PARNELL and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2010] AATA 9

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 9

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/2303

GENERAL ADMINISTRATIVE DIVISION		)
Re		RAYMOND AND VALMA PARNELL

Applicants

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

Respondent

DECISION

Tribunal M J Carstairs, Senior Member

Date8 January 2010

PlaceBrisbane

Decision The Tribunal affirms the decisions under review.

.................[Sgd].............................

Senior Member

CATCHWORDS

SOCIAL SECURITY – age pension – rejection of claims – value of combined assets – whether assets can be classified as “unrealisable assets” – decisions under review affirmed

Administrative Appeals Tribunal Act 1975 (Cth), s 34J

Social Security Act 1991 (Cth), ss 11, 37, 1064, 1064-G, 1121, 1129

Social Security (Administration) Act 1999 (Cth), s 44

REASONS FOR DECISION

8 January 2010 M J Carstairs, Senior Member

1.           Raymond and Valma Parnell claimed age pension on 23 October 2008. At the time of their claims, they had various assets, including an investment property, a self-managed superannuation fund, other managed investments, as well as savings and shares. In addition, they had other personal effects, including a boat, two cars and household goods.  Age pensions are assets tested, and the asset value limit for age pension at the time of their claims was $873,500[1].  As their assets were calculated, Centrelink rejected the Parnell’s’ claims as their combined assessable assets exceeded the relevant limit[2].

[1]        A Guide to Australian Government Payments (20 September – 31 December 2008), p 19.

[2]        Social Security Act 1991, s 37 and Social Security (Administration) Act 1999, s 44.

THE ISSUES

2.           The main issue before me is whether Centrelink was correct in deciding to  reject the claims. This question turns upon the value of their assets, and also whether it is true, as they submit, that the economic downturn had rendered a number of their assets unrealisable and Centrelink had not taken this factor sufficiently into account in working out their pension entitlements.

3. The parties have agreed to have their dispute about these issues determined on the written materials, without the need for a hearing: s 34J of the Administrative Appeals Tribunal Act 1975.

LEGISLATION

4.      Age pension is paid in accordance with strict legislative provisions, found in the Social Security Act 1991. The actual rate calculation process is set out in Pension Rate Calculator A, at point 1064 of the Act, with the provisions for assets testing in the calculation process set out at point 1064-G of the Act.   Where people are homeowners and are members of a couple, their assets are pooled and shared on a 50/50 basis. Any asset subject to a charge or encumbrance will have its value reduced accordingly[3].

[3] Section 1121(1) of the Act.

THE ASSETS AND THEIR VALUATIONS

At the time of the claims, Mr and Mrs Parnell’s assets were:

§  their home (“the Paradise Waters property”), which, being their principal place of residence is exempt from asset testing;

§  an investment property (“the Runaway Bay property”);

§   a managed investment with City Pacific First Mortgage Fund;

§  a self-managed superannuation fund with investments in the City Pacific First Mortgage Fund;

§  savings in bank accounts and term deposits; and

§  a boat, motor vehicles, and household contents.

5.      Mr and Mrs Parnell also have a “Complete Home Loan” with the Commonwealth Bank, and this loan is secured by a mortgage over both the Paradise Waters and Runaway Bay properties.

6.           Mr and Mrs Parnell’s investments have been affected by the downturn in values in the property market and their managed investment in the City Pacific First Mortgage Fund has been frozen since March 2008. The Fund has since gone into liquidation. Furthermore, companies in which they held shares have been liquidated, or are in the process of liquidation.

7.      Both the Paradise Waters and Runaway Bay properties have been placed on the market and have failed to attract buyers at a price at which Mr and Mrs Parnell would be prepared to sell.  Mr and Mrs Parnell have not been able to refinance the properties.

8.      There have been several valuations of the Runaway Bay property and these can be summarised as follows, taking into account the value of the mortgage:

§An Australian Valuation Office valuation of $2,500,000 in 2008[4] - asset value for Centrelink purposes :$1,374,894;

§Commonwealth Bank Australia valuation in 2006 of $1,975,000 - asset value: $1,152,001; and

§St George Bank valuation of $1,850,000 in 2009 - asset value :$1,203,614.

[4]        T20, p 120.

9.           Mr and Mrs Parnell told Centrelink at the time of their claim that they had, in addition, $1,400,000 in managed investments with City Pacific First Mortgage Fund, and a self-managed superannuation fund with investments in the City Pacific First Mortgage Fund.  As noted, the units held in the Fund have been frozen and the value of the property owned by the Fund has fallen significantly.   Centrelink’s overall assessment of Mr and Mrs Parnell’s total assets at the time of the claims was in excess of $4,000,000[5].

[5]        T15, p 110.

10. Mr and Mrs Parnell contend that the Runaway Bay property is an “unrealisable asset”, as defined in s 11 of the Act, as they have not been able to sell the property. It has been on the market for over 12 months; at a listed price of $2,800,000[6].   They are concerned that selling under its true value would not allow them to clear their mortgage.

[6]        T1.

11. Section 11 of the Act provides that an asset may be classified as an “unrealisable asset” if a person cannot sell or realise the asset and the person cannot use the asset as security for borrowing.

12.     It may well be true that the Runaway Bay property is unrealisable at the present time, however as the Social Security Appeals Tribunal pointed out in their Reasons[7], such a conclusion does not assist Mr and Mrs Parnell, as their case does not fall for consideration under the hardship provisions at or soon after the time of their claim.  Mr and Mrs Parnell have not requested consideration under the “financial hardship” provisions of the Act.  

[7]        T2.

13.          The value of an unrealisable asset may be disregarded if a person lodges a request, by approved form, and the Secretary must be satisfied that severe financial hardship would result if access to the financial hardship provisions was not granted[8]. It seems that it is unlikely that Mr and Mrs Parnell would satisfy the severe financial hardship requirement, this being the advice that they have received from Centrelink, according to evidence given at the Social Security Appeals Tribunal hearing[9].   

[8] Section 1129(1) of the Act.

[9]        T2.

14.          For this reason, the Runaway Bay property must be taken into account in working out their assets.

15.     That being so, it is clear that the Runaway Bay property alone exceeds the combined assessable asset value limit, and therefore Mr and Mrs Parnell are not eligible to be paid age pension at the time of their claims. 

16.          For these reasons Mr and Mrs Parnell cannot be paid age pensions.  Their assets must be taken into account and they exceed the relevant asset value limit.

DECISION

17.          The Tribunal affirms the decisions under review.

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of M J Carstairs, Senior Member.

Signed: ...................[Sgd].........................................................
  Emily Clarke, Associate

Hearing on the Papers
Date of Decision  8 January 2010
The Applicants were self-represented
Advocate for the Respondent   Mr R Hamilton