:            MAXWELL R. HAYES

Applicant

And:         REPATRIATION COMMISSION

Respondent

DECISION

Tribunal:       Mr B.H. Pascoe, Senior Member

Date:7 March 2006

Place:Melbourne

Decision:The Tribunal affirms the decision under review.

(sgd) B.H. Pascoe

Senior Member

VETERANS' AFFAIRS – asset test – one‑sixth interest in real estate as tenant‑in‑common – value of interest – unrealisable asset – no severe financial hardship

Veterans' Entitlements Act 1986

REASONS FOR DECISION

7 March 2006  Mr B.H. Pascoe, Senior Member

1.      This is an application to review a decision of the respondent of 17 January 200, which affirmed an earlier determination of 8 September 2004 to include a value for a one‑sixth interest in a property at Merriang South for the purpose of the assets test.  The effect of this inclusion was to reduce the applicant's service pension.

2.      At the hearing, the applicant, Mr Maxwell R. Hayes, was unrepresented.  The respondent was represented by Mr R. Douglass, an advocate with the Department of Veterans' Affairs.  Evidence was given by Mr Hayes.

3.      There is no dispute as to the underlying facts of this case.  The relevant property consists of 2.865 hectares some 6 kilometres south west of the Victorian country town of Myrtleford and had been part of a tobacco farm.  On the property are four dwellings, consisting of the original timber residence, a newer brick residence and two wooden/fibro cottages plus several large sheds.  The timber residence is occupied by the younger daughter of Mr Hayes with her three children.  The brick residence and one cottage are rented out on fixed tenancies and the other cottage is rented on a daily basis by visitors.  The location of the property limits available rents and relevant outgoings exceed the rented income.

4.      The property was purchased originally by the late wife of Mr Hayes.  Initial ownership was one‑third by Mrs Hayes, one‑third by the elder daughter and her husband and one‑third by the younger daughter as tenants‑in‑common.  In 1999, Mr Hayes purchased a one‑sixth share as tenant‑in‑common for $28,000 from his elder daughter's husband who needed capital for a new business in Tasmania.  It is the value of this one‑sixth interest which is the matter in dispute.

5.      In the original determination the share of Mr Hayes in the property was included at a value of $28,000, based on a valuation in 1999.  Subsequently, the property was valued by the Australian Valuation Office (AVO) in July 2004 and April 2005 at a total of $225,000, producing a value of $37,500 for the one‑sixth interest.  In August 2005, the Council valuation for rating purposes was $261,000.  In an opinion on value provided by a local real estate agent in April 2004, it was stated:

The property is unique due to the amount and size of buildings on a small parcel of land and is hard to place a value on as to my knowledge nothing like this has been sold recently.  I feel it would be very limited in the amount of prospective purchasers that may be interested making it difficult to sell.

Having taken into consideration all the relevant details, it is my opinion that the above property, if offered for sale in today's Real Estate market would be well under its replacement value and expect it to achieve in the range of $250,000 to $270,000.

6.      Mr Hayes accepted the AVO valuation of $225,000 as being a reasonable valuation of the property.  However, he argued that the value of his one‑sixth interest for the purposes of the asset test should be nil.  He maintained that his interest is worth nothing to him as he is unable to sell the one‑sixth interest and the possibility of sale of the property as whole is remote.  In the meantime, he is required to contribute to the net outgoings related to the property.

7.      Mr Hayes did not seek to demonstrate financial hardship if the asset is included in its valuation.  Severe financial hardship is a pre‑requisite for an asset of a person to be disregarded if it is an unrealisable asset pursuant to s 52Z of the Veterans Entitlements Act 1986 (the Act).  For the purposes of that section, an asset is an unrealisable asset if the person cannot sell or realise the asset or use if as security for borrowing or could not reasonably be expected to sell, realise or borrow against the asset.  If Mr Hayes had sought to and was able to demonstrate severe financial hardship, it may well be that the circumstances in relation to his one‑sixth interest in the land could support the view that it is an unrealisable asset and should be disregarded.  However, this is not the case.  Consequently, the sole issue is whether the circumstances justify a value of the asset at some amount less than $37,500.

8.      Mr Hayes said that he took steps in mid‑2004 to dispose of his share in the real estate.  He wrote to two local real estate agents seeking advice as to the likely prospects for a sale of the one‑sixth interest, but did not obtain any response.  On 22 September 2004, he placed a block advertisement in the Myrtleford Times.  No price was specified and no response was obtained.  This advertisement invited offers for a one‑sixth share of a 2.8ha family owned property.  It has to be said that it is quite unsurprising that there was no interest in purchasing such an interest with other family members, including one residing on the property, owning the remaining five‑sixths.  I am unable to accept that this was a serious attempt by Mr Hayes to dispose of his asset.

9.      Mr Hayes had done extensive research in preparing his submission.  However, many of the decided cases referred to related to the question of whether or not an asset was unrealisable.  None of these decisions was concerned with the question of the valuation of the asset, but whether the asset could be excluded as unrealisable once the person had passed the threshold question of suffering severe financial hardship.  Where an asset is unrealisable, provisions such as s 52Z do not apply to regard the asset as having no value, but simply exclude the value from the asset test where inclusion would cause the person to suffer severe financial hardship.

10.     Mr Hayes clearly has an asset comprising a one‑sixth interest as tenant‑in‑common in the relevant land.  That asset clearly has a value.  It is not to the point that Mr Hayes and his co‑owning daughters have no present intention of selling the land and that Mr Hayes cannot readily sell his one‑sixth interest.  It is assumed, although not demonstrated by evidence that neither of his daughters is in a position financially to purchase it from him.  Section 52 of the Act makes it clear that, where an asset is owned in common with other persons, the value is the person's interest in that asset.

11.     While it might be said that the share of the value of the land as a whole could be discounted for the ongoing share of costs into the future until the land can be realised, such costs are difficult to assess into the future.  On the other hand, the value of the land as a whole may well appreciate in coming years.  Here the value of the land acceptable to both Mr Hayes and the respondent is that assessed by the AVO at $225,000.  This value is lower than that assessed by the Council and by the local real estate agent.  In my view, it is appropriate and in accordance with the Act for the value of Mr Hayes' one‑sixth interest in the property at Merriang South to be included in his assets at one‑sixth of $225,000 or $37,500.

12.     It follows from the foregoing that the decision under review should be affirmed.

I certify that the twelve [12] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr B.H. Pascoe, Senior Member

(sgd)       Catherine Thomas

Clerk

Date of Hearing:  30 January 2006

Date of Decision:  7 March 2006
Advocate for the applicant:          Self‑represented

Advocate for the respondent:       Mr R. Douglass

Solicitor for the respondent:        Advocacy Section, Department of Veterans’ Affairs