Petselis and Secretary, Department of Family, Community Services and Indigenous Affairs

[2006] AATA 692

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 692

ADMINISTRATIVE APPEALS TRIBUNAL          № V2005/981

GENERAL ADMINISTRATIVE DIVISION

Re:           BYRON PETSELIS

Applicant

And:       SECRETARY,
  DEPARTMENT OF FAMILY,

COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal:       Mr C. Ermert, Member

Date:10 August 2006

Place:Melbourne

Decision:The Tribunal affirms the decision under review

. . . . . . . . . . . . . . . . . . . . . . . .

Member 

SOCIAL SECURITY – benefits – age pension – value of assets – property valuation

Social Security Act 1991

Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474

Re Secretary Department of Employment, Education, Training and Youth Affairs and McFarlane (1996) 44 ALD 30

REASONS FOR DECISION

10 August 2006  Mr C. Ermert, Member

INTRODUCTION

1.      Mr and Mrs Petselis are homeowners and live at 14 York Street, Kew. They also own a property at 41 Henry Street, Hawthorn (the Property), which is tenanted.  Until 24 May 2005 Mr and Mrs Petselis were in receipt of age pension payments.  For Mr and Mrs Petselis to continue to receive the pension the value of their combined assets must not exceed $485,000.  When combined with the couple’s other assets, this means that the value of the Property must not exceed $470, 038.

2.      Although Mr Petselis has a sworn valuation of $450,000 for the Property Centrelink, which acts as agent for the respondent, obtained a valuation of $600,000 from the Australian Valuation Office (AVO).

3.      On the basis of the AVO valuation a Centrelink officer cancelled Mr Petselis’ age pension.  Mr Petselis appealed that decision to the Social Security Appeals Tribunal (SSAT).  The SSAT affirmed the Centrelink decision and Mr Petselis has applied to this Tribunal for a review of the SSAT decision.

THE ISSUE

4. Sections 44 and 1064 of the Social Security Act 1991 (the Act) set out the way in which the rate of age pension is calculated.  The age pension is subject to an income test and an asset test.  The rate of payment is calculated under the two separate tests and the test that results in the lower (or nil) rate is the one that applies.  In this case the asset test applies.  Persons whose assets are over a certain threshold may still receive the age pension, but the rate of pension is progressively reduced as the value of the assets increases, until the rate is reduced to nil.

5.      The assets test is dependent, in part, on whether a person is single or partnered and whether the person is a homeowner or non-homeowner.  A person is partnered if they are a member of a couple.  Section 4 of the Act defines a member of a couple as, among other things, a person who is legally married and not living separately and apart, from the other person on a permanent or indefinite basis. The term homeowner is defined in subsection 11(4) of the Act as a person who has a right or interest in the place they occupy and that right or interest gives the person reasonable security of tenure.

6.      There is no dispute that Mr Petselis is married and living with his wife and that he owns the property in which he and his wife live.  As such the relevant requirements of sections 4 and 11(4) are satisfied.  That means that the relevant assets value limit is determined by reference to Mr Petselis’ status as partnered and a homeowner.  In such a situation, and at the relevant date of decision, the rate of pension is reduced to nil when the combined value of a person’s assets exceeds $485,000.

7.      There was no dispute between the parties regarding the values of the other assets owned by Mr and Mrs Petselis.  Neither was there a dispute that these values allowed an upper limit of $470,038 for the value of the Property before the age pension reduced to nil.  Thus the only issue in dispute in this matter is whether the value of the Property is greater than $470,038.

is the value of the property more than $470,038?

8.      Mr Petselis represented himself at the hearing.  In his evidence he stated that he had obtained three different valuations, none of which was greater than $450,000. He also stated that he had objected to the Capital Improved Value of $480,000, applied by the City of Boroondara in their Annual Valuation and Rate Notices for 2004/05.  He considered the value should have been only $450,000, unchanged from the previous year.  His reasoning was that although the site value may have increased, the value of the house would have decreased because of its deterioration.

9.      Mr A. Ciancio, a Certified Practising Valuer of seven years experience, from the firm Stockdale & Leggo, gave evidence in support of Mr Petselis.  Mr Ciancio had provided a written report dated 9 June 2005 which valued the Property at $450,000. He confirmed his valuation of the Property in oral evidence.  The principal factors that influenced his opinion were the proximity of the Property to a noisy railway bridge, the poor condition of the house and comparisons with recent sales of nearby properties.  The properties to which he referred and his comments on those properties as compared to the subject Property are:

·30 Malmsbury Street, Hawthorn, sale price $475,000, similar size, not near railway line;

·17 Allen Street, Hawthorn, sale price $479,500, smaller allotment, renovated, superior condition; and

·15 View Street, Hawthorn, sale price $511,000, larger allotment, superior house, superior location.

10.     In answer to questions from Ms J. Hume, the Centrelink advocate representing the respondent, Mr Ciancio stated that he performed between 120 and 130 written valuations per month.  He did not recollect whether the Malmsbury property adjoined a commercial property, but in any case he preferred a property adjoining shops rather than one opposite the nearby gardens.  Mr Ciancio reiterated that the noise from railway lines detracted from property values.  He also stated that he did not look at the Property as a true development site because Mr Petselis did not have plans and a permit for a development.  Mr Ciancio stated that in a development situation the value would be increased by over $100,000.

11.     Mr M. Trevethick, a Certified Practising Valuer from the AVO, gave evidence for the respondent.  He listed his qualifications as including a Bachelor of Property from RMIT.  He has been with the AVO for 15 years.  In that time he has performed between 2,000 and 3,000 valuations and currently performs 30 to 35 residential property valuations per week.

12.     Mr Trevethick initially conducted a kerbside view of the property followed by a full inspection on 24 June 2005.  He provided a written valuation dated 27 June 2005 valuing the property at $600,000.  The factors that influenced his valuation of the Property were its location in Central Hawthorn, midway between two shopping strips and central for schooling, the large size of the property (358 square metres), that it is a corner block, it has off-street parking for two to three cars and it is in a heritage overlay area ensuring that any new developments in the area would remain compatible with the area.  In his oral evidence Mr Trevethick confirmed his opinion that the value of the Property value was $600,000.  As the house was not renovated Mr Trevethick’s valuation is primarily the land value.  In his opinion the land would be highly desirable for redevelopment.  He considered the location opposite the gardens to be desirable.

13.     In making his valuation Mr Trevethick also considered the prices obtained from the Real Estate Institute of Victoria (REIV) data base for the sale of nearby comparable properties.  They are listed in the Schedule of Sales Evidence attached to his valuation report.

14.     Mr Trevethick commented on properties used by Mr Ciancio as comparators:

·30 Malmsbury Street – inferior and undesirable location being only 50 metres from the Geebung Hotel which is very noisy, with only a lane between the property and the back of shops;

·17 Allen Street – no off-street parking, smaller property, almost identical proximity to the railway line; and

·15 View Street – a semi-detached house and therefore not comparable with the Property.

15.     In Mr Trevethick’s opinion the Stockdale & Leggo valuation did not put enough weight on the fact that the Property is opposite the gardens, it is in a superior location, and that it has a large block of land.

16.     In answer to questions from Mr Petselis, Mr Trevethick stated that the full site inspection confirmed the preliminary valuation made as a result of his kerbside valuation and review of the REIV data base.  He did not change his preliminary valuation as the value is predominantly the value of the land.  The house has not been renovated and has little value.  In response to a question on the narrow width of the side street, Mr Trevethick said that the side street equally affects the Allen Street property, and the Allen Street property has no off-street parking.

17.     When asked about council valuations for rate purposes, Mr Trevethick stated that their purpose was to collect revenues and that they are usually out of date and are conservative to avoid too many objections from the ratepayers.  He considered that council rate valuations are not relevant for the purposes of determining market values.

18.     Ms Hume submitted that the AVO valuation of $600,000 should be preferred to the Stockdale & Leggo valuation of $450,000 because Mr Ciancio does not appear to have considered the proximity of the property to the gardens, and that it is a corner block with access for car parking.  She noted that a major consideration in Mr Ciancio’s valuation was the poor condition of the house.  Ms Hume submitted that this indicates that Mr Ciancio had not considered the highest and best use of the property, as he was required to do by ReWoodhouse and Secretary Department of Social Security (1987) 12 ALD 474.

19.     In Re Woodhouse the Tribunal considered the principles to be followed in the valuation of property for the purposes of the Social Security Act 1947 (Cth), the act in force at that time. At paragraph 30 the Tribunal said:

This Tribunal adopts the principles of valuation stated by the court in both Spencer's  case (Spencer v Commonwealth of Australia (1907) 5 CLR 418) and R v Brown, supra, (R v Brown (1867) 2 LRQB 630) as being appropriate in obtaining the market value of property for the purposes of the Act: see Re Reynolds, supra.  In particular, both cases are authority for the propositions that in assessing market value one must both ascertain the highest and best use of the property and assess the price that a desirous buyer would pay to a willing but not anxious seller to purchase the property (emphasis added).

20.     As part of her submission, Ms Hume stated that Mr Ciancio appeared to have prepared his valuation report for mortgage purposes and that as a result his valuation might be more conservative than it would otherwise be.  In support of that submission, Ms Hume referred to ReSecretary, Department of Employment, Education, Training and Youth Affairs and McFarlane (1996) 44 ALD 30. This issue arose because Mr Ciancio had used a form containing the words RESIDENTIAL VALUATION and SECURITY ASSESSMENT for Mortgage Purposes.  However, I accept Mr Ciancio’s statement in his letter of clarification on this issue, dated 20 September 2005, that the valuation of $450,000 represents the true value of the property as at 9 June 2005.

21.     Ms Hume further submitted that the AVO valuation is independent, it considered the highest and best use of the property, particularly its redevelopment potential, and it is supported by appropriate comparable sales in the area.

22.     After considering the evidence available to me I prefer the $600,000 valuation of the AVO for the following reasons:

·     Mr Trevethick considered the development potential of the Property in assessing its value for the highest and best use as required by Re Woodhouse;

·     Mr Ciancio did not consider the development potential in his valuation.  However, he acknowledged  that had he done so, the valuation would be increased by over $100,000, making his valuation of the Property over $550,000, which is much closer to the AVO valuation; and

·     Mr Trevethick gave sound reasons for disagreeing with Mr Ciancio’s comparisons of recent sales of nearby properties, at the same time as providing evidence of other comparable sales in the area.

23.     I find, therefore, that the AVO valuation of $600,000 reflects the market value of the Property at 41 Henry Street, Hawthorn.  This means that the value of the Mr and Mrs Petselis’ combined assets exceeds the $485,000, which is the upper limit for Mr Petselis to be eligible for the receipt of an age pension.  Therefore, Mr Petselis is not eligible to receive an age pension and the decision to cancel his pension is correct.

DECISION

24.     The decision of the SSAT is affirmed.

I certify that the twenty‑four (24) preceding paragraphs are a true copy of the reasons for the decision herein of

Mr C. Ermert, Member

signed:   . . . . . . . . . . . . . . . . . . . . . . .

Associate

Date of Hearing:  30 June 2006

Date of Decision:  10 August 2006

Advocate for the applicant:          Self-represented

Advocate for the respondent:       Ms J. Hume, Centrelink Legal Services Branch