Re Ward and Secretary, Department of Education, Employment and Workplace Relations

[2011] AATA 811

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 811

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2011/0987

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		SUSAN WARD

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mr John Handley, Senior Member  

Date16 November 2011

PlaceMelbourne

Decision The Tribunal affirms the reviewable decision dated 21 January 2011.

(sgd) John Handley

Senior Member

NEWSTART ALLOWANCE – allowable assets value limit – not a member of a couple – property not principal place of residence ‑ not a home owner ‑ deduction of charge or encumbrance – decision affirmed

Social Security Act 1991 ss 11, 11A, 611, 1121(1), 1131, 1132

REASONS FOR DECISION

16 November 2011 Mr John Handley, Senior Member

1.      Ms Ward is the registered proprietor of a home unit in suburban Perth which is leased and from which she receives rental income.  She resides in rented accommodation in Melbourne.  On 23 September 2010 the respondent cancelled her Newstart Allowance on the basis that her assets were above an allowable assets value limit.  The Social Security Appeals Tribunal (SSAT) affirmed that decision on 21 January 2011.  Ms Ward seeks a review of that decision. 

2.      An asset is defined as property or money within s 11 of the Social Security Act 1991 (the Act).

3. Section 611 of the Act provides that Newstart Allowance is not payable to a person if the value of a person’s assets is more than the assets value limit.  In determining the assets value limit, regard must be had to whether a person is a member of a couple and whether the person is a home owner. 

4.      Ms Ward is not a member of a couple and the respondent agrees she is not a home owner because she does not have an interest in the home in which she resides (s 11(4) and s 11A(10) of the Act and respondent’s Statement of Facts and Contentions at [4.12]).

5.      Immediately before 20 September 2010, the assets value limit was $313,250 which was used by the SSAT in its decision.  From that date, and therefore at 23 September 2010, the assets value limit for a person in the position of the applicant was $307,000.  For reasons which will emerge, this discrepancy will not affect the outcome of this review.  

6.      The Act is silent as to the method of valuation of a person’s assets.  In the case of real estate, it is common for the respondent to engage the services of the Australian Valuation Office (AVO) which it did in October 2010.  An officer of the AVO reported the Perth property to have a value in the range of $650,000 to $700,000 (T10, p 128). 

7.      The value of a person’s asset may be reduced by the value of any charge or encumbrance over the particular asset (s 1121(1)) of the Act.

8.      The Perth property is subject to a registered mortgage to the Westpac Banking Corporation.

9.      At 2 September 2010 the balance of Ms Ward’s mortgage liability to the Westpac Bank was $258,903.69.  At 4 October 2010 the mortgage liability was $260,350.29.  The liability at 23 September 2010 is not known. 

10.     There are two issues in dispute between the parties.  The first is the valuation of the Perth property.  Ms Ward contends that the valuation of her property should be found to be $627,000.  Mr Carson, on behalf of the respondent made a concession and submitted that the AVO’s lesser value of $650,000 should be preferred.

11.     The second issue before the Tribunal is whether the charge or encumbrance to the Westpac Bank, alone, may be used to reduce the value of the Perth property. In addition to the mortgage, Ms Ward said that a third party is seeking to recover $80,000 from her.  Although she disputes this liability, Ms Ward contends that it should also be taken into account.  She admitted that that loan was not secured by a mortgage or by a caveat or any other form of security over her property in Perth.

12.     A charge or encumbrance is not defined in the Act or the Social Security (Administration) Act 1999.

13.     Persons who claim an interest in real estate are entitled to lodge a form of security, usually in the nature of a mortgage or caveat, indicating to the Registrar of Titles that they assert an interest in the real estate.  Registration of a mortgage or a caveat gives that person security in the event that the registered proprietor defaults (in the case of loan funds) or deals with the real estate to the detriment of the mortgagor or caveator.  The registered owners’ ability to transfer or use the property will be restricted or denied – encumbered by ‑ the registered legal interest.  An unregistered mortgage might also be a charge or an encumbrance but it would be a lesser form of security because the interest asserted by the mortgagee would not be recorded on the title.  The law also recognises and permits encumbrances on personal property, for example, registration of a security or chattel mortgage as security for a loan or lease agreement.  In such a case, the legal owner cannot dispose of the property or use it inconsistently without regard to the equity held by the lender in registration of the security.

14.     Ms Ward admitted that she was disputing the $80,000 liability.  The third party, who allegedly lent her money, has not registered a mortgage or a caveat against the title of the Perth property (the particular asset) nor has that person asserted any form of equitable or other interest over the property. 

15.     In the circumstances, I am not satisfied that third party has a charge or encumbrance over the Perth property.  It follows that the only charge or encumbrance over the property, being the asset, for the purposes of s 1121 of the Act, is the registered mortgage of the Westpac Bank. 

16.     The asset value calculations in the following paragraph are based on a value of $650,000, having regard to the respondent’s concession in relation to the value of the Perth property.  The liabilities to the Westpac bank were found in a bank statement lodged by the applicant.  The dates were selected in the absence of the precise mortgage liability at 23 September 2010.

17.     If I were to find that the value of the asset, being the Perth property, is $650,000 and reduce that value by $258,903 which is the amount owing to the Westpac Bank at 2 September 2010, the value of the asset would be $391,097.  If the AVO valuation of $650,000 was reduced by $260,350, the amount owing to the Westpac Bank at 4 October 2010, the asset value would then be $389,650.  

18.     If I were to accept Ms Ward’s valuation of $626,000 and deduct $258,903.00 which is the amount owing to the Westpac Bank at 2 September 2010, the asset value would be $367,097.  If the valuation contended by Ms Ward of $626,000 is reduced by $260,350, the amount owing to the Westpac Bank at 4 October 2010, the asset value would be $365,650.

19.     It therefore follows that irrespective of the sum adopted as the value of the asset, namely the Perth property, and irrespective also of whether the charge or encumbrance to the Westpac Bank – which as I have found above is the only charge or encumbrance for the purposes of this review – is determined either on 2 September 2010 or 4 October 2010, the asset value for the purposes of s 1121 exceeds the asset value limit of $307,000 applicable to the applicant pursuant to s 611 of the Act at 23 September 2010.

20. Section 1131 and 1132 of the Act empower the respondent to have regard to whether a person would suffer severe financial hardship by the application of the assets test and for other reasons.  However, Ms Ward has not made an application for relief under the financial hardship provisions.  A decision therefore has not been made by the respondent and there is no decision on that issue presently capable of review.

21.     For all of the above reasons, I am satisfied that the value of the Perth property exceeds the allowable asset limit and Ms Ward is not entitled to Newstart Allowance. Accordingly, the reviewable decision dated 21 January 2010 should be affirmed.

22.      

I certify that the twenty-one [21] preceding paragraphs are a true copy of the reasons for the decision herein of  

Mr John Handley, Senior Member

Signed:          Olympia Sarrinikolaou

Legal Assistant

Date of Hearing  2 November 2011
Date of Decision  16 November 2011
Advocate for the Applicant          Self Represented

Advocate for the Respondent       Mr A. Carson,

Centrelink Program Litigation and Review Branch