Murphy and Secretary, Department of Employment and Workplace Relations

[2007] AATA 8

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 8

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2006/137

GENERAL ADMINISTRATIVE  DIVISION		)
Re		DIANE MURPHY

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Ms G Ettinger, Senior Member

Date5 January 2007

PlacePerth

Decision The decision under review to cancel Mrs Murphy's Partner Allowance on and from 20 August 2005 is affirmed.

..........(Sgd) Ms G Ettinger.....................  Senior Member  

CATCHWORDS

Social Security – Partner Allowance -  homeowner – assets in excess of statutory limits – questions re valuation – investment property sold - funds not yet invested into superannuation fund at relevant date increasing value of assets beyond limit for payment of Partner Allowance  – decision under review affirmed.

Social Security Act 1991 ss 11, 771, 118(1,
Social Security (Administration) Act 1999 ss 80(1)

Demovich and Secretary, Department of Family and Community Services [2004] AATA 647
Hunt v Secretary, Department of Family and Community Services (2003) 76 ALD 720.

REASONS FOR DECISION

5 January 2007	Ms G Ettinger, Senior Member
BACKGROUND

1.      Mrs Diane Murphy was receiving Partner Allowance when it was cancelled by Centrelink on 20 August 2005 due to the fact Centrelink held that her asset limit was in excess of the statutory limit for payment of such a benefit to a partnered home owner. The asset limit at the relevant time was $111,500.

2.      The situation arose because of the sale of the Murphy partnership’s farm and the value of an investment property, Dunskey Place. Mr T Murphy, Mrs Murphy’s husband, who represented her at the AAT hearing, submitted that the $38,000 which had been realised and what remained from the sale of the farm, was invested in a building society account, and was to be invested in a superannuation fund. He said that once that had occurred, Mrs Murphy was shown to be eligible for a social security benefit, and was at the time of the hearing before me, in November 2006, receiving Newstart Allowance.

3.      Mr and Mrs Murphy were not in agreement with the valuation of the Australian Valuation Office (“the AVO”) used by the Respondent to value the Dunskey Place property. That valuation was relied upon by the Respondent in coming to a conclusion that Mrs Murphy’s asset limit was in excess of the statutory limit for payment of Partner Allowance in August 2005.  Mr and Mrs Murphy objected to the method of valuation because it had been a desktop valuation, (carried out on 1 July 2005), as a result of which the AVO had valued the Dunskey Place investment property at $220,000. In support of his argument that the valuation was not accurate, Mr Murphy indicated that the AVO had made an error when valuing their farm, and had in fact only valued half of that property at the time of valuation. I was satisfied that no such error had occurred in the valuation of the Dunskey property, which was in fact listed for $248,000 during 2005, and sold for $245,000 in November 2005 which was more than the valuation.

4.      I was mindful of the arguments put by both parties, and the statutory requirements with regard to the qualifications for Partner Allowance. I found that the decision of Centrelink and the Social Security Appeals Tribunal (“the SSAT”) to cancel Mrs Murphy’s Partner Allowance was the correct or preferable decision and affirmed them.  My reasons follow.

5.      For the sake of completeness I note here that Mr Murphy represented his wife at the AAT hearing. He told me that Mrs Murphy was not attending because she felt intimidated by Centrelink staff. I reassured Mr Murphy that this Tribunal is not part of Centrelink, and is independent, and that every effort is made for every person before it to receive a fair hearing.

6.      I was mindful also of Mr Murphy’s request that a confidentiality order be made regarding this matter so that it would be heard in private, and the decision not be made public. He said that he would be talking about financial matters which were private to him and his wife. In the interests of procedural fairness I also heard the Respondent on the application by Mr Murphy for a confidentiality order to be made. Mr Holt who appeared for the Secretary, Department of Employment and Workplace Relations, opposed the making of a confidentiality order.

7. After hearing both parties, I concluded that as pursuant to section 35 of the Administrative Appeals Tribunal Act 1975, hearings are to be in public except in special circumstances, I was not satisfied that Mr Murphy had put before me any special circumstances which warranted exercise of the discretion to either have the hearing in private or the decision in private. Accordingly, I ruled that the hearing was to be an open hearing. The decision will be published in the usual way.

ISSUE BEFORE THE TRIBUNAL

8.      The issue I have to address is the decision under review which found that on the relevant date of 20 August 2005, Mrs Murphy’s asset limit was in excess of the statutory limit for payment of Partner Allowance. Her Partner Allowance was cancelled as a result. This was affirmed by the SSAT on 27 April 2006.  Accordingly I had to determine what Mrs Murphy’s assets were on 20 August 2005.

9. Assets test definitions are in section 11(1) of the Social Security Act 1991(“the Social Security Act”).

Assets test definitions

11(1)  In this Act, unless the contrary intention appears:

…

"asset" means property or money (including property or money outside Australia).

…

"exempt assets" means assets described in subsection 1118(1).

…

"homeowner" has the meaning given by subsection (4).

…
"primary producer" means a person whose principal occupation is primary production.

"primary production" means production resulting directly from:

(a)  the cultivation of land; or

(b)  the maintenance of animals or poultry for the purpose of selling them or their bodily produce, including natural increase; or
(c)  fishing operations; or
(d)  forest operations;

and includes the manufacture of dairy produce by the person who produced the raw material used in that manufacture.

"principal home" has the meaning given by subsections (5) to (7).

…

"value" has the meaning given by subsections (2) and (3).

Note:          see also sections 1118 (certain assets to be disregarded in calculating the value of a person's assets), 1121 (effect of charge or encumbrance on value of property) and 1145‑1157 (retirement villages).

RELEVANT LEGISLATION

10.     The relevant legislation in this matter is the Social Security Act, and the Social Security (Administration) Act 1999.

FINDINGS AND CONCLUSIONS

mr & mrs murphy are homeowners – their principal home is an exempt asset

11. In deciding what Mrs Murphy’s assets were on 20 August 2005, I noted that it was not in dispute that Mr and Mrs Murphy own their home jointly, and that it was valued at $200,000. The principal home is, in this case, an exempt asset. An exempt asset is defined in section 11(1) of the Social Security Act, which refers the reader to section 1118(1). Section 1118(1) provides for certain assets to be disregarded in calculating the value of a person's assets and is reproduced and discussed further in the paragraphs below.

12. Mr and Mrs Murphy are homeowners in the terms of section 11(4) of the Social Security Act. Mr and Mrs Murphy also owned a farm which was sold in May 2005. Certain funds which were realised from the sale were used to repay mortgages on their other properties and chattels such as vehicles.  The sum of $38,000 net remained from the sale and was invested in the Home Building Society. In the present context it is counted as an asset for the Murphys.

valuation of dunskey place

13.     As stated above, the main contention in this matter was the valuation of Mr and Mrs Murphy’s investment property at Dunskey Place. In an income and assets update dated 22 September 2005, (T29), Mr and Mrs Murphy had stated that the value of the Dunskey Place property was $128,000.  I noted at T34 the record of an interview on 18 October 2005 between Mr Murphy and a Centrelink  officer with regard to Partner Allowance for Mrs Murphy, and noted discussion of the discrepancy between the value declared for Dunskey Place ($128,000), and the listed sale price of $248,000. At the hearing I also had before me a valuation tendered by Mr Murphy which was carried out by Albany Valuation Services on 26 June 2001 (Exhibit A1). That valuation stated that Dunskey Place had a fair market value of $132,000. There was also one from Harman and Ricketts valuing the property at between $133,000 and $139,000. The latter was undated, but Mr Murphy told me it was done in approximately April 1999. Mr Murphy submitted that the previous decision makers should have relied upon those valuations, and that I too should. He stated that at the time they thought $135,000 might have been the right price. Mr Murphy was emphatic that the fact Dunskey Place property was on the market for $248,000 during 2005, and sold for $245,000 in November 2005, was irrelevant.

14.     In considering the valuation carried out by the AVO, I took into account Mr Murphy’s argument that the valuation was unacceptable because it was a desktop valuation. I was satisfied that the value of $220,000 given by the AVO valuer in July 2005 (Exhibit R2), was a reasonable indication of the value of Dunskey Place as it sold for $245,000 which exceeds the valuation, some four months later. 

15.     I noted the case of  Demovich and Secretary, Department of Family and Community Services [2004] AATA 647, in which Deputy President Purvis stated that:

“… If, as Mr Simic submits, the methodology used by the NSW Valuer-General is as sophisticated and complex as the method used by the AVO, then the difference between the two values would to my mind appear to be better explained by the difference in purpose in obtaining the valuation, than general unreliability in Mr Chappell’s figures.

…

As earlier noted I find that the best identifiable reason for the difference in the values to be the purpose for which they were undertaken. In these circumstances, the Tribunal prefers the value of the AVO as it is a market-value estimate, and done specifically for the purpose of asset valuation under the Act.”

16.     I am guided by Deputy President Purvis in Demovich (supra), and am satisfied that the AVO valuation was a market-value estimate, and done specifically for the purpose of asset valuation under the Act. It was also much more recent, having been conducted in 2005, whereas the valuation relied on by Mrs Murphy was carried out in 2001. I am satisfied that the method is quite acceptable and has been used many times. I have accepted that, notwithstanding it sold for more, the valuation of the Dunskey Place property which I accept is $220,000.

17.     Accordingly, I find that Mrs Murphy’s share of Dunskey Place was, at the relevant time, half of $220,000 which is $110,000.

18.     Other assets as recorded by Mr and Mrs Murphy at T29/140, and noted by the SSAT, consisted of:

·     caravan worth $1,000

·     household contents valued at $5,000

·     boat valued at $500

·     ute valued at $30,000 – shown on farm balance sheet and hence excluded from Mr and Mrs Murphy’s personal assets

·     car valued at $13,000 - shown on farm balance sheet and hence excluded from Mr and Mrs Murphy’s personal assets

·     net proceeds of the sale of the farm of $95,258

·     Home Building Society account of $38,000

19.     On adding a half share of the rest of the assets, that is half the $38,000 and the other items listed above, (and excluding the ute and car), takes Mrs Murphy’s assets well above the statutory limit of the time which was $111,500.

proceeds of the sale of the farm – offset against personal assets

20. In regard to the proceeds of the sale of the farm, the SSAT held that $88,668 was to be offset against Mr and Mrs Murphy’s assets. Mr Murphy argued before me that he and his wife were primary producers, that they had spent the $88,668 on their 100 acre farming block, with $10,000 spent on fences, $4,000 spent on hay and that $3,000 was deposited into the superannuation fund in April 2007. Mr Murphy also argued that pursuant to section 1121A(1)(a) of the Social Security Act, he and his wife were primary producers.

21. Mr Holt, noting that the SSAT had applied section 1121A(1) of the Social Security Act to offset the $88,668 asset value of the Murphy’s farming partnership (T2/para15), argued that the legislation could not be applied thus. He submitted that the legislation only allowed for the offsetting of liabilities on the value of assets used in primary production, and submitted that Dunskey Place was a rental property and not used for the purposes of primary production. In support of the Secretary’s contention, Mr Holt referred me to the case of Hunt v Secretary, Department of Family and Community Services (2003) 76 ALD 720. I noted that in that case, the issue was an application for a Re-start Re-establishment Grant which was refused on the basis that Mr Hunt’s assets exceeded allowable limits. The valuation of Mr Hunt’s shares by the Secretary far exceeded Mr Hunt’s valuation because it included redeemable preference shares. The issue was whether an under-lease constituted an interest in farming and whether the value of shares could be offset by the value of primary production liabilities. It was held in that case, that the value of shares in a company were not primary production assets, and accordingly could not be reduced. The Tribunal was concerned in that case with whether Mr Hunt was a farm owner or operator.

22.     I accepted the Respondent’s submissions and reliance on Hunt (supra). I accepted that the Murphys’ farm had been sold, and was mindful that Dunskey Place was a rental property. Accordingly I find that Mr and Mrs Murphy cannot be held to have been engaged in primary production in relation to Dunskey Place, and neither once the farm had been sold. I relied on the principles expressed in Hunt (supra), and did not agree with the SSAT which allowed offset of the $88,668 asset value of the Murphy’s farming partnership against the value of the Murphy’s personal assets.

the application of section 1118(1) of the social security act

23. Mr Murphy explained that the $38,000 which remained after the sale of the farm was put into their Home Building Society account because the sum was insufficient to start up a superannuation fund. He argued that the $38,000 was paid into the building society account on 21 July 2005, and submitted that pursuant to section 1118(1) of the Social Security Act, they were allowed 90 days to invest funds in superannuation before any action to cancel Partner Allowance should have been taken. He said given the benefit was cancelled on 20 August 2005, they were not afforded that time. He also told me that the $38,000 were not an asset, but funds used to run the farm.

24. As to Mr Murphy’s argument regarding the application of section 1118(1) of the Social Security Act, I noted the Secretary’s reference to sections 8(4) and 8(5) of the Social Security Act, which follow as relevant.

Certain assets to be disregarded in calculating the value of a person's assets

1118(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:

(e)  any amount that is:

(i)  received by the person within the immediately preceding period of 90 days; and

(ii)is excluded from the definition of income in subsection 8(1) by subsection 8(4) or (5);

…

Excluded amounts--home equity conversion (not member of a couple)

8(4)  If a person is not a member of a couple, an amount paid to or on behalf of the person under a home equity conversion agreement is an excluded amount for the person to the extent that the total amount owed by the person from time to time under home equity conversion agreements does not exceed $40,000.

Excluded amounts--home equity conversion (member of a couple)

8(5)  If a person is a member of a couple, an amount paid to or on behalf of the person or the person's partner under a home equity conversion agreement is an excluded amount for the person to the extent that the total amount owed by the person and the person's partner under home equity conversion agreements from time to time does not exceed $40,000.

25. I was mindful of Mr Murphy’s submissions regarding the 90 day period and the application of section 1118(1). However the reference to sections 8(4) and 8(5) in section 1118(1)(e)(ii) are references to payments under a home equity conversion, and I am satisfied that the $38,000 to which Mr Murphy refers in the Home Building Society account was not a payment under a home equity conversion agreement. Accordingly it could not be disregarded pursuant to section 1118 of the Social Security Act.

qualification for partner allowance

26. Now the qualification for Partner Allowance is set out in section 771HA of the Social Security Act.  The Respondent did not argue that Mrs Murphy was not qualified for Partner Allowance at the relevant time.

Qualification for partner allowance

771HA(1)  Subject to subsections (1A) and (3), and section 771HB, a person is qualified for a partner allowance in respect of a period if:

(a)  throughout the period, the person is a member of a couple; and

(b)  throughout the period, the person's partner is at least 21; and

(c)  the person's partner is receiving:

(i)  youth allowance, austudy payment, newstart allowance, sickness allowance, special benefit, rehabilitation allowance, age pension, disability support pension, mature age allowance, service pension or income support supplement; or
(ii)  assistance under a Student Financial Supplement Scheme or an income tested living allowance under an Aboriginal study assistance scheme; and

(d)  throughout the period, the person is an Australian resident; and
  (e)  the person was born on or before 1 July 1955; and

(f)  the person is not qualified for parenting payment at any time during the period; and

(h)  the person does not have recent workforce experience.

Note 1:       For member of a couple see section 4.

Note 2:       For Australian resident see section 7.

771HA(1A) If the Secretary determines under section 36 of the Administration Act that a person's claim for partner allowance is to be granted, the person's partner need not satisfy the requirements of paragraph (1)(c) in order for the person to remain qualified for the allowance.

771HA(1B)  For the purposes of paragraph (1)(c), the person's partner is taken to be receiving newstart allowance if the person's partner would be receiving newstart allowance except for:

(a)  the application of a compliance penalty period; or
  (b)  the application of a period of non‑payment under section 634.

Note:          For compliance penalty period see subsection 23(1).

…

27.     However, section 771HF states that Partner Allowance is not payable to a person if the value of the person’s assets exceeds the person’s assets value limit. I have noted above that the assets limit for Partner Allowance at the relevant time was $111,500.  I am mindful that Mrs Murphy’s assets are half those of the total in the Murphy partnership. Accordingly the value of Dunskey Place which I have accepted was $220,000 at the relevant time, brings Mrs Murphy’s assets to $110,000.  In adding the other assets (household contents, and the $38,000 (net) realised in the sale of the farm, and halving their value), (section 771HF(3)), her asset level is increased beyond the assets limit in August 2005.

Assets test--allowance not payable if assets value limit exceeded [see Appendix for CPI adjusted figures]

771HF(1)  A partner allowance is not payable to a person if the value of the person's assets exceeds the person's assets value limit.

Note:          The value of the person's assets is only half the combined value of the person's assets and the assets of the person's partner (see subsection (3)).

771HF(2)  A person's assets value limit is worked out using the following Table:

Assets value limit table
Column 1 Item	Column 2 Person's situation	Column 3 Assets value limit
1.	Person or partner a homeowner	$80,250.00
2.	Neither person nor partner a homeowner	$120,500.00

Note 1:       For homeowner see section 11.

Note 2:       The assets value limits in column 3 are indexed annually in line with CPI increases (see sections 1191 to 1194).

771HF(3)  The value of the person's assets is taken to be 50% of the sum of the value of the assets of the person and the value of the assets of the person's partner.

28.     Pursuant to section 771HC(1), a Partner Allowance not payable if the allowance rate is nil. That applied to Mrs Murphy at 20 August 2005.

771HC(1)  Subject to subsection (2), a partner allowance is not payable to a person if the person's partner allowance rate would be nil.

29. Pursuant to section 80 of the Social Security (Administration) Act 1999, if the Secretary, and hence the Tribunal standing in the shoes of the Secretary, is satisfied that a social security payment has been paid, or is being paid to a person who is not qualified for the payment, the payment must be cancelled or suspended. That is what has occurred in this case, and based on my findings above, cancellation of Mrs Murphy’s Partner Allowance at the relevant date of 20 August 2005 was the correct decision. Accordingly I affirm that decision.

Cancellation or suspension determination

(1)  If the Secretary is satisfied that a social security payment is being, or has been, paid to a person:

(a)  who is not, or was not, qualified for the payment; or

(b)  to whom the payment is not, or was not, payable;

the Secretary is to determine that the payment is to be cancelled or suspended.

DECISION

30.     The decision under review to cancel Mrs Murphy’s Partner Allowance on and from 20 August 2005 is affirmed.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member

Signed:         .........(Sgd.) Ms R Riberi................................
   Associate

Date of Hearing  8 November 2006
Date of Decision  5 January 2007
The Applicant  Mrs Murphy represented by Mr Murphy
Advocate for the Respondent         Mr A Holt