Parton and Secretary, Department of Social Services (Social services second review)

[2023] AATA 1903

Parton and Secretary, Department of Social Services (Social services second review) [2023] AATA 1903 (30 June 2023)

Division:GENERAL DIVISION

File Number(s):      2022/1846 & 2022/5481

Re:Rosemary Parton and Raymond Parton  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Member P Ranson

Date:30 June 2023

Place:Brisbane

DECISION

The decision under review is affirmed. That means the residue of $179,710 from the sale of the former principal home of Mr and Mrs Parton is not an exempt asset.

..........................[SGD].......................

Member P Ranson

Catchwords

Social welfare and service — Age pension — Reduction of age pension — Proceeds from sale of home assess as an asset — 24-month assets exemption — Security of tenure — Delays beyond control in renovating other residence — Decision under review affirmed.

Legislation

Social Security Act 1991 (Cth)

Social Security (Administration) Act 1999 (Cth)

Secondary Materials

Social Security Guide - Version 1.307 - Released 8 May 2023

REASONS FOR DECISION

Member P Ranson

30 June 2023

INTRODUCTION

1. Mr and Mrs Parton sold their residence at Bald Knob in July 2020. They bought another property at Shelly Beach in January 2021. The Shelly Beach property was tenanted until March 2021, until they moved in. After the purchase, there was a residue of funds of $179,710 to be used for renovations on the Shelly Beach property. From their reading of the age pension rules, the residue would not be counted as a financial asset for up to 24 months. During the 24-months the funds would be consumed by the renovations on the Shelly Beach property. On the basis the residue would be an exempt asset, they applied for the age pension in April and May 2021 respectively.

2. On 6 October 2021, Mr and Mrs Parton wrote to Centrelink explaining their position regarding the residue.[1] Their letter includes a timeline including the renovations to the Shelly Beach property. The timeline of events relevant to this case looks like this:

   [1] T10. See also A2.

Date	What happened
3 June 2020	Contract to sell the residence at Bald Knob signed
27 July 2020	Settlement of the sale of the Bald Knob property
22 September 2020	Contract to buy the Shelly Beach property signed
20 January 2021	Settlement of the purchase of the Shelly Beach property
22 March 2021	Mr and Mrs Parton take up residence at Shelly Beach
16 April 2021	Mrs Parton applies for an age pension
19 May 2021	Mr Parton applies for an age pension

1. Centrelink assessed their entitlement to the age pension and counted the residue as a financial asset. Centrelink calculated Mr and Mrs Parton’s rate of pension accordingly and began paying them some age pension. At the hearing, Mr Summers for the Secretary, advised their age pensions had been cancelled retrospectively and the Secretary no longer contended they were being paid the correct amount. The amount of the residue of $179,710 is not in dispute.

2. The agreed issue in this case is whether the residue is an exempt asset for age pension purposes and for how long.

3. For the following reasons, the decision under review is affirmed. That means the residue of $179,710 from the sale of the former principal home of Mr and Mrs Parton is not an exempt asset.

   Calculation of the age pension

4. The rate of age pension is calculated as the lower amount derived from the income and assets tests. The relevant assets test thresholds in April and May 2021 were $401,500 and $880,500.[2] Below the lower threshold the amount of assets does not affect the calculation. Above the upper threshold, no pension is payable. For a homeowner couple, their combined income and combined assets are tested.

   [2] See paragraph 22 and 23 of the R SFIC.

5. A person is a homeowner if their right or interest they have in their principal homes gives them reasonable security of tenure.[3] The value of the applicants’ principal home is excluded from the assets test.[4]

   [3] Section 11A(10) of the Social Security Act 1991 (the Act). See also paragraph 29 of the SFIC.

   [4] Section 1118(2) of the Act.

6. Where a person sells their principal home and they apply or intend to apply the sale proceeds to build, rebuild, repair or renovate another residence, the principal home sale proceeds exemption can apply. That exemption allows a period of up to 12 months to build, rebuild, repair or renovate another residence before the sale proceeds are no longer exempt.[5] Where the person is making reasonable attempts to build, rebuild, repair or renovate another residence within a reasonable period after selling their principal home and they experience delays beyond their control in doing so, a period of up to 24 months exemption can apply.[6]

   [5] Subsection 1118(1B) of the Act.

   [6] Subsection 1118(2B) of the Act.

7. For the exemption to apply, the person must not yet have a right or interest in their principal home or if they do, they do not have security of tenure in it. The question of security of tenure gives rise to the only issue in this case. Once Mr and Mrs Parton purchased their replacement home, they had a right or interest in it. However, while it was tenanted, the tenant had security of tenure. Once the tenant vacated the property and Mr and Mrs Parton moved in, they had security of tenure.

8. Any residue of the proceeds of sale that were not used to purchase the Shelly Beach property that became the principal home, are an assessable asset. In this case that asset is in the form of money in the bank. If that residue is subsequently used to renovate or restore the newly purchased property, then as those proceeds are expended the value of the asset, being money in the bank, will decrease and if reported to Centrelink there may be a corresponding increase in the rate of pension.

   Does the exemption apply to Mr and Mrs Parton?

9. From the timeline Mr and Mrs Parton had a principal home at Bald Knob until

   
   

   20 July 2020, then exempt sale proceeds until 20 January 2021, then a right or interest but not security of tenure in the Shelly Beach residence until 22 March 2021 when the Shelly Beach residence became their principal home. However, these dates pre-date their age pension applications.

10. Mr and Mrs Parton never had more than one principal home in 2020 and 2021. They had a home, sold it and bought another. From 27 July 2020 to 20 January 2021, the sale proceeds would have been exempt had they applied for the age pension at that time, as they intended to buy another principal home and had not yet done so, therefore subparagraph 1118(1B)(b)(i) would have applied.

11. The elements of subsection 1118(1B) which apply to the circumstances of

    
    

    Mr and Mrs Parton from 20 January 2021 are:

    (a)Subparagraph 1118(1B)(b)(ii) and

    (b)Subparagraph 1118(1B)(c)(ii)

12. Read together they say the sale proceeds exemption applies where a person sells their principal home (Bald Knob) and they have a right or interest in another principal home (Shelly Beach) that the Secretary is satisfied does not give them reasonable security of tenure (while the property was tenanted) and the person applies the whole or a part of the proceeds of the sale to build, rebuild, repair or renovate another residence that is to be their principal home (Shelly Beach).

13. Where those conditions apply, subsection 1118(2) will apply to disregard the value of the land, the residence, and any other structure on it (from the assets test) for

    
    

    12 months.

14. The wording of subparagraph 1118(1B)(b)(ii) which goes directly to the issue in this case. Those words include: ‘does not give then reasonable security of tenure’.

    
    

    Mr and Mrs Parton did not have security of tenure in the Shelly Beach residence until the tenant moved out. They moved in on 22 March 2021 after which they had security of tenure so subparagraph 1118(1B)(b)(ii) ceased to apply and their entitlement to the sale proceeds exemption also ceased.

15. Subsection 1118(1B) does not contemplate the scenario where a person purchases another principal home for less than the proceeds of the sale of their previous principal home. Neither does it allow the residue of proceeds from the sale, to be spent at some future date on improving the new principal home.

    Does subsection 1118(2B) apply?

16. At the hearing, Mrs Parton discussed the application of subsection 1118(2B) to their case. The subsection allows the Secretary to determine a period of up to 24 months in which the sale proceeds of a principal home can be exempt from the assets test.

17. That subsection applies where:

    (a)a person who has sold their principal home is making reasonable attempts to purchase, build, repair or renovate another residence; and

    (b)the person has been making attempts within a reasonable period after selling the principal home; and

    (c)the person has experienced delays beyond their control in purchasing, building, repairing, or renovating the other residence.

18. Mrs Parton says that is clearly their situation as they had many difficulties and delays in renovating the Shelly Beach property, which was not completed even at the time of the hearing. For this reason, she felt they landed squarely within this exemption. Unfortunately, that is not the case because subsection 1118(2B) only applies if subsection 1118(1B) applies. As discussed above, subsection 1118(1B) ceased to apply once the tenant moved out and they gained security of tenure on 22 March 2021.

19. Once the exemption under subsection 1118(1B) ceased on 22 March 2021, the exemption under subsection 1118(2B) could never be enlivened.

    DECISION

20. The decision under review is affirmed. That means the residue of $179,710 from the sale of the former principal home of Mr and Mrs Parton is not an exempt asset.

I certify that the preceding 22 (twenty – two) paragraphs are a true copy of the reasons for the decision herein of Administrative Appeals Tribunal

.................................[SGD].......................................

Associate

Dated: 30 June 2023

Date of hearing:	4 April 2023
Applicants:	Rosemary Parton and Raymond Parton
Solicitor for the Respondent:	Mr Andrew Summers Services Australia