Myers and Secretary, Department of Family and Community Services

[2005] AATA 1216

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1216

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          N2005/813

GENERAL ADMINISTRATIVE DIVISION		)
Re		KENNETH & LOIS MYERS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date9 December 2005

PlaceSydney

Decision The Administrative Appeals Tribunal affirms the decision under review.

[Sgd] Ms N Isenberg, Member

CATCHWORDS

SOCIAL SECURITY – cancellation of age pension – assets test – value of property – issue of whether property can be considered as an ‘unrealisable asset’ – issue of reasonableness of Applicant’s selling or borrowing against asset - claim for consideration under the hardship rules – decision affirmed

Social Security Act 1991 sections 11(12), 11(13), 1129

Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409

Re Dainty and Minister for Immigration and Ethnic Affairs (1987) 6 AAR 259

Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82

Re Nagle and Secretary, Department of Social Security (1988) 15 ALD 486

Re Webster and Repatriation Commission (AAT 12126, 8 August 1997)

VZM and Secretary, Department of Family and Community Services [2000] AATA 186

Copping v Secretary, Department of Social Security (1987) 12 ALD 634

Re Farrow and Secretary, Department of Social Security (AAT 2708, 13 June 1986)

REASONS FOR DECISION

9 December 2005 Ms N Isenberg, Member

DECISION UNDER REVIEW

1.      The decision under review is the decision of the Social Security Appeals Tribunal (“SSAT”) dated 17 May 2005 which affirmed the decision of the original decision maker to cancel Mr and Mrs Myers age pensions due to the assessment of assets by Centrelink.

APPEARANCES

2.      A hearing was held before me on 1 December 2005 at which Mr and Mrs Myers were self-represented.  Centrelink was represented by Luke Carter, an advocate from the Centrelink Service Recovery Team.

3.      I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which I took into evidence.  These included written submissions by the Applicants.

BACKGROUND

4.      Mr and Mrs Myers each hold a one quarter share, as joint tenants, of a property at 13 Seaview Street Dunbogan (“the Property”).  On 22 July 2005, the Australian Valuation Officer (“AVO”) valued the Property at $550,000.  As a result, Centrelink deemed the value of Mr and Mrs Myers’ share of the Property to be $275,000. (T32)

5.      On 23 July 2004, Centrelink decided to cancel Mr and Mrs Myers’ pensions because the value of their assets was above the allowable limit. (T34)

6.      Mr Myers told me that in about 1974 he and his wife (as joint tenants) bought the Property as tenants in common with his sister and her husband (also as joint tenants).  His brother-in- law died and the share in her Property was then owned by his sister (1/2 share) and the Myers as to the other 2/4 share.  On his sister’s death that share in the Property was left to her three sons.  At one stage, one of the sons wished to dispose of his share but was unable to do so, and instead, apparently gave it to his brothers.

7.      The two brothers, the Myers’ nephews, helped Mr Myers build the house on the property.

8.      Mr Myers said that the property had been bought and the house constructed as a family holiday home for the Myers family and the Ferry family (ie the family of Mr Myers’ sister).

9.      He said the arrangement between the families is strict as to financial contribution and usage.  The property is not rented at all and is frequently used by all members of the extended family; for example, the Myers’ daughter recently spent three weeks there, and the extended family will be there over Christmas.

10.     Mr Myers said that his nephews have no intention of selling the property and neither do he and his wife.  His children love it too and would ‘kill him’ if it was sold.  The Property has been in the family for 30 years and Mr Myers said that the family intends to keep it that way by handing it down through the generations.  Mr Myers conceded that the Property could be sold but that they have decided that it will not be sold.

ISSUE BEFORE THE TRIBUNAL

11.     The main issue before the Tribunal is whether it is correct to include half the value of the Property as an asset for the purposes of determining Mr and Mrs Myers’ eligibility for age pension. 

This entails consideration of:

·the value of the Property

·whether the property is an ‘unrealisable asset’

·whether Mr and Mrs Myers will suffer financial hardship if the Property is classified as an unrealisable asset

LEGISLATION

12. The relevant legislation in this matter is sections 11 and 1129 of the Social Security Act 1991 (‘the Act”). Section 1129 of the Act provides as follows:

“1129   Access to financial hardship rules—pensions

1129(1)     If:

(a)       either:

(i)a social security pension is not payable to a person because of the application of an assets test; or

(ii)…; and

(b)       either:

(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii)…; and

(c)the person, or the person's partner, has an unrealisable asset; and

(d)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

(1A)     …).

1129(2)….”

EVIDENCE, CONSIDERATION OF ISSUES and FINDINGS

13.     In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.

What was the value of the property?

14.     In a report dated 26 July 2004 Ray White Real Estate, Laurieton valued the Property at between $470,000 and $490,000. (T35).  Centrelink accepted that the Myers’ share of the value of the property, in the event that the Property was to be sold, was $240,000.

15.     Mr and Mrs Myers also agreed that if the property were sold their share (namely 2/4) of the proceeds of sale, would be $240,000.  Mr and Mrs Myers posited however that the Property should be valued by Centrelink at $0 because it is an unrealisable asset.  In support of this argument, Mr Myers pointed to the Guide to Social Security Law (“the Guide”) which provides that assets are (only) generally to be assessed at their net market value. (T4/18) However, this provision relates to a different Division of the Act to that under consideration in this matter.

16.     Section 11(2) provides that “the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset”.  Therefore it follows that the Myer’s interest in the Property can be assessed notwithstanding that there is more than one owner.  

17.     I find that the value to be attributed to the two one quarter share interest owned by the Myers in the Property based on an assessment of market value is $240,000.00.

Is the property an ‘unrealisable asset’?

18.     If it is established that the Property is an unrealisable asset then it may be excluded from an assessment of the Myers' assets.

19. Subsections 11(12) and 11(13) of the Act define ‘unrealisable asset’ as follows:

“11(12)     An asset of a person is an unrealisable asset if:

(a)       the person cannot sell or realise the asset; and

(b)       the person cannot use the asset as a security for borrowing.

11(13)For the purposes of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:

(a)the person could not reasonably be expected to sell or realise the asset; and

(b)the person could not reasonably be expected to use the asset as a security for borrowing.”

20.     Mr Myers invited my attention to his written submission wherein he outlined the reasons he considered the property should be regarded as an unrealisable asset as follows:

“The Centrelink valuation method fails to take into account all relevant factors and considerations likely to affect the value of the asset such as:

a.   Multifamily holiday home

b.   Cannot borrow against the asset (quarter share)

c.   Cannot be lived in

d.   High maintenance cost due to beach location

e.   Agreement of other shareholders before use

f.    Derives no income

g.   Share in up keep duties”

21.     Guidance as to unrealisable assets is set out in paragraph 4.6.7.50 of the Guide, which is published by Centrelink for assistance in administering the Act. Whilst the Tribunal is not bound to apply policy guidelines of the kind referred to in the Guide (see Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), it will usually do so unless there are cogent reasons in a particular case for not doing so: see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645; Re Dainty and Minister for Immigration and Ethic Affairs (1987) 6 AAR 259 at 267; and Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82 at 86.

22.     Mr Myers invited my attention to the following entry under the title ‘Unable to sell or borrow against an asset’ in 4.6.7.50 of the Guide:

“a customer is unable to sell or borrow against an asset if:

…:

·“the asset is owned jointly with another person and this person refuses to consent to the sale of the asset, OR

·The asset is owned as a tenant in common and the practical effect of this form of ownership is that the asset would be unsaleable”

23.     In this regard Mr Myers noted that his nephews do not propose to sell the property.  He also noted that his third nephew had been unable to sell his 1/6 share and had to ‘give it’ to his brothers.  He therefore submitted that the Myers’ share was also unsaleable.

24.     I reviewed the relevant case law and in particular cases where there has been a co-ownership of an asset.  The current matter is not similar to the tragic family circumstances in Re Nagle and Secretary, Department of Social Security 15 ALD 486 or Re Webster and Repatriation Commission (AAT 12126, 8 August 1997).  Nor are there legal impediments to sale such as in VZM and Secretary, Department of Family and Community Services [2000] AATA 186

25.     I do not consider Mr Myers’ evidence to amount to an inability to sell the property but rather an unwillingness to do so.

26. Further, I note that there are statutory provisions, such as s66G of the Conveyancing Act 1919 (NSW) that specifically provide for the appointment of a trustee in respect of property in circumstances where co-owners cannot agree as to sale.

27.     I now turn to consider if it is unreasonable to expect the Myers to realise the asset.  I note the Guide in this respect provides examples of circumstances where it would be unreasonable to expect the property to be sold:

“For pensioners customers accept that it would be unreasonable for them to sell an asset if:

·the asset is a property AND the customer has lived there for at least 20 years AND the property cannot be subdivided to allow the customer to retain the portion their home is on, OR

…

·the asset is a house occupied by a near relative AND the near relative has lived in the house for at least 10 years OR the near relative has previously provided care for the customer in the house (which was formerly the customer’s home) OR the near relative is a handicapped son or daughter and the customer is providing the house to promote the child’s independent living OR the near relative has dependent children and the family income of the near relative does not exceed the FTB income ceiling.”

28.     The nature of the Property does not readily fall within any of the examples outlined.  I accept that the Myers and their extended family have a deep emotional attachment to the property and that it has provided them all with many joyful times over the last 30 years.  It is understandable that they all wish this arrangement to continue.

29. I reviewed the relevant cases in relation to section 11(13) of the Act. In Re Farrow and Secretary, Department of Social Security (AAT 2708, 13 June 1986) and Copping v Secretary, Department of Social Security (1987) 12 ALD 634 personal factors were taken into account when considering whether it was unreasonable for a person to sell or realise an asset. However, those cases dealt specifically with the special plight of farmers. In Boyd and Secretary, Department of Social Security (AAT 9652, 4 August 1994) Tonkin and Secretary, Department of Social Security (AAT 4521, 29 July 1988) and Murphy and Secretary, Department of Family and Community Services [1999] AATA 264 the Tribunal considered whether unfortunate family circumstances caused it to be unreasonable for each applicant to sell or realise his or her asset. In the present case, there are no unfortunate family circumstances which make the sale of the property difficult.

30.     The test of whether it is ‘reasonable’ for the Myers to sell or borrow against an asset is an objective one.  The Myers desire to provide a holiday home for their extended family must be balanced with the community expectations that those members of the community with assets use those assets to support themselves.

31.     I therefore find that the property is therefore not an ‘unrealisable asset’.

Is there financial hardship if the property is an unrealisable asset?

32.     Having come to the view that the property is not an unrealisable asset, it was not necessary for me to consider if the Myers would be in financial hardship should the property be included in their assets. 

33.     I note though that Mr Myers told me that their annual taxable income was in the vicinity of $40,000.

DECISION

34.     The Administrative Appeals Tribunal affirms the decision under review.

I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg

Signed:  A. Krilis, Associate

Date of Hearing  1 December 2005
Date of Decision  9 December 2005
Advocate for the Respondent        Luke Carter
Representative for the Applicant    Self - Represented