McPherson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 657

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 657

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/0224

GENERAL ADMINISTRATIVE DIVISION		)
Re		AILEEN McPHERSON

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Senior Member L Hastwell

Date30 July 2008

PlaceAdelaide

Decision The Tribunal affirms the decision under review.

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

L HASTWELL
  (Senior Member)

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances – assets test – extended land use exemption – principal home requirement considered – decision affirmed

Social Security Act 1991 ss 11A, 1118

Re Samek and Secretary, Department of Social Security (1988) 16 ALD 295

REASONS FOR DECISION

30 July 2008   Senior Member L Hastwell   

1.      This is an application by Aileen McPherson (the applicant) to review a decision of the Social Security Appeals Tribunal (the SSAT) dated 8 January 2008.  That decision affirmed an earlier decision by the respondent (the Department) to assess the applicant’s farm property, apart from the farm dwelling itself and a curtilage of two hectares (five acres), as an assessable asset for Social Security purposes.

2. The applicant attended the hearing by telephone link and Ms Giaretto represented the Department. The documents filed under s 37 of the Administrative Appeals Tribunal Act 1975 were received into evidence as Exhibit R1.

background facts

3.      The applicant is aged 63 years.  She was not of Age Pension age at the date that this matter was before the SSAT and she was a recipient of Carer Payment.  She was of Age Pension age by the time the matter came before this Tribunal.

4.      She continues to receive Carer Payment and her husband is now a recipient of an Age Pension.

5.      The applicant and her husband purchased a 640 acre farm situated near Tailem Bend in 1988 (the farm).  They purchased the farm from the applicant’s father who continued to reside on the farm with that remaining his principal home until he died.  The applicant and her husband continued to live in Adelaide until they moved to live on the farm in May 1997 after the death of the applicant’s mother. 

6.      After acquiring the farm, the applicant paid some of the expenses associated with the property even though her father remained the primary occupant.

7.      The applicant and her husband owned a property at Semaphore in Adelaide where they resided from 1978 to May 1997.  The applicant’s husband was working in Adelaide until his retirement in 1995 and the applicant was significantly involved in the care of her mother who lived only a couple of streets away from her.

8.      The applicant regularly spent time with her father on the farm, particularly in the last 10 years of his life when she would visit on weekends and assist him as he became more elderly and incapable of caring for himself.

9.      The applicant uses the farm property as a hobby farm as it is not viable beyond that and it is an agreed fact that there is no potential commercial use for the farm property.

10.     The applicant has a significant emotional attachment to the farm as it has been in her family since the 1920s and she seeks a determination that the property (apart from the farmhouse itself and a 5 acre curtilage) should be exempted as an asset for all Social Security purposes. 

11.     The applicant is concerned that the price of real estate may escalate and she may find herself in a situation where, if the farm is not exempted as an asset, her pension and that of her husband will be affected by the value of the property. 

12.     When she and her husband sold their property at Semaphore after moving to the farm, it was sold for considerably less than they had hoped to receive.  She is fearful that just as real estate prices have escalated in Adelaide, they may also escalate in the rural area in which she and her husband now reside. 

13.     The applicant acknowledges that she has not lived continuously at the farm for 20 years and that her current application is based on her concern about the future rather than on any impact that her ownership of the farm is having at present. 

14.     The current market value of the farm is assessed at $215,000, while the house and curtilage are assessed at $185,000 for Social Security purposes (T11/60).  This means that the farm property currently has an assessable value of $30,000 as an asset for Social Security purposes, and of this amount $15,000, ie 50 percent, is attributable to the applicant.

15.     At this stage, the applicant receives a full pension and owns assets significantly below the level at which assets would begin to affect her entitlement to Social Security.

relevant legislation

16.     The relevant legislation is contained in the Social Security Act 1991 (the Act). 

17. Section 1118(1) of the Act provides as follows:

“1118  Certain assets to be disregarded in calculating the value of a person’s assets

(1)In calculating the value of a person’s assets for the purposes of this Act (other than sections 198F to 198MA (inclusive), Division 1B of Part 3.10, Division 2 and sections 1133 and 1135A), disregard the following:

(a)if the person is not a member of a couple—the value of any right or interest of the person in the person’s principal home that is a right or interest that gives the person reasonable security of tenure in the home;

(b)if the person is a member of a couple—the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home;

…”

18. The definition of “principal home” is set out in s 11A(1) of the Act in the following terms:

“11A    Principal home definition for the purpose of the assets test

Principal home

(1)A reference in this Act to the principal home of a person includes a reference to:

(a)if the principal home is a dwelling‑house—the land adjacent to the dwelling‑house to the extent that:

(i)the land is held under the same title document as the land on which the dwelling‑house is located; and

(ii)the private land use test in subsection (3) is satisfied in relation to the land or, if the person is one to whom the extended land use test applies in relation to the land, the extended land use test in subsection (6) is satisfied in relation to the land; or

…”

19.     The private land use test is met if the area of the land adjacent to the dwelling house (minus the curtilage) is not more than two hectares (five acres) and is used primarily for private or domestic purposes (s 11A(3) of the Act).

20. The extended land use test was introduced in 2007 to assist some pensioners and Carer Payment recipients who were living on farms and residential blocks of more than two hectares who are excluded or receive a reduced pension because of the assessable asset value of land adjacent to their homes The extended land test is set out in ss 11A(4) and (5) of the Act in the following terms:

“(4)The extended land use test applies to a person in relation to land adjacent to the dwelling‑house if:

(a)      the person has reached pension age; and

(b)the person is qualified for an age pension or carer payment and that pension or payment is payable to the person; and

(c)the dwelling‑house has been the person’s principal home for 20 years or more continuously.

(5)Where a person (the first person) to whom the extended land use test applies in relation to land adjacent to the dwelling‑house in which the person lives is a member of a couple:

(a)the extended land use test applies to the first person’s partner (the second person); and

(b)the extended land use test continues to apply to the second person if the first person and the second person cease to be members of a couple for any reason, provided the dwelling‑house continues to be the second person’s principal home.”

issues

21.     The issue to be determined in this case is whether the extended land test can apply to the applicant such that the entire farm asset can become an exempt asset for Social Security purposes and be treated as her principal home.

22. It was agreed at the hearing that the applicant meets the criteria required to satisfy the extended land test in s 11A(4)(a) and (b) of the Act in that she has reached pension age and has qualified for an Age Pension or Carer Payment. The contentious issue is whether she can satisfy s 11A(4)(c) of the Act, namely whether the dwelling house on the land has been her principal home for 20 years or more continuously.

consideration and application of the law

23.     The Department submits that the applicant cannot satisfy the requirements of having had the dwelling house as her principal home for 20 years or more continuously.  She can only satisfy that requirement since 1997 and therefore she is still nine years short of having lived continuously on the farm such that she could satisfy that test.  The Department submits that the farm land adjacent to her dwelling house – over and above the two hectare curtilage – is an assessable asset for Social Security purposes.

24.     The applicant asked the Tribunal to take into account her emotional attachment to the land and the fact that she regularly spent time on the property at times on a weekly basis for at least 10 years prior to moving to the property. 

25.     The Tribunal considered the case of Re Samek and Secretary, Department of Social Security (1988) 16 ALD 295 where there is a discussion of the concept of principal home.

26.     The Department contended that the concept of principal home is there to specifically delineate between residences of a person where a person has more than one residence.  It is a concept that has significant consequences in various areas of the law.   For instance, a person’s principal home is exempt from capital gains tax whereas a property that is not their principal home and is acquired after a certain date, does not attract such as exemption.

27.     The home base of a person is their principal home.  The fact that the applicant’s husband was working in Adelaide until 1995 and that until 1997 the applicant’s mother was alive and required attention meant that the parties had their principal base in Adelaide until at least 1997.  Their major residence was where they were based throughout the week.  The farm was a secondary residence, which only became a principal residence when she and her husband sold the property in Adelaide and packed up their belongings and moved to the farm in 1997.

28.     The Tribunal appreciates that the applicant has an emotional link to the farm and has had that for many years, but that is not sufficient to turn that property into her principal home prior to 1997.  During part of the period that falls within the 20 year requirement being 1988 to 1997, the applicant had a house in Adelaide and owned a rural property.  She acknowledged that she spent the bulk of her time in the Adelaide house and that was her address for all purposes, save that she visited her father on weekends and did work on her rural property.  Her furniture and personal possessions were based in Adelaide.  Her main home was in Adelaide.  She may have spent as much as two fifths of her time at the farm, but that did not convert that property to being her principal home.

29.     There is a parallel between her situation and that of people who own a holiday house and enjoy spending weekends there.  The fact that they regularly spend time at that holiday house does not convert it to their principal home.

30. In the circumstances, the Tribunal is satisfied that the applicant cannot satisfy the requirement of s 11A(4)(c) of the Act. As the requirements of s 11A are cumulative and the applicant must satisfy all criteria set out therein to gain the extended land exemption, her case must necessarily fail.

31.     In the circumstances, the Tribunal affirms the decision under review.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member L Hastwell

Signed:         ...........J Coulthard............................................
  Associate

Date of Hearing  30 June 2008
Date of Decision  30 July 2008
Advocate for the Applicant       Self-represented

Counsel for the Respondent     Ms L Giaretto

Centrelink Legal Services Branch