"SAAJ"; Secretary, Department of Employment and Workplace Relations
[2006] AATA 563
•28 June 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 563
ADMINISTRATIVE APPEALS TRIBUNAL )
) No S2005/315
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Applicant
And
“SAAJ”
Respondent
DECISION
Tribunal Deputy President D G Jarvis Date28 June 2006
PlaceAdelaide
Decision
The tribunal sets aside the decision under review, and in place of that decision decides that the respondent is not entitled to parenting payment (single) during the period commencing 12 months after the sale of her principal home and ending on the date from which her parenting payment (single) was reinstated.
D G Jarvis
(Signed)
Deputy President
CATCHWORDS
SOCIAL SECURITY – parenting payment (single) – asset test – proceeds of sale of principal home exempted from value of assets – period of exemption – portion of assets to be considered as assessable – no discretion to extend exemption period – statutory interpretation – consideration of extrinsic material – valuation of partly erected residence – meaning of “homeowner” – meaning of “principal home” – tribunal has no jurisdiction to consider hardship – decision under review affirmed.
Social Security Act 1991 (Cth), ss 500Q, 1118(2), s11(4)(c), (5), (6A), (7)
Acts Interpretation Act 1901 (Cth), s 15AA, 15AB(1)
Braverus Maritime Inc v Port Kembla Coal Terminal Ltd (2005) 148 FCR 68
Newcastle City Council v GIO General Ltd (1997) 191 CLR 85
R v L (1994) 49 FCR 534
Re Bolton: Ex parte Beane (1987) 162 CLR 514
Re Chowhan and Secretary, Department of Family and Community Services (2004) 85 ALD 444
Re Dickeson and Secretary, Department of Social Security (1989) 18 ALD 58
Re McDonald and Secretary, Department of Family and Community Services (2004) 86 ALD 704
Re Secretary, Department of Family and Community Services v Gledich (2005) 87 ALD 503
Re Secretary, Department of Family and Community Services and Kulshrestha (2003) 73 ALD 438
Re Secretary, Department of Social Security and Gelders (1993) 29 ALD 812
Secretary, Department of Family and Community Services v Brown [2006] FCA 532
Hyam : The Law Affecting Valuation of Land in Australia, 2nd Edition
Pearce and Geddes, Statutory Interpretation in Australia, 5th Edition
Rost and Collins : Land Valuation and Compensation in Australia, 1996 ed
REASONS FOR DECISION
28 June 2006 Deputy President D G Jarvis 1. Following the break-up of her marriage in 2004 the respondent decided to sell her former matrimonial home. It was no longer suitable for her and her children, and she wanted to make a fresh start in a new home.
2. On 6 February 2004 the respondent purchased a block of land in another location for $98,000. She borrowed $78,000 on the security of a mortgage over the land. She made enquiries with Centrelink regarding the potential impact upon her entitlements to her Parenting Payment (Single) (“PPS”) should she decide to sell her old home and build a new home on the allotment she had bought. She decided to go ahead, and on 24 April 2004 signed a building contract to build a home on the allotment.
3. The respondent intended to use the proceeds of the sale of her old home to meet the contract price of her new home and related costs of establishing it. Centrelink was satisfied that she was likely, within 12 months, to do so. Centrelink accordingly accepted that the proceeds of sale were exempt from the PPS assets test calculation under subsection 1118(2) of the Social Security Act 1991 (the “Act”), and that the respondent remained entitled to receive her PPS for a period of 12 months after the sale (although at a reduced rate, because of the imputed income on the balance of the proceeds of sale). Unfortunately, the respondent’s new home was not completed within the 12 month period. The respondent had made certain progress payments to the builder during that period, but due to the value of her assets at the expiration of the 12 month period, Centrelink decided to cancel her PPS.
4. The respondent sought review of that decision by an Authorised Review Officer (“ARO”). The ARO affirmed the original decision. The respondent then appealed to the Social Security Appeals Tribunal (“SSAT”), which set aside the earlier decision of Centrelink on the grounds that the balance of the proceeds of sale of the old home remained exempt until the new home was completed.
5. The Secretary, Department of Employment and Workplace Relations has applied to this tribunal to review the SSAT decision with respect to the calculation of the value of the respondent’s assets following the sale of her old home, and her subsequent entitlement to PPS.
Issues before the Tribunal
6. The issues raised by the application are as follows.
(a)Is the asset exemption referred to in subsection 1118(2) of the Act limited to the period of 12 months from the sale of the principal home?
(b)If the exemption is limited to the above period of 12 months, is there a discretion to extend the exemption beyond that period?
(c)If there is no such discretion, should the balance of the proceeds of the old home be considered as an assessable asset for the purposes of calculating her PPS entitlement after 28 May 2005?
(d)Should the value of the new home have been included in the respondent’s assessable assets?
(e)Was the value of the respondent’s car, furniture and household appliances less than the value she had attributed to them when she applied for a PPS? If so, did this affect her entitlement to a PPS?
background
7. After she was divorced in June 2004, the respondent and her two very young children remained in the old home, which she had owned at all times.
8. On 28 May 2004 the respondent sold the old home for the sum of $490,000, and received $473,777 net after discharging a mortgage over the home and after costs. She paid $50,000 out of that amount to reduce the outstanding mortgage over the allotment on which she intended to build a new home.
9. As the respondent was in receipt of a PPS her entitlement to that payment was subject to an assets test as set out in s 500Q of the Act. Following the sale of the old home Centrelink assessed the respondent’s assets at a total liquid asset holding of $426,777. Annual earnings were deemed to be $20,626.
10. At the relevant time, under sub-section 11(4)(c) of the Act, the respondent’s asset value limit was $153,000 if she was a home owner, and $263,500 if she was not a homeowner. During the period of 12 months after she had sold her home, the balance remaining of the proceeds of sale were treated as exempt from her asset test calculation pursuant to subsection 1118(2) of the Act.
11. The delay in the construction of the respondent’s new home resulted from some unexpected difficulties in obtaining council approval and other unforeseen complications over which she had no control. As mentioned above, the respondent’s new home was not completed within 12 months from the date of sale of the old home. She therefore retained a significant amount of the proceeds of the sale of her home as a liquid asset for a period exceeding 12 months, and after 28 May 2005 Centrelink no longer regarded those funds as exempt from her asset calculation.
12. The respondent lived in rented accommodation until she took up residence in her new home. She did all she could to attempt to negotiate an arrangement that would enable her to move in to the new home before it was completed and so make that property her principal place of residence. However, through no fault of her own she was unable to arrange this. As a result Centrelink did not treat the partly erected house as her principal home, and it was deemed to be an asset for the purposes of the asset test calculations in respect of her PPS.
13. The respondent gave evidence that she had also made her own investigations into the impact the sale of her old home might have upon her PPS. She drew my attention to a passage from “The Guide to Social Security Law” issued by Centrelink which she believed to be relevant (exhibit R4). The page on which she relied is headed “4.6.2.10 General Provisions for Exempt Assets”. The final line on that page and continuing on to the following page says:
“The 12 month exemption CAN be extended IF the customer CAN demonstrate:
·that they had a genuine intention to spend the payment within 12 months, BUT
·were unable to for reasons beyond their control.
Example: The exemption can be extended if building materials or a building contractor were unavailable.”
14. I also record that after the hearing had been concluded, and apparently as a result of my giving the parties’ representatives opportunity to adduce further evidence (if they so wished) in relation to the value of the respondent’s assets, the respondent herself sent to the Tribunal, by facsimile transmission on 13 June 2006, certain further submissions . These submissions included further extracts from the Guide which contain statements that appear to be inconsistent with the relevant statutory provisions, to which I will now refer.
Legislation
15. The relevant limit on the value of assets and the exemption of the proceeds of sale of the principal home are provided for in subsections 500Q(1) and 1118(2) of the Act. Those subsections provide as follows.
“500Q(1) Parenting payment is not payable to a person … if the value of the person’s assets exceeds the person’s assets value limit.
(2) A person’s assets value limit is worked out using the following table:
Assets Value Limits Table
Column 1
Item
Column 2
Person’s situation
Column 3
Assets value limit
1 Person is a homeowner $125,750 2 Person is not a homeowner $215,750”
“1118(2) If:
(a) a person sells the person’s principal home; and
(b) the person is likely, within 12 months, to apply the whole or a part of the proceeds of the sale in acquiring another residence that is to be the person’s principal home;
so much of the proceeds of the sale as the person is likely to apply in acquiring the other residence is to be disregarded during that period for the purposes of this Act.”
16. Subsection 11(4) provides for who is a homeowner, and states relevantly as follows.
“Homeowner
11(4) For the purposes of this Act:
…
(c) a person (whether a member of a couple or not) is a homeowner if:
(i)the person has sold the person’s principal home not more than 12 months previously; and
(ii)the person is likely to apply some or all of the proceeds of the sale in acquiring another residence that is to be the person’s principal home.
Parties’ Submissions
17. The Secretary submitted in effect that the SSAT had misconstrued s 1118(2) of the Act, and that on its correct interpretation the subsection only exempted the relevant portion of the proceeds of sale within a period of 12 months from the sale of the person’s principal home.
18. In support of her contention that the SSAT’s interpretation was correct, counsel for the respondent, Ms M Riley, provided very thoroughly researched written submissions which included a detailed history of the earlier position and the legislation preceding subsection 1118(2) of the Act, including excerpts from the explanatory memoranda to the Social Security & Repatriation (Pensions Income & Assets Test) Bill 1983 and to various amendments to the Social Security Act 1947, as well as the current Social Security Act 1991. Ms Riley also referred to various passages from the Guide referred to in paragraph 13 above.
19. In her submissions Ms Riley emphasised the use of the word “likely” in sub-section 1118(2) of the Act. She submitted that the words of subsection 1118(2) indicate an accommodating approach, and should be interpreted beneficially, and to mean that provided the funds are “likely” to be applied in acquiring a new residence, and the application of those funds is forecast to occur within a 12 month time frame, then those funds are exempted from the asset test, even if the proposed future home is not acquired within 12 months of the sale of the former home.
20. Ms Riley also referred to s 11 and the definition of “homeowner”, and what could be said to constitute a “principal home”. She argued as the respondent had entered into a binding contract for the erection of the new house, the respondent should be considered a homeowner, and further that the new house should be regarded as her principal home during the relevant period.
21. It was also contended on behalf of the respondent that when she applied to Centrelink for her PPS she overestimated the value of her furniture, vehicle and other chattels to a significant extent, because she based her estimates on the replacement cost and not the resale value of certain of those items. In her evidence the respondent provided an updated estimation of the value of her furniture and other effects, namely $10,000, whereas when she applied for her PPS in 2002 she had estimated the value at $40,000. Further she said she understood that her car was worth only $2,000, compared with her earlier estimate of $9,000. I accept that based on the respondent’s evidence of the age and condition of the above items, she had significantly overvalued them in her original estimation to Centrelink.
22. I have also considered all of the submissions made by the respondent in her facsimile of 13 June 2006.
Consideration
23. I was not provided with a copy of the building contract for the new house. However, evidence was given as to the contract price of the new house, including variations to what was apparently a standard home offered by the builder. I accept that the respondent has satisfied the conditions in paragraphs (a) and (b) of subsection 1118(2), in that she had sold her principal home and was likely, within 12 months of that sale, to have applied the whole of the proceeds of sale of that home in acquiring another residence that was to be her principal home.
24. It is therefore necessary to consider, on the proper interpretation of subsection 1118(2), the period during which the proceeds of sale of the former home are to be disregarded for the purposes of assessing the value of the respondent’s assets.
25. I turn first to whether it is appropriate in the present matter to consider the extrinsic material relied upon by Ms Riley.
26. Subsection 15AB(1) of the Acts Interpretation Act 1901 (Cth) provides for the circumstances in which consideration may be given to appropriate extrinsic material to determine the meaning of the provision of an Act. As noted by McHugh J in Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 112, this subsection permits a liberal use of many forms of extrinsic material. But the section has its limits. Paragraph (a) of that subsection enables consideration to be given to extrinsic material in order to confirm the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act. Paragraph (b) enables consideration to be given to extrinsic material when:
“(i) the provision is ambiguous or obscure; or
(ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.”
27. I do not think that subsection 1118(2) of the Act could be characterised as ambiguous or obscure. The wording of the section is clear. The period within which the relevant portion of the proceeds of sale of the principal home is to be disregarded is the period referred to in the subsection, namely 12 months. To give the section the interpretation contended for by the respondent would be to distort its meaning. Subsection 15AB(1) of the Acts Interpretation Act does not permit an interpretation which would amount to a departure from the ordinary meaning of the provision in question, nor would it permit, by a distortion of the relationship of the words used in the section, an interpretation that modifies a requirement that is otherwise clearly provided for in the relevant subsections of the Social Security Act (see generally Pearce and Geddes, Statutory Interpretation in Australia, 5th Edition, [3.11] to [3.13]). As pointed out by Bennett J in Secretary, Department of Family and Community Services v Brown [2006] FCA 532 at [21], courts may construe words in a statute so as to operate in a particular way, even if the words used would not, on a literal construction, so operate, but the words which actually appear in the statute must be reasonably open to such a construction. I do not think that s 1118(2) is reasonably open to the construction contended for by the respondent.
28. The above interpretation is also consistent with the provisions of subsection 11(4)(c) of the Act, under which a person is deemed to be a homeowner where the person has sold his or her principal home not more than 12 months previously.
29. I have also considered the possible relevance of s 15AA of the Acts Interpretation Act 1901 (Cth), which provides:
“In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”
30. The long title of the Social Security Act states that it is “An Act to provide for the payment of certain pensions, benefits and allowances, and for related purposes”. It is clear that the Act is beneficial legislation. Subsection 1118(2) is intended to prevent people in receipt of social security benefits being penalised during a period of transition after selling their principal home. The natural meaning of the subsection is that the period in which the exemption is available is limited to the period referred to in the subsection, namely 12 months after the sale of the former principal home. That interpretation is not inconsistent with the beneficial nature of the legislation in that persons receiving benefits will have up to 12 months to use the proceeds of sale of their home to acquire another home without losing their benefits.
31. In any event s 15AA of the Acts Interpretation Act does not permit subsection 1118(2) to be given a construction that would not otherwise be open, or the adoption of a construction that would amount to redrafting the relevant sections: R v L (1994) 49 FCR 534, at 538 - 539.
32. For the sake of completeness, I have also considered the common law principle of statutory interpretation which requires an interpretation to be consistent with the purpose of the provision in question (see Braverus Maritime Inc v Port Kembla Coal Terminal Ltd (2005) 148 FCR 68 at [36]). Whilst this principle is not confined to circumstances where the provision being interpreted is ambiguous, it must appear that the strained construction contented for by the respondent would cure the mischief that the provision was intended to cure or would achieve the provision’s clear legislative purpose : Brown (supra) at [24]. I consider that it would not be permissible to construe subsection 1118(2) in such a manner as to extend the time frame beyond the 12 months within which the funds from the sale of the principal home are exempt from the assets calculation. Once again, this would be tantamount to rewriting the provisions in question, and the literal interpretation of the subsection entailing an exemption for up to 12 months from the sale of the principal home is not inconsistent with the purpose of the Act.
33. Subsection 11(4)(c) of the Act provides for the circumstances in which a person continues to be a homeowner notwithstanding the sale of his or her principal home. It is clear that this is the position only where the sale has occurred not more than 12 months previously. This provision and subsection 1118(2) must be read so that they are in conformity. An interpretation of subsection 1118(2) that could result in the exemption extending beyond 12 months from the sale would be inconsistent with the clear words of subsection 11(4)(c). This is a further ground for rejecting the respondent’s interpretation of subsection 1118(2).
34. The respondent also relied upon the passage from the Centrelink Guide which I quoted in paragraph 13 above. However, directly above that passage is a further heading that reads “Assessing compensation & insurance payments”. It is apparent that at the time the respondent read the Guide the respondent did not understand that the extension was not applicable to her circumstances. In any event, the wording in the Guide cannot, of course, override the provisions of the Act. I also note that it appears that the respondent did not access this information until after she had entered into the contract to build her new home.
35. In support of her contentions Ms Riley also referred the tribunal to the case of Re Secretary, Department of Social Security and Gelders (1993) 29 ALD 812 at [19]. However, the issue in that case was whether the exemption of the proceeds of sale of the principal home in subsection 1118(2) applied to the assessment of liquid assets for the purposes of subsection 519(1) of the Act. This subsection which provided for a waiting period before a person was eligible for a job search allowance. The case did not involve interpreting the period referred to in subsection 1118(2).
36. As mentioned above, Ms Riley also submitted that the partly erected house should be characterised as the respondent’s principal home. If that was the position, it would follow, by virtue of subsection 1118(1), that that property should be disregarded when calculating the value of her assets. Ms Riley further argued that the respondent was a “homeowner” during the period after she had signed the building contract for the new home.
37. The definition of “principal home” has been considered by this tribunal in a number of earlier decisions. The representative of the Secretary, Ms A Pugsley, referred to Re Dickeson and Secretary, Department of Social Security (1989) 18 ALD 58 and Secretary, Department of Family and Community Services and Kulshrestha (2003) 73 ALD 438. It was held in those decisions that a person’s principal home is the place where the large majority of one’s domestic life is carried out, such as eating, and sleeping. In Dickeson (supra) at [62] the tribunal considered the principal home to be “the place where the centre of gravity of one’s domestic life is to be found.”
38. In contrast Ms Riley drew my attention to various cases, including Re McDonald and Secretary, Department of Family and Community Services (2004) 86 ALD 704, Re Secretary, Department of Family & Community Services v Gledich (2005) 87 ALD 503 and Re Chowhan and Secretary, Department of Family and Community Services (2004) 85 ALD 444.
39. However, the above cases are distinguishable from the respondent’s situation. During the relevant period she had never resided in or at the new house. It had not been her principal residence prior to the sale of her old home. Because it was under construction, the new house was not inhabitable as a home at any time during the period of 12 months after the sale of the old home. The respondent and her children ate, slept and carried out their domestic life within their rental accommodation. Unlike the situation in Gledich, the respondent’s rental property was adequately equipped with bathroom facilities and electricity. It was the family home, even though the respondent viewed it as a temporary home. I find that the new house did not constitute the respondent’s principal home until she moved into it.
40. I further find that by virtue of subsection 11(4)(c) of the Act, the respondent ceased to be a homeowner 12 months after the sale of her old home.
41. As mentioned in paragraph 21 above, the respondent over-stated the value of her furniture, vehicle and other chattels, and as at the date of the cancellation of her PPS, it is likely that the value of these assets was substantially less than the figure used by Centrelink to calculate the value of her assets.
42. The respondent’s evidence as to the value of her furniture, motor car and other assets was tentative, and she disclaimed any expertise in assessing the value of the relevant items. I am also mindful that after the date of cancellation of the PPS, the respondent made further progress payments in respect of the partly constructed home, and these payments would of course have reduced the value of her liquid assets. Further, Centrelink did not adduce any evidence as to the value of the partly finished house, and when making its assessment Centrelink apparently assumed that the value of that property equated to its land value. In the circumstances, I gave both parties the opportunity to adduce further evidence as to value if they wished to do so. Neither party took up this invitation.
43. There may be circumstances where an uninhabitable improvement on an allotment can even devalue the allotment, if for example it would not be economical to put the improvement into an inhabitable condition (see generally Rost and Collins : Land Valuation and Compensation in Australia, 1996 ed., at pages 117 to 118, and 123, and the concept of the unrealised potential of land explained in Hyam : The Law Affecting Valuation of Land in Australia, 2nd Edition, at pages 84 and 85, and the cases there referred to).
44. As I understand the evidence, the new house was a project home provided by the builder; and whilst the respondent made certain significant variations to the standard design, it was likely, and I find, that the home in its partly finished form on and after the date of cancellation of the PPS was in such a condition that if it were put on the market for sale, a prospective purchaser would have been prepared to purchase it for not less than the land value of the allotment as a vacant allotment, and probably more than this figure, having regard to the amount paid for work already done. It also seems likely, and I find, that after the date of the cancellation of the PPS, further progress payments made by the respondent would have further increased the value of the partly erected house, with the result that her assets would have remained above the limit provided for in s 500Q of the Act.
45. On the evidence before me, I find that the value of the respondent’s assets exceeded the relevant asset limit from the date of cancellation of her PPS until the date when she moved into her new home. At this time, the new house became her principal home for the purposes of the Act, and its value was exempted from an assessment of the value of her assets by virtue of s 500Q of the Act.
Hardship or Act of Grace Payment
46. Counsel for the respondent also made further submissions regarding the respondent’s eligibility for PPS under the financial hardship provisions. She tendered a report from a psychologist which describes the difficult financial position in which the respondent found herself following the cancellation of her PPS, and her resulting ill-health. In her facsimile submissions the respondent herself raised the question of whether she should receive an act of grace payment. However, the respondent’s eligibility for such relief is not a matter that is before me in the present proceedings. Neither Centrelink, nor, relevantly, the SSAT has made a decision in relation to any hardship application by the respondent, and I have no jurisdiction to determine matters of hardship or an act of grace payment in the present proceedings.
47. Nevertheless I think it appropriate that I should record that the respondent gave her evidence in a straightforward and honest manner, and I accept her evidence as to the matters that I have narrated above. In particular, I accept that the respondent did not anticipate that there would be any undue delay in the completion of the construction of her new home, and further, that that delay arose because of matters completely outside of her control.
48. The respondent also gave evidence as to her communications with Centrelink in relation to her proposals to build the new house and the possible effect on her PPS of selling her home. However, these matters were not relevant to the issues before me. It was not therefore necessary for the respondent to lead any evidence from the relevant Centrelink officer as to his version of the conversations, and no such evidence was led. I accordingly make no findings as to these matters, other than to say that it was unfortunate that for whatever reason, the respondent did not (as she could easily have done) reduce the mortgage over the new property as this would have reduced her deemed income and resulted in a somewhat higher PPS during the 12 month period after the sale of her former home. Because of the combination of all of these matters, coming as they did after the extremely upsetting circumstances surrounding the break-up of her marriage, the respondent was placed in a very difficult position, and I accept the evidence as to the serious adverse impact that these events had on her health. No doubt the above matters will be taken into account appropriately if at some future time the respondent makes application for some other form of relief.
49. I referred in paragraph 14 above to the extracts from the Guide enclosed with the facsimile from the respondent of 13 June 2006. These extracts do not in my view afford the respondent an entitlement to any increased PPS in the circumstances of the present matter. However, it would be appropriate for the Secretary to review the relevant portions of the Guide, and if necessary arrange for them to be amended so that they are consistent with the provisions of the Act.
Decision
50. The tribunal sets aside the decision under review, and in place of that decision decides that the respondent is not entitled to parenting payment (single) during the period commencing 12 months after the sale of her principal home and ending on the date from which her parenting payment (single) was reinstated.
I certify that the 50 preceding paragraphs are a
true copy of the reasons for the decision
herein of Deputy President D G JarvisSigned: .....................................................................................
J. MacIntyre AssociateDate/s of Hearing 4 April 2006
Date of Decision 28 June 2006
Date of final submissions 13 June 2006
Advocate for the Applicant Ms A Pugsley
Counsel for the Respondent Ms M Riley
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