Mills and Secretary, Department of Family and Community Services

[2004] AATA 1402

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1402

ADMINISTRATIVE APPEALS TRIBUNAL      )

)N2004/211

GENERAL ADMINISTRATIVE DIVISION		)
Re		LESLIE MILLS and JOYCE MILLS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondents

DECISION

Tribunal Ms Robin Hunt, Senior Member

Date24 December 2004

PlaceSydney

Decision The Tribunal affirms the decision under review.

….[sgd]Robin Hunt….

Senior Member

CATCHWORDS

Social Security – Age pension – Assets test for homeowners – Valuation of assets – Value of assets exceeds cut-off - Cancellation of pension.

Legislation

Social Security Act 1999 ss 11(1), 44(1), 55 and 1064-GI
Social Security (Administration) Act 1999, s 80(1)

Case Law

Spencer v Commonwealth of Australia (1907) 5 CLR 418

Keremelevski and Secretary, to Department of Social Security (AAT 11247, 17 September 1996)

REASONS FOR DECISION

24 December 2004	Robin Hunt, Senior Member
summary

1.        Mr Mills, the first Applicant, appeared before the Tribunal and claimed that he and his wife were entitled to the age pension and that Centrelink had wrongly cancelled their payments on 25 March 2003. Centrelink cancelled their pensions as current valuations of the couple’s real estate holdings exceeded the assets value limit as at 25 March 2003. The valuations of the couple’s real estate were supplied by the Australian Valuations Office (AVO). Mr Mills disagreed with the valuations and argued they were excessive. He argued that controls applied to the properties which reduced their use and value.

2.      The Social Security Appeals Tribunal (SSAT) reviewed the cancellation decision. It set aside the decision and ordered reconsideration by Centrelink after a full inspection and fresh valuation taking into account zoning and environmental controls to which the properties were subject. Centrelink carried out these steps but still found that, despite a reduction in the valuation of the assets of Mr and Mrs Mills, their assets still exceeded the maximum for age pension payments. The Tribunal has reviewed the reconsideration decision and has affirmed it on the basis that Mr and Mrs Mills’ assets exceed the maximum allowable for payment of the pension.

issue

3.      The issue before the Tribunal was whether the value of all the assets of Mr and Mrs Mills exceeded the allowable asset limit for the purposes of receiving the age pension. Centrelink produced new valuations, dated 23 June 2003, which were undertaken after an inspection on 22 April 2004. These valuations were supplied for reconsideration of the pension decision concerning Mr and Mrs Mills.  The valuations reduced the real estate values on which Centrelink had previously relied when cancelling the pension payments but still exceeded the amount Mr Mills thought appropriate. Mr and Mrs Mills did not produce any independent valuation to the Tribunal. At a Tribunal hearing, Mr Mills made observations from his personal knowledge of property in the area. He described problems with properties such as his which were located in the Sydney water catchment area. He pointed out that restrictions on his properties, which were zoned special uses 5(c1), were worse than properties listed in the AVO valuations, which were zoned 5(c2). He argued that sales of property compared for the valuation were not a true indicator and that he would not be able to sell his properties for comparable amounts. The valuer who carried out the new valuations gave oral evidence to the Tribunal about the inspections he undertook and how he reached his opinion about the properties in question.

evidence and submissions

4.      Mr Mills appeared before the Tribunal unrepresented and gave sworn oral evidence. Mrs Mills was not sufficiently well to attend and give evidence. Mr Mills provided a doctor’s certificate stating that Mrs Mills suffered from dementia. Mr Mills told the Tribunal that he was his wife’s carer and was a farmer. He said he and his wife had been receiving the age pension since 1994. Their assets had not changed since 1994, only the valuations. He said that the land had been re-valued at an excessive amount but he and his wife were actually worse off than before. Their land actually had been devalued by the restrictions on its use brought in since they purchased it and should not, therefore, deprive him and his wife of the pension.

5.      Mr Mills explained the land formed part of the Sydney water catchment area and could not be developed or used in a number of ways. He would not have bought it had he foreseen this problem. Mr Mills believed that the new valuations made for the reconsideration of his and his wife’s pension entitlement did not fully allow for the effect of these restrictions. The land was zoned by the Special Uses 5 (c1) Water Catchment under the Wollondilliy Shire Council’s Planning provisions. This zoning was particularly restrictive and he could not subdivide as well as having to observe other limited use controls. The Special Uses 5 (c2) Water Catchment Zoning did not have such an adverse affect on land value as individual holdings could be smaller and allowed owners to subdivide.

6.      He also said that because of the lack of rain in the area in the last 8 years as well as the water catchment restrictions, he ran only 100 sheep on the land and made little income. He claimed the properties were uninsurable. Mr Mills said that a bushfire in 2001 had damaged his property and he had to replace the fencing at his own expense as the property was uninsurable. He also touched on difficulties he had when applying to Centrelink for a carer allowance to help him look after his wife. However, Mr Mills did not want to pursue his possible entitlements on the grounds of hardship and did not apply for a waiver of the assets test.  He wanted to rely on the argument that the value of his and his wife’s assets was below the amount that stopped their pension entitlement.

7.      The Secretary produced to the Tribunal the full valuation reports made to Centrelink on 1 October 2004. The valuer who made the reports, Mr Lewis, also gave oral evidence and answered Mr Mill’s questions. Mr Lewis said that he had been a valuer for many years and had inspected the properties in question. He contrasted the inspection procedure he had followed with the more usual drive by valuations he often made because access to properties is not always available. He believed his valuations made in April 2004 were more accurate because he had the opportunity to walk around the land and inspect it and the improvements. He observed that he had changed and reduced the valuations after his inspections. He said it was not unusual for a reduced valuation to result from full access and an inspection.

8.      Mr Lewis noted that the restriction on the Mills’ properties, which were zoned Special Uses 5(c1), were worse than some of the properties listed in the valuations as evidence of recent sales. He agreed with Mr Mills that properties zoned 5(c2) were more valuable to the extent that the zone 5(c2) blocks were able to be smaller than zone 5(c1) blocks. He further gave evidence that he had taken into account the effect of the water catchment restrictions on the Mills’ properties. He took into account the restrictions on use as well as the size requirement. He indicated that their blocks would be worth a great deal more if they could be subdivided.  

9.      Mr Lewis said that the smaller blocks in the area near the Mills’ property were actually worth more per hectare than the Mills’ properties because of the size impediment. This meant the Mills’ properties had come in at a lower value than other smaller properties he compared to theirs. Although he had listed properties in the attached schedules of sales that had advantages over the Mills’ properties, he had made deductions from the value of the Mills’ properties to take this discrepancy into account. Mr Lewis said that he realized that the smaller 2 hectare blocks were extremely valuable. He had made appropriate deductions from the Mills’ holdings in comparison to these small holdings as to the land values. He noted in his report that their land was zoned 5(c1) and, as such, was not divisible. He reiterated his evidence that the Mills’ properties were worth less than if divisible and that he was aware of this factor.  

10.     When Mr Mills suggested his land had actually lost value, Mr Lewis said he did not look at any lost value but only current market value.  When Mr Mills queried the relevance of the 2 hectare properties that Mr Lewis had included in his lists of sales evidence, Mr Lewis gave evidence that he had included those properties for comparison in order to establish the house curtilage value only.  He had inspected the house and improvements on the block occupied by Mr Mills to establish the value of the house and curtilage as well as the total land value.

legislation

11. Subsection 44(1) of the Social Security Act 1991 (the Act) provides that a pension is not payable to a person whose age pension rate is nil. Section 55 of the Act sets out how to calculate an entitlement to the age pension including whether the applicable rate is nil. Paragraph (a) refers to the Pension Rate Calculator A (the Calculator) attached to section 1064 of the Act. The Calculator contains a statement explaining the rates including maximum payment rate. The value of assets affects the maximum payment rate under section 1064-G1. Section 11(1) of the Act defines the term “asset” to mean property or money. The value of Mr and Mrs Mills’ assets therefore must be taken into account to determine any pension entitlement.

12.     Section 1118 of the Act contains provisions that reduce or increase the value amount of an asset. Subsection 1118(1) takes in the value of real estate including investment property. Subsections 1118(1)(a) and (b) exclude a person’s or couple’s “principal home” from the asset test. Subsection 1121(1) provides that the value of an asset is reduced by deduction of any mortgage debt. Subsection 1118(3) adds the value of personal effects and household property to the deemed value of $10,000 unless the couple demonstrates their assets are worth less.

13.     The “principal home” exclusion is modified by the provisions in section 11. Where land adjacent to the principal home exceeds 2 hectares, under subsection 11(5), only that land not exceeding 2 hectares is exempt. The Respondent and the valuer referred in the proceedings to the house and curtilage being exempted, this being the area covered by subsection 11(5).

14. Where a person is not entitled to the age pension as calculated above, section 80(1) of the Social Security (Administration) Act 1999 requires cancellation of any such payments. As Centrelink calculated that Mr and Mrs Mills were not entitled to the pension because of the values of their assets, payments to them ceased.

findings and reasons

15.     There is no dispute that Mr and Mrs Mills have a principal home. The Respondent has calculated the value of the house and curtilage and has not included this in the calculation of assets. Mr Mills also did not argue about the deemed value of his personal effects and household goods.  Mr Mills has taken issue only with the valuation of his vacant block of land and the value of the land on which he lives. The latter value he says is excessive without going into particulars of the portion ascribed to the house and curtilage. Mr Mills has not suggested a particular value to either of the properties he and his wife own. He simply claims the value is less than it was, that the land ownership did not disqualify them previously and that their entitlement to the pension continues.

16.     Mr Lewis gave convincing evidence to the Tribunal of his thorough and informed approach towards valuing the Mills’ properties. I am satisfied that he has properly put his expertise to the task of valuing the properties and has reached the best estimate of value possible. As the properties have not been put on the market, no better estimate of value can be reached. In these circumstances, the High Court held in Spencer v Commonwealth of Australia (1907) 5 CLR 418 that the appropriate value is the price which might be paid by a desirous buyer to a willing but not anxious seller. In the Tribunal matter of Keremelevski and Secretary, to Department of Social Security (AAT 11247, 17 September 1996), Senior Member Lewis and Member Way held on the facts of that matter that at all material times the valuations of property provided by the AVO are to be used in calculating the rate of pension payable. As Mr and Mrs Mills have not submitted any report by another expert or valuer to compare with the AVO’s valuation and consistent with the approach of previous Tribunal decisions, I rely on the property valuations provided by the AVO.

17.      I am therefore satisfied that the valuations before the Tribunal reflect an accurate value of Mr and Mrs Mills’ properties. The valuations do take into account the environmental and zoning restrictions in place. I am satisfied that the property at portion 62 Braddocks Road is worth $410,000 and that the property at 123 Braddocks Road is worth $840,000, with the house and curtilage worth $710,000, leaving a balance of $130,000. Mr and Mrs Mills have not queried the value placed by Centrelink on any other assets.  The resulting calculation before the Tribunal is:

Calculation of effect of assets on maximum payment rate as per section 1064-GI:

$271,673        Asset value

$103,250        Asset value limit at 25/3/03

$168,387        Assets excess

Calculation as per section 1064-G4:

168,387 x 19.50        =        13,134.18       Annual reduction for assets

250

Maximum age pension for a member of a couple at 25/3/03 is $367.50 each or $9,555 annually.

Mr and Mrs Mills reduction for assets therefore exceeds the maximum pension payable.

18.     Mr and Mills have not disputed the method of calculating the effect of these asset values on the maximum payment rate under the Act. Accordingly, I am satisfied that the Respondent has reached a correct calculation of the excess that prevents Mr and Mills from having an age pension entitlement.

19. As section 44(1) of the Act provides that an age pension is not payable to a person whose age pension rate is nil and section 80(1) of the Social Security (Administration) Act 1999 provides that any payment of the pension should be cancelled where the recipient is not entitled to it, I find that the decision to stop payment should be affirmed.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Robin Hunt, Senior Member.

Signed:         .....................................................................................
  Associate: Reuben Mansour

Date of hearing  9 December 2004
Date of decision     24 December 2004

Advocate for the Respondent  Mr J. Larcombe