Kamel and Secretary, Department of Social Services (Social services second review)
[2023] AATA 1284
•21 April 2023
Kamel and Secretary, Department of Social Services (Social services second review) [2023] AATA 1284 (21 April 2023)
Division:GENERAL DIVISION
File Number: 2023/0057
Re:Adel Kamel
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:21 April 2023
Date of written reasons: 22 May 2023
Place:Sydney
The decision of the AAT1, made on 3 January 2023 affirming the decision of an Authorised Review Officer of the Respondent on 16 November 2022 which determined the Applicant's rate of Disability Support Pension from 21 September 2022, is affirmed.
..............[SGD]..........................................................
Emeritus Professor P A Fairall, Senior Member
CATCHWORDS
Disability Support Pension – income and assets test – whether investment property valued correctly – where the valuer appropriately qualified – where financial contributions made to Applicant by family members – whether financial contributions were unsecured received from family members as loans – decision affirmed
LEGISLATION
Social Security Act 1991 (Cth) s 1121
CASES
Keshan and Repatriation Commission (Veterans' entitlements) [2021] AATA 398
Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369
Tsiokantas and Secretary, Department of Social Services (Social services second review) [2018] AATA 398
SECONDARY MATERIALS
Guide to Social Security Law (the Guide)
WRITTEN REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
22 May 2023
The decision under review is the decision of the Administrative Appeals Tribunal (Social Services and Child Support Division) (AAT1), made on 3 January 2023. The AAT1 affirmed the decision of an Authorised Review Officer (ARO) within Services Australia (the Respondent) dated 16 November 2022 which determined the Applicant's rate of Disability Support Pension from 21 September 2022.
Mr Kamel (the Applicant) owns a residential property where he lives with his father, his wife, and their three children. He has received a disability support pension (DSP) since 2001.[1] DSP is subject to an income and assets test. It is therefore necessary to calculate his net assets from time to time. He is treated as a homeowner for social security purposes.[2]
[1] T23, 233.
[2] T23, 235–237.
He and his wife own an investment property, which they purchased in 2014 for about $480,000. It is subject to a registered mortgage to Bankwest, which shows a balance of $2,516.62.[3] The investment property was valued in October 2022 at $740,000 by JLL, an independent market valuer engaged by Centrelink at Mr Kamel’s request.
[3] T7, 75.
On 16 November 2022, Centrelink assessed Mr Kamel’s total combined assessable assets at $768,817.00. DSP was calculated from 21 September 2022 on this figure, which represented the combined value of the investment property, joint bank accounts, personal and other assets, and cash in hand.[4]
[4] Joint bank account (10,113), personal and other assets (21,000), and cash in hand (220), and the investment property (740,000 minus 2,516 equals 737,484). Total equals $768, 817.00 ignoring all cents.
After a thorough analysis of the law and facts, the Tribunal member conducting the AAT1 review was satisfied that the calculation made by the ARO was correct. The present task of the Tribunal is to determine the matter afresh.
THE HEARING
The Tribunal heard evidence from Mr Kamel, his wife and two of their children, aged 24 and 18 respectively.
Mr Kamel stated that the deposit for the investment property was funded by contributions from his father, children, and wife. His initial mortgage was in the vicinity of $340,000 which has since been almost cleared. He gave evidence that he had received money from his sons and father, and this had been used to pay down the mortgage.
Mr Kamel provided bank statements which showed transfers from members of his family to his bank account during the life of the mortgage.
In oral evidence, Mr Kamel’s wife said that in 2014 she had a bank account and that money from this account had been used towards the deposit.
She said the account included money from various sources, and that some of it belonged to the children, being the proceeds of gifts, pocket money and so on. Some of the money belonged to her. She ran the account because the children were underage. She was not able to provide any documentary evidence in the form of bank records to show that any transfer was made from this account for the purchase of the investment property.
Mr Kamel relies upon statutory declarations made by his father and each of his three sons. Mr Kamel said that the money had been used to reduce the mortgage and should be regarded as loans. He also said that his equity in the property is much lower when regard is had to contributions made by other family members.
He questions the valuation of his combined assets. Specifically, he says that the investment property valuation done by JLL is too high.
He also disputes the other amounts included in the calculation.
Finally, he expressed concern with the advice he says he received from the Financial Information Service (FIS) at Centrelink, regarding the various dealings between him and family members. He wanted to know what redress was available for incorrect advice. At the hearing, it was made clear that this was not a matter within the scope of this review.
TRANSFERS FROM FAMILY MEMBERS
Section 1121 of the Social Security Act 1991 (Cth) is headed “Effect of charge or encumbrance on value of assets”. It provides:
(1) If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.
This provision provides the statutory basis for subtracting the mortgage balance from the market value of an investment property. Centrelink therefore used the amount of $740,000 (the market valuation) from which it subtracted the current mortgage balance of $2,516, to arrive at the sum of $737,484.
There is no analogous statutory provision relating to unsecured loans advanced to a property owner for the purpose of acquiring or maintaining an asset. However, the Social Security Guide (the Guide) contains a beneficial policy relating to unsecured loans. Paragraph 4.6.6.30 of Guide states:
If a recipient has an unsecured loan and provides evidence that the loan was specifically obtained to purchase the asset, the outstanding amount of the loan is deducted from the value of the asset.
Importantly, amounts provided by way of loan for the maintenance of a property, as opposed to its acquisition, are not recognised as deductible amounts under the policy.
Mr Kamel claims that members of his family provided loans to him for the acquisition of the investment property and to pay down the mortgage. He says that these sums should be subtracted from the market value. His assertion cannot be accepted, for the following reasons.
None of the advances made by family members can be described as loans. There is no certainty of terms, whether as to terms of repayment, calculation or waiver of interest, loan term, or default provisions. None of the indicia of a contract are present.
Mr Kamel emphasised that this was all done by verbal agreement, in keeping with his customs and culture. With respect, I accept the conclusion reached by AAT1 that there was no intention to create legal relations. Whatever arrangements were in place, they were not legally enforceable loan agreements. The family arrangement was simply verbal and not at any time reduced to writing. An informal contract can arise verbally, but in such cases the evidence required as to certainty of terms and obligations is considerably higher than was available in these proceedings.
Specifically, there is no contemporaneous record to show bank transfers from family members to Mr Kamel and his wife at the time the property was acquired.
Moreover, even if the transfers made after the acquisition of the property are treated as unsecured loans, there is no lawful basis for deducting these amounts from the market valuation. In my view, given the lack of contemporary evidence regarding the nature of the transfers, this is simply not a suitable vehicle for questioning the policy contained in the Social Security Guide.
As for defining this arrangement, each of the “donors” (to use a neutral word) expected some advantage. Mr Kamel’s father benefited by providing for his grandchildren, in that they would each have a share of the investment property. Each of the children expected to receive a share of the property and were promised their money back any time they asked for it. No doubt this was possible by using the redraw facility on the loan. And obviously, Mr Kamel and his wife benefited by acquiring the investment property and having a significantly smaller loan balance, with a commensurate saving in interest payments.
All of this arose by way of an informal understanding between family members. Whatever the precise details of the various transfers, they do not give rise to loan agreements.
As to whether these arrangements give rise to trusts for the benefit of the children and Mr Kamel’s father is a quite separate matter. I understand that Mr Kamel is concerned that repayment of any of these advances will be seen as gifts. That is not a matter for this Tribunal to determine. It would not be appropriate to express any view on the matter.
VALUATION OF INVESTMENT PROPERTY
Mr Kamel did not agree with the JLL valuation and stated that he considered a value of $700,000 as realistic. He said that there were some structural issues with the underpinnings of the investment property, although he did not provide any evidence in support of this claim, and there is no reference to any such issue in the valuer’s report.
The report compared the investment property with five comparable properties in the same region which sold between June and October 2022. Sale prices ranged between $726,000 and $865,000. The lowest priced comparator was close to the Western motorway and described as “inferior overall”. The $740,000 valuation for the investment property was the second lowest in the group.[5]
[5] ST1, 328.
In Keshan and Repatriation Commission (Veterans' entitlements) [2021] AATA 398 at [16]-[23], I described the relevant law as follows:
The Act is silent as to the method to be used in the valuation of assets, and the value thereof is taken to be the net market value of those assets at a particular point in time.
The net market value is the value that a willing (but not desperate) buyer would need to pay, assuming the owner is desirous of selling, but does not need to do so. The hypothetical buyer is assumed to be aware of any imperfections affecting the value of the property.
The hypothetical buyer is taken to be:
perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
The views of a properly qualified independent valuer carry considerable weight and may even be conclusive: Evans and Secretary, Department of Social Security [1993] AATA 497, at [8].
Where the Tribunal has conflicting valuations from certified valuers, the Tribunal is entitled to make whatever adjustments are required by the evidence, but it should avoid the error of defaulting into the role of a third valuer: Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369. In that case, Debelle J noted at [81]:
I am especially conscious of the fact that, although the duty of the court is to determine whether it is proper to set aside the assessment and then determine what the annual value is, the judge must never allow himself to be cast in the role of a third valuer... But the court is not bound to accept either valuation and may make such adjustments as are required by the evidence... The court's duty of determining this appeal is appropriately discharged by deciding which of the two valuations is to be preferred and making whatever adjustments are required by the evidence. [emphasis added]
In considering an expert valuation report, the relevant questions are:
- Is the valuer appropriately qualified?
- Is the valuer experienced in the sort of valuation under consideration?
- Was the valuer’s state of mind independent of the purpose for which the value was sought?
- Was the valuation carried out in accordance with accepted practices of the profession?
The Tribunal must form its own conclusions based on the evidence presented, and is not bound by an expert valuation.
The above principles are summarised by Deputy President Sosso in Tsiokantas and Secretary, Department of Social Services (Social services second review) [2018] AATA 398, at para [35]-[46]. (Citations omitted)
An independent valuation of the investment property was carried out by Ms Kim, valuer at JLL. According to her report:
The purpose of the valuation is to ascertain the market value of the above mentioned property for Statutory Assessment purposes as at 25 October 2022.
This valuation report has been prepared in accordance with the Australian Property Institute Practice Standards and Social Security Act 1991 currently in force at the time of valuation.
Reliance on this valuation report is permitted only:
a. by a party expressly identified by the report as being permitted to rely on it;
b. when the given party has received the report directly from JLL; and
c. for a purpose expressly identified by the report as being a permitted use of the report.
…
Market value is defined as the best price at which the property being valued might be expected to be sold at the date of valuation assuming that it is:
‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’ (Australian and New Zealand Valuation and Property Standards).[6]
[6] ST1, 320-332.
The valuation was a standard market valuation and carried out in accordance with accepted standards by a professional and independent valuer. Mr Kamel does not dispute the professional credentials of the valuer. He simply does not agree with her analysis.
Mr Kamel provided an example of a property listed for sale in the same neighbourhood for $699,000, which he said was of a similar quality. According to publicly accessible information, I note that this property sold on 29 March 2023, three weeks before the hearing, for $765,000. There is no independent evidence that this was a comparable property. It sold more than 6 months after the relevant date. I attach little, if any, weight to this comparator, other than to say it does not assist Mr Kamel to demonstrate that the independent JLL valuation of $740,000 should be doubted.
There is nothing to suggest that the valuer was not entirely independent. On the face of it, the comparison properties are comparable with the investment property. I am satisfied that the figure of $740,000 represents a reasonable assessment of market value on 25 October 2022.
There is simply no evidence before the Tribunal on which it might find that the market estimate provided by JLL should be discounted.
OTHER ASSETS
As to the other assets, Mr Kamel disputed that the amount standing in the joint account was his but provided no evidence to support his claim.
As to the valuation of cars and caravans, he provided no evidence that would enable the Tribunal to depart from the findings made by AAT1.
CONCLUSION
The decision of the AAT1, made on 3 January 2023 affirming the decision of an Authorised Review Officer of the Respondent on 16 November 2022 which determined the Applicant's rate of Disability Support Pension from 21 September 2022, is affirmed.
I certify that the preceding 37 (thirty-seven) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member
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Associate
Dated: 22 May 2023
Date(s) of hearing: 21 April 2023 Applicant: In person Solicitors for the Respondent: Mr M Gauci, Hunt & Hunt Lawyers
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