Melling and Secretary, Department of Social Services
[2014] AATA 52
•4 February 2014
[2014] AATA 52
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/3645 & 4656
Re
Norman and Valerie Melling
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr S. Webb, Member
Date 4 February 2014 Place Tenterfield, NSW The decision under review is affirmed.
......................[sgd]..................................................
Mr S. Webb, Member
SOCIAL SECURITY – Age Pension – cancellation of pension – assets test – principal home exemption – meaning of ‘principal home’ – policy of assessing principal home on the basis of time when claimants have more than one home – use of a home for business purposes – indicia of the principal home of members of a couple who are both homeowners – decision affirmed
Social Security Act 1991, ss 11, 11A, 44, 55, 1064A, 1118
Hafza v Director-General of Social Security [1985] FCA 164
Re MacNamara and Secretary, Department of Employment, Education and Workplace Relations [2012] AATA 40
Re WT92/12 and Commissioner of Taxation [1993] AATA 177Guide to Social Security Law
REASONS FOR DECISION
Mr S. Webb, Member
4 February 2014
Norman and Valerie Melling claimed and were paid Age Pension for a time. They own and divide their time between three properties in the Tenterfield area - a house in town and two rural properties. Age Pension was granted on the basis that one of the rural properties is their principal home. This is significant because the principal home is exempt from the assets test that applies when calculating the rate of Age Pension. Shortly afterwards, on 24 December 2012, Centrelink decided that their principal home is the house in town, thereby raising the value of their assessable assets over the upper limit for payment of Age Pension.
Unhappy with this decision, Mr and Mrs Melling pursued their rights of review, thus far without success. The decision was affirmed by the Social Security Appeals Tribunal, and it is the subject of their present applications.
The issue for determination is the amount of Age Pension that is payable to Mr and Mrs Melling as of 24 December 2012, if any. Making that determination requires an assessment of the value of their combined assets at that time, excluding their principal home. Determining which of Mr and Mrs Melling’s properties is their principal home is the central issue.
The contextual facts are not in dispute.
On 26 September 2012 Mr and Mrs Melling lodged a claim for Age Pension[1], which was granted on 18 October 2012.
[1] T8 and T9.
At this time, Mr and Mrs Melling, individually or jointly, owned or had a right or interest in the following real property assets[2] –
(a)‘Cloverlea’ – the marital and family home, purchased in 1966 by Mr Melling, and held in his name, alone. The property consists of two titles divided by a creek, both with road frontage. There are four paddocks, totalling 9.14 hectares. Improvements include a farm house and a large shed. The property is on town water and it is connected to the electricity grid. It has a septic sewage system.
(b)‘George Street’ – a house on a single town block that Mrs Melling inherited from her father in 2009. The house is encumbered as a mortgage security over the ‘River Oaks’ property[3].
(c)‘River Oaks’ – a 48.59 hectare property, which is partly cleared. It consists of one large grazing paddock and a three to four acre paddock planted with proteas and other flowering plants. Improvements include a two storey house and a large shed. The shed is partly lined to provide a bedroom, a kitchen, and a bathroom, laundry and toilet. The property was purchased by Mr and Mrs Melling in 2010. The property is encumbered by a mortgage.
(d)‘Spence’ – a house in Canberra that Mrs Melling inherited from her late sister. Mrs Melling paid out the mortgage and owns the property without encumbrance. The property is tenanted.
(e)‘Bundaroo’ – a farming property bequeathed in equal shares to Mr Melling and his sister by their late father, Ronald Melling. Following his death in 2009, on or about 29 September 2011, ownership of the property was transferred to the Executor of his estate, Norman Melling, for the purposes of sale. The property has a total area of 73 hectares in 10 titles. Improvements include a three bedroom house.
[2] See Mrs Melling’s property descriptions in T47, folios 291-294.
[3] T17 folio 167.
The reported value of Mr and Mrs Melling’s combined assessable assets at that time was $911,994[4], excluding ‘Cloverlea’ which was taken to be their principal home. It appears that their assessable asset values were reported to be $1,024,560[5] on 9 November 2012 and $1,014,460 on 21 November 2012[6]. The rate of their Pension was reduced on 5 December 2012, as the value of their assessable combined assets reportedly increased to $1,024,460[7], due to an increase in the valuation of ‘George Street’. How each of these assessments was calculated is not clear.
[4] T18 and T19.
[5] T21
[6] T25 and T26.
[7] T29 and T30.
On 24 December 2012, Centrelink decided that Mr and Mrs Melling’s principal home was ‘George Street’[8]. This resulted in an increase in the value of their assessable combined assets to $1,294,460[9], above the upper threshold for payment of Age Pension at that time - $1,050,000. It was in consequence of this that Mr and Mrs Melling’s Age Pension was cancelled on 10 January 2013.
[8] T32 folio 236.
[9] T33 and T34
The cancellation decision was affirmed by an authorised review officer on 20 March 2013[10], even though the total value of Mr and Mrs Melling’s combined assets, excluding their principal home at ‘George Street’, was found to be $1,169,919. The decision was affirmed by the Social Security Appeals Tribunal on 24 June 2013[11].
[10] T41.
[11] T2.
The issues to be decided are –
(f)the value of Mr and Mrs Melling’s assessable assets for the purposes of calculating the rate of Age Pension that is payable under s 1064 of the Social Security Act 1991 (the Social Security Act); and for that purpose
(g)as of 24 December 2012, which of their homes is their ‘principal home’ for the purposes of s 1118 and ss 1064-G1 to G7.
Value of assets
The applicable assets value limit as of 24 December 2012 for members of a couple is $1,050,000. If the value of Mr and Mrs Melling’s assessable assets, excluding the value of their principal home, exceeds this amount, Age Pension is not payable.
There is no dispute about the ownership or value of the following combined assets of Mr and Mrs Melling at or about 24 December 2012. The value of the assets that were taken into account by Centrelink when assessing Mr and Mrs Melling’s assets are as set out by the authorised review officer at T41 folio 254 –
(h)‘Cloverlea’ – the value of this property at the relevant time is $390,000[12], with the house and curtilage valued at $270,000.
(i)‘George Street’ – the agreed value of this property at the relevant time is $230,000[13]. The property is encumbered – it is held as a mortgage security over the ‘River Oaks’ property[14]. On 2 October 2012 the balance owing on the mortgage was $297,206[15]. I note that Centrelink apportioned the mortgage between the George Street ($105,460) and River Oaks ($191,745) properties[16]. Thus, the net value of ‘George Street’ at that time is $114,540.
(j)‘River Oaks’ – the value of the property at the relevant time is $400,000[17]. The property is encumbered by a mortgage. The net value of this asset at the relevant time is $208,255.
(k)‘Spence’ – the value of the property as of 3 January 2012 is $500,000[18].
[12] T7 folio 59.
[13] T27 folio 225.
[14] T17 folio 167.
[15] T17 folio 162.
[16] T20 folio 206.
[17] T5 folio 57.
[18] T6 folio 58.
But these assets are not all of Mr and Mrs Melling’s assessable assets.
On 12 December 2012, Mrs Melling raised an issue she initially raised in the Income and Assets module of the Age Pension claim she lodged on 26 September 2012 concerning ‘Bundaroo’ and Mr Melling’s interest in his late father’s estate[19]. The value of his interest as beneficiary was not taken into account by Centrelink when determining the value of their assessable combined assets, even though Mrs Melling provided Centrelink a copy of the late Mr Melling’s draft, unsigned and undated will[20]. This was an unfortunate, and presently unexplained, error on Centrelink’s part of which Mrs Melling was understandably critical – had the asset properly been taken into account, subsequent proceedings may have been avoided. But it is not an error that can lead to the value of the unassessed assets being excused – all assessable assets must be properly taken into account.
[19] T31 folio 234 and T10 folio 109.
[20] T38.
Consequently, Mr Melling’s beneficial interest in his late father’s estate must now be taken into account in the quantification of Mr and Mrs Melling’s assessable combined assets. As only very scant reference is made to the assets of the estate in the documents, I ordered that additional relevant documents should be obtained and placed before the Tribunal. This was done and three bundles of documents were filed – Exhibit 12 (filed on 16 December 2013), Exhibit 13 (filed on 20 December 2013), Exhibit 14 (filed on 20 January 2014) and Exhibit 15 (filed on 21 January 2014). Further submissions and a valuation of the property by the Australian Valuer-General’s Office were also filed, to which Mrs Melling responded. I have had regard to all of these documents.
Under the terms of the will, Mr Melling is the Executor of the estate and the estate (excluding specifically apportioned items) is to be divided equally between Mr Melling and his sister, their mother having pre-deceased their father. The assets listed in the Inventory of Property of the estate on 25 March 2010[21] were estimated to have a total value of $723,775, as follows –
(l)‘Bundaroo’ – with an estimated value of $700,000;
(m)a water licence valued at $5,000;
(n)farm plant and equipment valued at $2,000;
(o)a bank account containing $8,227;
(p)1256 shares in Insurance Australia Group Limited, valued at $4,948;
(q)a 1985 Ford motor vehicle valued at $600 and bequeathed to Betty Brindley; and
(r)a 1981 Toyota truck valued at $3,000 and bequeathed to Norman Melling.
[21] Exhibit 12.
In a Distribution Statement dated 30 September 2011 it appears that the farm plant and the shares were sold, returning $3,510 and $3,623 respectively, and the bank account balance was $4,481. Total receipts to the estate are $12,462, against which payments totalling $12,457 are drawn, leaving a balance in trust of $5. Further receipts of $257 and payments of $254 are recorded as of 19 January 2012, leaving a balance in trust of $8. It is likely that other small amounts were expended, either preparing the property for sale or in execution of the sale.
It appears that ‘Bundaroo’, as a whole, was sold at auction on 7 December 2013 for an amount of $550,000[22] and the water licence was sold for an amount of $5,000.
[22] See Contract of Sale dated 7 December 2013 in Exhibit 14.
On 28 January 2014, the AVO reported that the value of the ‘Bundaroo’ property as of September 2012 was $500,000. Even though Mrs Melling says that there are apparent errors in the reported property data, namely the area of the property (reported as 40.49 hectares, when it is 73 hectares in total), the age of the dwelling (the dwelling is more than 70 years old) and the interior construction of the dwelling (wood, not plaster), she does not quibble with the quantum of the valuation. I will proceed on the basis that the value of ‘Bundaroo’ was $500,000 on 24 December 2012.
Under s 1118(1)(j), Mr Melling’s interest in the assets to which he was entitled under the terms of his father’s estate may only be disregarded if the interest or the asset has not been received, or is not able to be received. Mr Melling was Executor of the estate and, acting in that capacity, on or about 13 September 2011, titles to the Bundaroo property and the water licence were transferred into his name, alone, for the purposes of selling the property. When payment of Mr and Mrs Melling’s Age Pensions was suspended in December 2012, Bundaroo was listed for sale in a number of lots, but it had not yet sold. In these circumstances, it cannot be said that Mr Melling was not able to receive the assets to which he was entitled from his father’s estate. While Mr Melling could not receive his share of the value of the property in monetary terms until sale of the property had been finalised, and he could not use it as collateral security, it does not follow that his share of the asset should be excused for the purposes of s 1118 of the Act. Mr Melling had not received his share of the value of the asset in December 2012, but there was no barrier in law or under the terms of the will that precluded him from being able to receive it. Thus, for the purposes of assessing the value of Mr and Mrs Melling’s combined assets, 50 percent of the value of ‘Bundaroo’ and the water licence must be included.
This is a difficulty for Mr and Mrs Melling. When the value of Mr Melling’s 50 percent beneficial interest in the Bundaroo property ($250,000) and the associated water licence ($2,500) is taken into account, the value of their combined assets, excluding their principal home, exceeds the asset value limit for members of a couple at the time. This is so even if Cloverlea (being the home with the highest value) is excluded as their principal home (see discussion below).
The calculation is as follows. The value of Mr Melling’s interest in Bundaroo and the related water licence is $252,500. This amount is added to the value of Mr and Mrs Melling’s assessable assets as set out by the Authorised Review Officer on 20 March 2013[23] ($1,169,919),which I am satisfied is correct. The net value of the George Street property ($114,540) is added and the value of the Cloverlea property ($390,000) is excluded as their principal home. Under this calculation, the total value of their combined assessable assets is $1,146,959. This exceeds the applicable asset value limit for payability of Age Pension at the time - $1,050,000. Even if additional costs of sale were to be subtracted from the sale price of the Bundaroo as asserted by Mrs Melling (and I make no such finding), no different result would be obtained.
[23] T41 folio 254.
It follows, even on this most generous assessment, assuming Cloverlea as their principal home, Age Pension is not payable to Mr and Mrs Melling as the value of their combined assessable assets is too high. For this reason the decision to suspend payment on 24 December 2012 is correct, albeit for different reasons, and it must be affirmed.
Strictly, it is not necessary to proceed further to consider the question of which of Mr and Mrs Melling’s three properties is their principal home.
But, in order to assist the parties, as requested, I will do so.
Principal home
Initially and during the hearing, the Secretary maintained that George Street is Mr and Mrs Melling’s principal home for the purposes of s 1118 of the Social Security Act 1991 (the Social Security Act). In written submissions after the hearing, this position appears to have changed, such that the Secretary presently contends that River Oaks is their principal home. This, so the argument goes, reflects the temporal aspect of the policy set out in the Guide to Social Security Law (the Social Security Guide), a policy document issued by the Secretary.
Mr and Mrs Melling deny that River Oaks is their principal home. They do not identify this property as their home – it is a place they use for business and recreational purposes. They maintain that Cloverlea is their principal home.
The phrase ‘principal home’ is not expressly defined in the Social Security Act. Under s 1118(1), a person’s principal home is to be disregarded when applying the assets test -
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 …, disregard the following:
…
(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;
…
As can be seen, the exclusion applies in respect of ‘one residence’ that meets the description of ‘principal home’ for one or both members of a couple. Section 11A provides guidance as to inclusions and absences, but it does not explain the meaning of ‘principal home’ –
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
(b) if the principal home is a flat or home unit—a garage or storeroom that is used primarily for private or domestic purposes in association with the flat or home unit.
…
(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.
…
(6) The extended land use test is satisfied in relation to land if:
(a) the area of the land, together with the area of the ground floor of the dwelling‑house, is more than 2 hectares; and
(b) the Secretary determines that, given the circumstances of the person to whom the test is applied in relation to the land, the person is making effective use of the land.
…
(9) A residence of a person is to be taken to continue to be the person’s principal home during:
(a) any period (not exceeding 12 months or any longer period determined under subsection (9A)) during which the person is temporarily absent from the residence; and
…
While not definitive, these provisions shine some light on three important features of the conception of a ‘principal home’ for the purposes of s 1118. Firstly, wholly or partly, it must be an asset of the person, in which the person has an equitable interest. Secondly, use of the adjective ‘principal’ recognises that ‘one residence’ or home is to be treated as the main or leading home, or the home of first importance, and distinguished from other homes in which the person has an interest. Thirdly, ‘home’ is referred to as a dwelling house or a flat or a home unit, or a ‘residence’ from which the person may be temporarily absent.
I note in passing that the phrase ‘place of residence’ is defined in s 10A for the purposes of the Seniors Health Card provisions under the Act –
place of residence, in relation to a person, means:
(a) a place at which the person resides; or
(b) a place at which the person has sleeping accommodation;
whether on a permanent or temporary basis and whether or not on a shared basis.
In many cases, a person’s principal home is the home in which he or she resides and sleeps. Commonly, in the case of a couple, this is the family home. This holds even if the couple owns a second home, but used that home only on an occasional basis, perhaps as a holiday home for example. The determination becomes more complex in a case such as this, where the couple owns and uses three homes as residences to varying degrees.
The Social Security Guide adopts a temporal approach at clause 4.6.3.30 in respect of members of a couple who own more than one home –
If an income support recipient, or their partner, has more than one home:
- their principal home is the one in which they spend the greatest amount of time, UNLESS
- they spend the same amount of time in each of them, in which case the most expensive home is defined as the principal home.
[Original emphasis]
In the usual course, the Tribunal would apply this policy unless there is a good reason not to. While in many cases, the amount of time a person spends in one home rather than another may well provide a reasonable basis to determine which home is the person’s principal home for the purposes of the Act, this does not apply satisfactorily in all cases. These are matters of fact and degree that must be assessed in the particular circumstances of each case.
I am mindful of the determinative criteria adopted by the Tribunal in recent decisions, such as Re MacNamara and Secretary, Department of Employment, Education and Workplace Relations[24], with which I respectfully agree, where the Tribunal has applied criteria other than the amount of time spent, alone.
[24] [2012] AATA 40 at [28] to [34].
Continuity of association and the intentions of the person are important considerations when determining one residence as a person’s principal home. If a residence is used for business purposes, this, too, is a relevant consideration.
When considering the phrase ‘usual place of residence’ under antecedent legislation to the Social Security Act in Hafza v Director-General of Social Security[25], Wilcox J said –
[25] [1985] FCA 164.
13. …As a general concept residence includes two elements: physical presence in a particular place and the intention to treat that place as home; at least for the time being, not necessarily forever. The concept was explained in a taxation case, Koitaki Para Rubber Estates Limited v The Federal Commissioner of Taxation by Williams J.:
"The place of residence of an individual is determined, not by the situation of some
business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on
a yacht or some other abode."
14. Physical presence and intention will co-incide for most of the time. But few people are always at home. Once a person has established a home in a particular place -- even involuntarily -- a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place together with an intention to return to that place and an attitude that that place remains "home". It is important to observe firstly, that a person may simultaneously be a resident in more than one place and, secondly, that the application of the general concept of residence to any particular case must depend upon the wording, and underlying purposes, of the particular statute in relation to which the question arises. But, where the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.
[References removed]
Similar conceptions of residence arise under Part 3-1 of the Income Tax Assessment Act 1997 (the Tax Act), in respect of the exemption of a person’s ‘main residence’ from capital gains tax. In this context, the determinants of a person’s ‘main residence’ have been construed to include those applying to ‘principal residence’ under antecedent tax legislation, as discussed in Re WT92/12 and Commissioner of Taxation[26] (Case 8769) at [9] to [11] –
[26] [1993] AATA 177; 93 ATC 320.
1. The further question of whether a dwelling is a person's principal residence is essentially a matter of fact and degree (see Byrne v Rowbottom (1969) 210 Estates Gazette 823). In determining this question the decision-maker has to make a commonsense assessment taking into account a number of varying and even conflicting circumstances. The element of continuity of living arrangements is a factor in deciding where one lives (Collector of Customs v Perkins Shipping Pty Ltd (1989) 24 FCR 520 at 525). Where, however, a person resides at more than one place, the problem becomes more complex. That the factor of how one divides one's time between various residences is not the sole criterion was emphasised by Nourse J in Frost v Feltham [1981] STC 115, in relation to a cognate term in United Kingdom tax legislation, when he said (at 118):
"If someone lives in two houses the question which does he use as the principal or the more important one cannot be determined solely by reference to the way in which he divides his time between the two... In his Lives of the Lord Chancellors (1847 Vol VII), Lord Campbell tells how Lord Eldon was often prevented by the burdens of his office from visiting his estate at Encombe in Dorset for long periods at a time. Sometimes he was only able to get down there for three weeks or so in the year, for the partridge shooting in September. True it was that Lord Eldon also had a good house in Hamilton Place, but it could not really have been suggested that he did not use Encombe as his principal or more important residence. The question is essentially one of fact and degree for the Tribunal of first instance, in this case the General Commissioners."
2. As the Tribunal sees it, the term may be interpreted according to its ordinary, lexical meaning. "Principal", when used as an adjective, is relevantly defined in the Shorter Oxford Dictionary as "first in rank or importance; chief; leading" (with similar meanings given in the Macquarie Dictionary). "Residence" is defined in the Shorter Oxford Dictionary as "place where one resides; abode". In the absence of Australian authority directly in point, the Commissioner of Taxation has issued Tax Determination 51 [TD51] on 26 March 1992 setting out what he believes to be the factors to be taken into account in determining whether a dwelling is a taxpayer's sole or principal residence. That Determination reads, so far as relevant to this case:
"(1) Whether a dwelling is a taxpayer's sole or principal residence is an issue which depends on the facts in each case.
(2) Some relevant factors may include, but are not limited to:
(i) the length of time the taxpayer has lived in the dwelling;
(ii) ...
(iii)whether the taxpayer has moved his or her personal belongings into the dwelling;
(iv) the address to which the taxpayer has his or her mail delivered;
(v) ...
(vi) the connection of services such as telephone, gas electricity;
(vii) the taxpayer's intention in occupying the dwelling.
The relevance and weight to be given to each of these or other factors will depend upon the circumstances of each particular case."
3. The Tribunal accepts as relevant, though not exhaustive, the considerations listed in the Determination. It would add that, in making its decision, it also sees as relevant the consideration whether the applicant freely chose, or was obliged, to spend time at one residence or another. This necessarily includes an element of subjectivity on her part.
While the terms and purposes of the Tax Act are not the same as those applying under the Social Security Act, and caution must be exercised when considering similar conceptions under disparate legislative schemes, to my mind the determinants discussed in Case 8769 are not far removed from what is required when determining which of Mr and Mrs Melling’s three homes is their principal home for the purposes of the Social Security Act. Consistent with the construction Wilcox J adopted in Hafza’s case, these are of assistance when considering relevant and appropriate determinants of the principal residence of a person for the purposes of s 1118 of the Social Security Act.
As to the present facts, Mr and Mrs Melling own, maintain and use three homes – River Oaks, George Street and Cloverlea. Each property has a dwelling house or residence in which they keep various possessions. They are the owners and sole occupiers of each property.
In respect of time, on the present evidence, it is likely that Mr and Mrs Melling spend two or three nights over three or four days in some weeks, at River Oaks, tending to Mrs Melling’s flower production business and to Mr Melling’s grazing operations, or recreating with members of their family, or with their friends, from time to time. Their oral evidence is that they always travel to this property together and stay a couple of nights as it is more than 30 kilometres out of town. There is a substantial discrepancy in their accounts of the period over which they spend time at River Oaks. Mrs Melling’s evidence is that this occurs from February to December each year, especially during the flowering season of the proteas and other plants she grows. Mr Melling told me that he thought the flowering season spanned a couple of months, suggesting that this was probably from September to January, but he could not be sure. Mr Melling informed me that his wife would know, as she managed the flower business.
On Mrs Melling’s evidence, it is likely that she and Mr Melling spend an average of three days per week at River Oaks for up to 10 months of each year.
When they are not at River Oaks, Mr and Mrs Melling spend each night at George Street. But Mr and Mrs Melling spend differing amounts of time at their George Street residence, day by day.
It appears that Mrs Melling conducts her cut flower business from this house, storing, preparing and packing cut flowers for delivery to local retailers or for dispatch using courier services. Mrs Melling told me that she benefits from spending quiet time at George Street each morning, after her husband has left for Cloverlea. Her evidence is that she keeps some personal items and clothes at the George Street house but mostly her personal possessions and family artefacts are kept in the family home at Cloverlea. She told me that the contents of the house are substantially those left by her late father, from whom she inherited the house in 2009. By her account, she and Mr Melling sleep at the George Street house for reasons of security, as well as for Mrs Melling’s peace of mind, as the house was previously vacant and vandalised. Mrs Melling was equivocal about whether she intended to return to sleep nights at Cloverlea.
Mr Melling told me that he rises early, before his wife, and takes her a cup of tea at around 7am each morning at the George Street house. He does not make coffee or take breakfast there, as he would much rather do so at the place he calls home – Cloverlea. Each day he leaves George Street for Cloverlea by around 7am. He spends the rest of the day working on the farm or in his workshop or extensive vegetable garden at Cloverlea. It is there that he prepares and eats his meals, often joined by Mrs Melling, between her busy schedule of volunteer commitments and activities in Tenterfield. Mrs Melling told me that her kitchenware is all at Cloverlea, and she often cooks meals, including dinner, for herself and her husband in what they both consider to be their family home. Each gave evidence, separately, that on some days each week they watch television after dinner at Cloverlea and often doze off, waking late at night, sometimes after midnight, whereupon they return in their separate vehicles to George Street to sleep. Mr Melling’s evidence is that he adheres to this pattern on most days, whereas Mrs Melling joins him in the evenings on some days only. Otherwise, she drops in and spends time at Cloverlea during the day. Mr Melling told me that he would prefer to sleep nights at Cloverlea and intended to do so in the future, but his preference and his intention are tempered by Mrs Melling’s present desire to sleep at the George Street house.
Considering this rather unusual arrangement, and doing the best with the present evidence, when they are not at River Oaks it is likely that Mr Melling spends an average of 8 hours each day at George Street, primarily for the purposes of sleeping, and the remaining time at Cloverlea, whereas Mrs Melling spends the majority of her time at George Street, sleeping, relaxing, conducting her flower business between volunteer commitments in town, with perhaps an average of four or five hours each day at Cloverlea.
Proceeding on this assumption, in order to assess the temporal aspect of Mr and Mrs Melling’s use of the River Oaks, Cloverlea and George Street properties, it is convenient to apportion time in an average week having regard to usage patterns over a full year. On this basis, it is likely that:
(s)Mr Melling spends –
·3 days per week (3 days of 24 hours) for 10 months (an average of 2.5 days per week over a full year) at River Oaks;
·1.33 days per week (4 days of 8 hours) for 10 months and 2.33 days per week (7 days of 8 hours) for 2 months ( an average of 1.5 days per week over a full year) at George Street; and
·2.67 days per week (4 days of 16 hours) for 10 months and 4.67 days per week (7 days of 16 hours) for 2 months (an average of 3 days per week over a full year) at Cloverlea; and
(t)Mrs Melling spends -
·3 days per week (3 days of 24 hours) for 10 months (an average of 2.5 days per week over a full year) at River Oaks;
·3.17 days per week (4 days of 19 hours) for 10 months and 5.54 days per week (7 days of 19 hours) for 2 months ( an average of 3.56 days per week over a full year) at George Street; and
·0.83 days per week (4 days of 5 hours) for 10 months and 1.46 days per week (7 days of 5 hours) for 2 months (an average of 0.94 days per week over a full year) at Cloverlea.
As can be seen, under this analysis, Mr Melling spends more time each week at Cloverlea than at River Oaks or George Street, whereas Mrs Melling spends more time at George Street than at Cloverlea or River Oaks. If these apportionments of time are aggregated for the purposes of assessing where Mr and Mrs Melling, as a couple, spend their time, they would spend more time each week at George Street (2.53 days) than at River Oaks (2.5 days) or Cloverlea (1.97 days). On this temporal basis, George Street would be their principal home.
But this does not take into account other relevant factors, such as the nature and extent of Mr and Mrs Melling’s association with each residence, the uses to which each residence is put, and their intentions.
If the area included in a valuation of the principal home is reduced on the basis of business usage, as discussed in the Social Security Guide[27], it follows that business usage may also reduce temporal considerations. Each property is used to some degree for business purposes. River Oaks and George Street are used for Mrs Melling’s flower business. The land at River Oaks and Cloverlea is used for grazing stock. Part of Mr and Mrs Melling’s attendance at the residences on each of these properties is associated with business uses, and should be excluded.
[27] Social Security Guide at 4.6.3.10.
Each of the cut flower and grazing businesses operates only at a low level – there are not sufficient records, in the form of tax returns for example, to determine the true extent of each business.
On Mr and Mrs Melling’s evidence, most of the time spent at River Oaks is for the purposes of their flower and grazing businesses, with the balance being spent for recreational purposes. On this basis, it is likely that River Oaks is not their principal home.
As regards George Street and Cloverlea, doing the best with imprecise evidence, if at the relevant time Mrs Melling spent 20 hours per week at George Street working on the flower business for 10 months each year and Mr Melling spent five hours each week at Cloverlea working on the grazing business at Cloverlea, and these amounts are excluded for the purposes of determining their principal home, Mrs Melling would spend an average of 2.86 days each week at George Street and Mr Melling would spend 2.62 days each week at Cloverlea over the course of a year. In aggregate, as a couple, they would spend an average of 2.18 days each week at George Street and 1.78 days each week at Cloverlea. On this temporal analysis, George Street would still be their principal home, but the variance of time spent at each home is not great and the evidence on which the assessment is made is imprecise.
Other aspects of Mr and Mrs Melling’s association with Cloverlea and their intentions should be considered.
Cloverlea was purchased by Mr Melling before their marriage, and it is where he and Mrs Melling lived when they married and where they raised their family and engaged in farming and related activities over many years. Each of them, but Mr Melling in particular, has a close and ongoing association with this home. The strength and ongoing nature of this association is demonstrated by their decision to use the George Street property rather than Cloverlea as security for the mortgage over River Oaks when it was purchased in 2010 in order to preserve Cloverlea as their family home, free from encumbrance. Furthermore, I accept that Cloverlea is where Mr and Mrs Melling have the bulk of their personal possessions and items of family significance, such as family photographs, jewellery, tools and household or domestic wares.
Mr Melling told me that he is not a town person and he does not like being in town. He was brought up on a farm. He has lived his entire life on the land, oftentimes spending long periods alone or without visiting town, and that is ongoing. By his account, the only reason he spends time at George Street is to accompany his wife, as he considers that is the proper thing to do in the circumstances, but he holds no attachment to or association with the house at George Street as a home – his home is Cloverlea. Mrs Melling’s evidence supports this account. On their evidence, Mr Melling’s friends know that if they want to visit or ring him, they do so at Cloverlea.
As regards mail, the situation is confused as Mr and Mrs Melling’s have two mailing addresses – George Street and Cloverlea, although much of their mail is directed to the George Street address. Mrs Melling explained that this is for reasons of security and convenience – Cloverlea does not have a street number, being out of town on a rural road, and it is convenient for deliveries to be made to the George Street property as this is where her flower business deliveries are made.
The Cloverlea property is located in close proximity, some few kilometres or five minutes by car, to Tenterfield and the Melling’s George Street residence.
There are electrical issues with a light in the bathroom at Cloverlea, and the home requires minor maintenance. But this does not render it uninhabitable or unsuitable for occupation as a home. The kitchen and bathroom appliances are intact and operational, albeit perhaps old. The solar hot water service operates when it is switched on. All of the usual utilities one might expect, including electricity, water and telephone services, are connected and operational – connection to the town water supply indicates the close proximity of Cloverlea to Tenterfield. The fact that the fridge/freezer is located in a shed next to the house may be unusual, but this is simply a matter of choice. The house is heated by a wood stove, which is cheap and effective to operate, whereas the George Street house does not have a wood stove, and it is too expensive to heat through winter.
As regards Mr and Mrs Melling’s intentions, it is quite clear to me that Mr Melling’s strong preference is to continue his long association with Cloverlea as his home, although his intentions are tempered by the patterns of life Mrs Melling has established – he told me that but for Mrs Melling, he would spend each night at Cloverlea. Mrs Melling expressed a strong and continuing association with Cloverlea, but she was equivocal about changing the patterns of life she has established around the George Street residence.
In these circumstances, Mr and Mrs Melling’s pattern of life, whereby they habitually sleep at their George Street residence but retain a close and ongoing association with their family home at Cloverlea, is unlikely to change, despite Mr Melling’s preferences.
In sum, Mrs and Mrs Melling spend marginally more time at their George Street home than at Cloverlea. But their association with Cloverlea as their family home is much greater than their association with the residence at George Street, especially for Mr Melling. As the two homes are in close proximity, I accept that Mr and Mrs Melling effectively live and reside in both homes. For the purposes of determining which residence is their principal home, these considerations are finely balanced. That being so, it is reasonable to find that Cloverlea is their principal home for two reasons. Firstly, in my opinion, their association with Cloverlea (particularly that of Mr Melling) outweighs the marginally greater amount of time they spend, in aggregate and on average (excluding business use) over the course of a year, at the George Street residence. And secondly, the assessment of time spent in each home is sufficiently close and imprecise to permit a finding that equal time is spent in each, whereby the ‘more expensive’ home, Cloverlea, should be adopted as the principal home.
Conclusion
In this unusual case, where Mr and Mrs Melling sleep at night and where they spend most of their time may not be accurate indicators of their ‘principal home’. Once business use is taken into account, the temporal determinants discussed in the Social Security Guide are finely balanced. In those circumstances it is appropriate to consider other factors, particularly the nature and extent of Mr and Mrs Melling’s association with each of their homes, and their intentions.
The strength or character of association with a home may not be the same for each member of a couple, and each person may have divergent intentions to some degree. That is so for Mr and Mrs Melling, even though they are committed to each other and to their marriage. These are matters that require the exercise of commonsense and judgement, having regard to the terms and purposes of the legislation, and weighing all of the relevant factors and evidence in the particular circumstances.
In the present circumstances, on balance, the preferable decision is that as of 24 December 2012 Mr and Mrs Melling’s principal home is their residence at Cloverlea. Whether that will be so in the future, must be determined on the merits and in the particular circumstances at the time if Mr and Mrs Melling claim again for payment of Age Pension.
Notwithstanding this, the value of their combined assessable assets as of 24 December 2010 exceeds the applicable assets value limit. It follows that for each of them, Age Pension is not payable as of 24 December 2012.
For this reason, the decision under review must be affirmed.
I certify that the preceding 67 (sixty -seven) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member ..........................[sgd]..............................................
Associate
Dated 4 February 2014
Date(s) of hearing 5 December 2013 Date final submissions received 2 February 2014 Applicant In person Advocate for the Respondent Glenda Heggen Solicitors for the Respondent Programme Litigation & Review Branch, Department of Human Services
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