Pecikoza and Secretary, Department of Family and Community Services

[2004] AATA 1051

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1051

ADMINISTRATIVE APPEALS TRIBUNAL       )
  )          N2004/551   

GENERAL ADMINISTRATIVE DIVISION		)
Re		MILAN PECIKOZA

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal  Ms N Isenberg, Member

Date             11 October 2004
Place             Sydney

Decision The decision under review is affirmed.

[SGN] Ms N Isenberg

Member

CATCHWORDS

SOCIAL SECURITY – disability support pension –  disability support pension cancelled - Applicant owned an investment property – investment property valued over the threshold amount for eligibility of pension – investment property valued at $490,000 - dispute regarding the value of the investment property – the Applicant refused to consent to an inspection of the investment property – Applicant failed to produce evidence that value of the investment property was less than $490,000 – decision under review is affirmed.

LEGISLATION

Social Security Act 1991 – sections 11(1), 117, 98(1), 1118(1)(a), 1118(3), 1121(1), 1064 Module A1

Social Security (Administration) Act 1991 – section 80(1)

REASONS FOR DECISION

11 October 2004 Ms N Isenberg, Member

BACKGROUND

1. Mr Pecikoza (the “Applicant”) claimed a disability support pension on 24 July 1998 (T6).  He advised in his claim that he owned the home in which he lived at 37 King Street, St Marys and that he owned an investment property at 10 Barbara Crescent, Merrylands (“the property”) (T6: page 44).  In a questionnaire completed on 24 July 1998 he estimated that the value of the property was $260,000 and advised that he owed $50,000 on the property (T8: page 51).

2. A disability support pension was granted to Mr Pecikoza from 23 July 1998 at a reduced rate due to the value of his assets and he was notified of the grant on 26 August 1998 (T9).  The notice advised him, among other things, that his total assets had been valued at $220,004, which included real estate/business assets valued at $210,000 and personal effects and financial investments valued at $10,004.  The notice also advised that he was required to notify Centrelink within 14 days if, among other things, the value of his assets, other than financial assets, was more than $220,246 (T9: page 54).

3. On 4 August 2003 Mr Pecikoza completed an “Income and Assets Update” questionnaire (T14) in which he advised, among other things, that the value of the property was $260,000 and that the amount owing on the property was $50,000 (T14: page 72).

4. On 18 September 2003 the Australian Valuation Office (“the AVO”) was requested to provide a valuation of the property.  On 26 September 2003 the AVO provided a valuation of $490,000 (T15).

5. On 1 October 2003 Mr Pecikoza’s pension was reassessed, taking into account the information provided in the “Income and Assets Update” questionnaire and the AVO valuation of the property.  The reassessment resulted in the cancellation of his pension and he was advised accordingly in a notice dated 1 October 2003 (T18).  The notice advised, among other things, that his pension had been cancelled because the value of his assets was above the allowable limit and that the value of assets taken into account was $450,007.

6. On 21 October 2003 Mr Pecikoza sought a review of the decision, indicating that his income from the rental of the property was insufficient for his support (T20).  He was asked to complete a real estate details questionnaire if he disagreed with the valuation.  He completed the questionnaire on 31 October 2003 (T23).  In the questionnaire he said, among other things, that the value of the property was $260,000 when he bought it in 1998 but he did not know the exact current value.  He also indicated that the property was mortgaged and that the amount he owed was $50,000.

7. Mr Pecikoza reportedly declined to complete an authority for inspection of the property (T19).

8. On 4 November 2003 the original decision-maker notified Mr Pecikoza that they had decided the original decision was correct (T24).  In reaching the decision the original decision-maker took into account the following factors:

• The property had been valued at $490,000 by the AVO; and

• Centrelink was unable to review this valuation as Mr Pecikoza was not prepared to allow the AVO to visit the property.

1. On 29 December 2003 an authorised review officer affirmed the decision to cancel Mr Pecikoza’s pension (T28 and T29)

2. On 20 January 2004 Mr Pecikoza applied to the SSAT for review of the decision (T31). 

3. On 25 February 2004 the SSAT affirmed the decision (T2).   

ISSUE BEFORE THE TRIBUNAL

1. The issues to be decided by the Tribunal are whether:

• the value of Mr Pecikoza’s assets were assessed correctly

• the rate of the disability support pension payable to Mr Pecikoza was nil

• the decision to cancel his disability support pension was correct

LEGISLATION

1. The relevant legislation in this matter is the Social Security Act 1991 (“the Act”), in particular section 117. That section, so far as is relevant, provides as follows:

   “ 117 How to work out a person's disability support pension rate
   
   

   A person's disability support pension rate is worked out:

   (a) if the person is not permanently blind and paragraph (b) does not apply to the person—using Pension Rate Calculator A at the end of section 1064 (see Part 3.2); or

   (b) if the person is not permanently blind and has not turned 21—using Pension Rate Calculator D at the end of section 1066A (see Part 3.4A); or

   (c) if the person is permanently blind and paragraph (d) does not apply to the person—using Pension Rate Calculator B at the end of section 1065 (see Part 3.3); or

   (d) if the person is permanently blind and has not turned 21—using Pension Rate Calculator E at the end of section 1066B (see Part 3.4B).”

THE HEARING

1. A hearing was held on 17 September 2004 at which the Applicant was self-represented, and the Respondent was represented by Mr G Richardson from the Centrelink Service Recovery Team.

2. 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.

3. The Applicant gave sworn evidence and was cross-examined on behalf of the Respondent.  I also asked him questions.

4. Mr Pecikoza told me that he had bought the property at Merrylands in 1998 for $260,000.  In addition he had to pay stamp duty of about $10,000 and legal costs.  There was a mortgage to St George Bank for $50,000.

5. He was immediately able to rent out the property.  He had 2 tenants before the current tenant who has rented the property continuously since 2001 at a weekly rental of $270.  The agent takes $86 per month, so on average, he receives about $1000 per month.

6. The property is a 3 bedroom brick veneer house with a carport on a small block of land.

7. He said it was “not true” that the property was worth $490,000, as valued by the AVO, because he had paid only $260,000.  When asked to comment on the Sydney property market he said that the value of the property could still not have jumped so much. 

8. Mr Pecikoza was asked if he had organised a valuation himself or asked the agent about the value of the property.  He had not done either.

9. He said he had not contemplated selling the house, nor has he contemplated increasing the rent and has not discussed this with the agent.  He knows that there are a lot of properties available for rent in the Merrylands area and, notwithstanding that the rent has remained the same since 2001, he does not want to lose the tenant by putting up the rent.

10. His mortgage remains at about $50,000 as he has been mostly paying off interest.

11. He said that he is unable to live on $140 per week, which is what is left after payment of the mortgage.  While his daughter receives “Austudy” she uses that money to pay for petrol and her mobile phone.  Otherwise he supports her.  Since his pension has been cancelled he has had to borrow money from a friend as bills come in.  Currently he owes about $1000 to this friend.

12. He did not take up Centrelink’s offer of financial advice, although he has discussed his situation with Centrelink officers many times, but has been told he will “not receive one cent”.

13. I asked him about his refusal to permit the AVO to visit the premises for a review of its valuation.  He said: “Why send them a second time?  Same people, so it would be the same”.

14. He said he thought “Social Security” wanted to cut off his pension and consequently had arranged this valuation.  He questioned the fact that “Social Security helps 14 million people in Australia, so why can't they give me a half pension?”

CONSIDERATION OF EVIDENCE AND FINDINGS

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

2. The AVO assessed the value of the property at $490,000.  Mr Pecikoza did not produce any evidence to suggest that the valuation is inaccurate, although he asserted that that was the case.  He has not discussed the value of his property with his managing agent.

3. He conceded that property values in Sydney may have increased since the time of purchase, some 6 years ago, but did not think that the increase was quiet so high.

4. When Centrelink proposed a review of the valuation he declined to authorise an on-site inspection of the property. 

5. In these circumstances, in the absence of evidence to the contrary, I find that value of the property should be accepted as $490,000.

6. There was no dispute that Mr Pecikoza meets the medical requirements for eligibility for the disability support pension.  It remained to consider whether a pension was payable to Mr Pecikoza, given that he owns an investment property valued at $490,000.

7. Section 117 of the Act (T3: page 10) explains how a person’s disability support pension rate is worked out in accordance with a Pension Rate Calculator in section 1064 Module A1 of the Act (T3: page11.) Essentially, a person’s income and assets are taken into account when determining the rate of their pension.

8. In Mr Pecikoza’s case the only income taken into account in applying the ordinary income test was $5,483.00, comprised of the annual net rental income from the property and $0.17, the annual deemed income on his then bank balance of $7.00.

9. Section 11(1) of the Act says that in the Act the term “asset” means “property or money”. Real property falls within this definition. Section 1118(1)(a) of the Act explains that in calculating the value of a person’s assets, the value of the person’s principal home only is to be disregarded. 

10. The value of assets taken into account in applying the assets test to Mr Pecikoza on 1 October 2003 was $450,007. This was comprised of: $440,000, the net value of the property obtained by deducting the value of the mortgage on the property, $50,000, from the gross value of the property, $490,000, as assessed by the AVO. (Section 1121(1) of the Act provides for the value of a particular asset of a person to be reduced by the value of an encumbrance over that asset. Thus, the gross value of the property was reduced by the value of the mortgage over the property); $10,000, the deemed value of household property and personal effects (as provided by subsection 1118(3) of the Act); and $7, the bank account balance.

11. Under the assets test, as at 1 October 2003, a single homeowner could receive a full pension if the value of the person’s assets was $149,500 or less.  A part pension could be paid if the value of the person’s assets was $302,500 or less.  If the value of the person’s assets was greater than $302,500 the rate payable under the assets test was nil.

12. In Mr Pecikoza’s case, as at 1 October 2003, the value of his assets (that is, primarily the Merrylands property) excluded him from eligibility.

13. Section 98(1) of the Act provides that a disability support pension is not payable to a person if the person’s disability support pension rate would be nil.

14. Section 80(1) of the Social Security (Administration) Act 1999 says that if the Secretary is satisfied that a social security payment is being paid to a person to whom the payment is not payable, the Secretary is to determine that the payment is to be cancelled or suspended. 

15. I understand Mr Pecikoza’s disappointment that his already-reduced disability support pension has now been cancelled.  Further, I accept that he and his daughter are likely to have cash flow difficulties if all they are left with after the mortgage repayments is $140 per week, plus her student benefits.  While, as Mr Pecikoza pointed out, a large number of Australians receive financial support in some form from the Government, it is not the intention of the legislation that persons with significant property holdings, in addition to their own home, should be supported by the community.

DECISION

1. The decision under review is affirmed.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of MS N ISENBERG,
MEMBER

Signed: M Di Condio
             Associate

Date/s of Hearing  17 September 2004  
Date of Decision  11 October 2004      
Representative for the Applicant               Self-Represented

Representative for the Respondent          Mr Gary Richardson, Centrelink Service Recovery Team