Sinclair and Secretary, Department of Social Services (Social services second review) - [2020] AATA 3118

Sinclair and Secretary, Department of Social Services (Social services second review) [2020] AATA 3118 (24 August 2020)
Division:GENERAL DIVISION
File Number(s): 2020/1798
Re:David Sinclair
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Member W Frost
Date:24 August 2020
Place:Canberra

The decision under review is affirmed pursuant to subsection 43(1)(a) of the Administrative Appeals Tribunal Act 1975.
............................................................
Member W Frost
Catchwords
SOCIAL SECURITY – pensions, benefits and allowances – age pension – eligibility for age pension – valuation of assets – whether the applicant owned assets valued above the maximum allowable limit – whether the land was valued correctly - decision under review affirmed.
Legislation
Social Security Act 1991
Social Security (Administration) Act 1999
Cases
Andriotis and Secretary, Department of Social Services [2014] AATA 390
Cummins and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 513
Davies and Secretary, Department of Social Services [2015] AATA 819
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Evans and Secretary, Department of Social Security [1993] AATA 497
Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468
Re Jack and Woodhouse and Joyce Woodhouse and Secretary, Department of Social Security [1987] AATA 73
Re Juhan Torv and Secretary, Department of Social Security [1992] AATA 185
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Nosek and Secretary, Department of Social Services [2016] AATA 199
Re Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193
Secretary, Department of Social Security and Langton [1993] AATA 315
Secondary Materials
Social Security Guide
The Valuer and Land Economist, May 1993
REASONS FOR DECISION
Member W Frost
24 August 2020
INTRODUCTION

This decision concerns the valuation of assets to determine eligibility for the Age Pension. The Applicant, Mr David Sinclair, was in receipt of a reduced rate of Age Pension, or a ‘part pension’, up until May 2019. At that time, the then Department of Human Services (now Services Australia and referred to in this decision as the Agency) notified him that the social security payment had been cancelled because his assets were above the ‘allowable limit’ due to the value of the assessable land at his property known as ‘Northbank’ in Goulburn, New South Wales (Northbank).
Mr Sinclair disputed the valuation of the assessable land that was obtained by the Agency and the manner in which he was notified that his Age Pension was cancelled. An Authorised Review Officer (ARO) of the Agency found the cancellation of his Age Pension was correct. Mr Sinclair applied for review of the ARO decision by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1). In February 2020, the AAT1 affirmed the Agency’s decision to cancel Mr Sinclair’s Age Pension and he applied to the General Division of the Administrative Appeals Tribunal (Tribunal) for review of that decision. For the following reasons, the Tribunal has affirmed the AAT1 decision, meaning Mr Sinclair is currently ineligible for the Age Pension.
ISSUE
The issue for determination by the Tribunal is whether Mr Sinclair’s Age Pension was correctly cancelled from 17 May 2019.
BACKGROUND
In August 2001, Mr Sinclair and his now deceased wife purchased Northbank in Goulburn for $355,000.[1] The contract for the sale of land listed Mr and Mrs Sinclair as joint tenants of Northbank. The property is 54.52 hectares in size and remains Mr Sinclair’s principal place of residence.[2]
[1] Exhibit R1, T4, pages 61-63.
[2] Exhibit R1, T6, page 65.
In May 2007, Mr Sinclair was granted an Age Pension, together with the Energy Supplement and Pension Supplement.[3]
[3] Exhibit R2 (being documents provided to the Tribunal by the Respondent following the hearing).
In November 2011, the Agency sent a letter to Mr Sinclair regarding his social security payments.[4] The letter, among other things, listed Northbank as a real estate asset valued at $610,000. The house and land immediately surrounding it (or curtilage) was valued at $550,000, and the ‘excess land’ (or ‘assessable land’ for the purpose of the application before the Tribunal) was valued at $60,000. However, the ‘assessed value’ of Northbank for the purpose of Mr Sinclair’s Age Pension was $30,000, representing half of the total assessable value of the ‘excess land’ in circumstances where, at that time, Mr Sinclair held an equal joint share of the property with Mrs Sinclair.
[4] ibid.
On 16 December 2016, the Agency sent a letter to Mr Sinclair which listed the value of his ‘Real Estate’ assets at $305,000.[5] This valuation was said to have had a ‘Date of Effect’ of 15 December 2010 and represented Mr Sinclair’s fifty per cent share of Northbank, the balance then being held by Mrs Sinclair, for a total asset value of $610,000.
[5] ibid.
In 2017, Mr Sinclair became the sole owner of Northbank following the death of Mrs Sinclair.[6]
[6] Exhibit R1, T5, page 64.
On 3 April 2017, the Agency sent a letter to Mr Sinclair outlining the income and assets it had recorded in his and the late Mrs Sinclair’s names. The Agency notified Mr Sinclair to inform the Agency of any resultant changes in his ownership of income or assets for the purpose of ensuring the correct rate of social security payments were being made to him.[7] For example, the ‘Summary of Income and Assets’ listed ‘Real Estate’ as being a shared asset held by each of Mr and Mrs Sinclair in two equal amounts of $305,000, the total value of Northbank being $610,000.
[7] Exhibit R2.
On 3 May 2017, the Agency sent a letter to Mr Sinclair with an ‘Income Statement’ listing a decrease in the rate of his Age Pension from 4 May 2017, with the value of his ‘Real Estate’ assets assessed at $610,000, with effect from 24 March 2017, because it was now an asset held solely by Mr Sinclair.[8] Accordingly, an ‘assessable asset’ amount of $60,000 for the assessable land at Northbank was recorded for the purposes of Mr Sinclair’s Age Pension.
[8] ibid.
On 3 July 2018, the NSW Valuer General valued the total land at Northbank in the amount of $338,000, being the freehold value of the land excluding any structural improvements to the property.[9]
[9] Exhibit R1, T6, page 65.
On 15 May 2019, at the request of the Agency, a desktop valuation (Desktop Valuation) of Northbank was completed by a qualified valuer for LMW (Statutory Services) Pty Ltd (LMW).[10] This valuation occurred more than two years after Mr Sinclair’s ‘assessable amount’ (for the ‘assessable land’ at Northbank) had increased from $30,000 to $60,000, following him becoming the sole owner of Northbank, and was almost nine years since the whole property had last been valued by or on behalf of the Agency at $610,000 for the purpose of determining his social security payment. The Desktop Valuation provided a valuation of $1 million for Northbank, with the house and curtilage accounting for $750,000 of this amount, and the balance of $250,000 being the value of the excess or assessable land. The Desktop Valuation noted that the size of the property at Northbank was 54.52 hectares and it was located 5 kilometres from Goulburn. It further noted that the property had a double garage, four farm sheds, water tanks, six excavated dams and rural fencing. The Desktop Valuation listed a number of property sales around the Goulburn area in order to make a comparison with Northbank. For example, a 10.3 hectare property on the same road as Northbank sold for almost $900,000 in April 2018. This nearby property was said to be inferior ‘due to property and residence size’.[11] Additionally, a 49.7 hectare property in Tarlo, near Goulburn, was sold for $930,000 in October 2018, but was also said to be inferior ‘due to location and ancillary improvements’.[12] The Desktop Valuation noted that ‘market value’ was defined as ‘the estimated amount for which an asset of liability should exchange on the date of valuation, between a willing buyer and a willing seller in an ‘arms length’ [sic] transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion’. The Desktop Valuation also commented that Northbank was:
A relatively large rural-residential holding for this locality which is in very close proximity to Goulburn.
The country consists of productive grazing land.
The property appears well improved structurally including a large, modern residence plus a number of farm outbuildings located well away from the residence.
Under the current zoning, this property could be subdivided into 2 lots both with a residential entitlement due to a now 20 Ha minimum lot size in this locality for this entitlement.
…
We have added the value of the principal dwelling and domestic improvements ($500,000) onto a 2.0ha rural lifestyle block ($250,000) and which provides a total H&C [house and curtilage] assessment of $750,000. Improvements that are non-residential or of a commercial nature have been excluded and include any rural infrastructure.
[10] Exhibit R1, T8, pages 68-73.
[11] ibid., page 69.
[12] ibid.
On 17 May 2019, the Agency sent a letter by post to Mr Sinclair that he was no longer eligible for the Age Pension because the value of his assets was ‘above the allowable limit’, being $567,250.[13] The letter stated that Mr Sinclair’s total assets were valued at $629,172.05 and his final instalment of the Age Pension was to be paid up until 16 May 2019.
[13] Exhibit R1, T9, pages 74-75. See below for the source of this amount.
On 31 May 2019, Mr Sinclair submitted a form to the Agency, in which he provided an estimate of $670,000 for the total value of the property and an estimate of $610,000 for the home and curtilage, being the surrounding two hectares.[14] Therefore, Mr Sinclair estimated that the value of the balance of the property, the ‘assessable land’ of more than 53 hectares, remained $60,000.
[14] Exhibit R1, T10, pages 76-81.
On 4 July 2019, an on-site valuation (On-site Valuation) of Northbank was completed for LMW on behalf of the Agency by the same valuer that conducted the Desktop Valuation.[15] Following the On-site Valuation, the total market value of Northbank was determined to be $1 million, with the value of the house and curtilage said to be $750,000, and the value of the excess land said to be $250,000. The On-site Valuation reflected the valuation of Northbank made in the Desktop Valuation and relevantly stated that:
[15] Exhibit R1, T11, pages 82-93.
The Global Financial Crisis (G.F.C.) starting in September, 2008 reduced demand for rural-residential property in the Goulburn region to near minimal levels.
From 2010, there was an improvement in market activity with values levelling out or slightly rising in 2014. The market in 2015 improved considerably and has continued strongly through 2016 and 2017. Values have increased over 20% in this period and approximately 10% in 2017 and into 2018. This is especially so for smaller holdings (easier management) which are becoming scarcer due to zoning restrictions and for properties close to Goulburn. The market, although active, has become more subdued over the last 12 months.
This market is mainly due to city-based buyers who have benefited significantly from the rapid rise in values in urban areas who are now seeking a ‘tree-change’.
There are only limited properties which now sell for under $500,000 except for those in remote areas or of overall poor quality.
…
Both the Sales Comparison and Cost Approach methods have been used. The Sales Comparison approach has been used as the primary method with the Cost Approach as a secondary check method. Sales Comparison compares the subject property to sales of other relatively comparable properties with adjustments made for points of difference. The Cost or Summation Approach adds the land value as analysed from comparable sales evidence to the depreciated value of the improvements.
…
“Northbank” is one of the larger rural lifestyle properties in the locality which is situated on the northern outskirts of the major regional centre of Goulburn.
The property is well improved structurally with a large, modern residence with the former attached garage now converted into a living area. The farm sheds are however old and basic in construction.
The land consists of mainly weed-free, good quality grazing country and has a number of large farm dams.
The customer, Mr. Sinclair, claimed that the previous departmental valuations of his asset test liability was only $60,000 and could not understand why it escalated to $250,000. We have no knowledge of this $60,000 assessment and a value so low would not reflect market values around Goulburn for many years.
Mr. Sinclair stated that council advised him recently that he could not subdivide the land, which is contrary to the relative map (LSZ_001C) on the council website…
Mr. Sinclair stated he did not disagree with our whole farm value of $1,000,000.
In view of the above, We confirm our valuation of 15 May, 2019 at the ‘Adopted Value’ of $1,000,000 and House and Curtilage Value of $750,000, based on available sales evidence and current zoning rules. [emphasis in original]
On 31 July 2019, following Mr Sinclair’s request for review of the Agency’s decision to cancel his Age Pension from 17 May 2019, an ARO affirmed that cancellation decision.[16] Mr Sinclair applied for review of this decision by the AAT1.
[16] Exhibit R1, T13, pages 95-100.
On 18 February 2020, the AAT1 affirmed the Agency’s decision to cancel Mr Sinclair’s Age Pension.[17]
[17] Exhibit R1, T2, pages 4-8.
On 20 March 2020, Mr Sinclair lodged an application for review of the AAT1 decision with this Tribunal.[18]
[18] Exhibit R1, T1, pages 1-3.
LEGISLATION & POLICY
Subsection 11(1) of the Social Security Act 1991 (Act) defines an ‘asset’ to mean ‘property or money (including property or money outside Australia)’ and ‘exempt assets’ to be ‘assets described in subsection 1118(1)’ of the Act.
Under subsection 1118(1)(a) of the Act, in calculating the value of a person’s assets, the value of ‘any right or interest of the person in the person’s principal home’, as defined by section 11A of the Act, is to be disregarded. That is, the ‘principal home’ is an exempt asset.
Subsection 11A(1) of the Act states that the ‘principal home’ of a person includes a reference to:
(a) if the principal home is a dwelling‑house—the land adjacent to the dwelling‑house to the extent that:
(i) the land is held under the same title document as the land on which the dwelling‑house is located; and
(ii) the private land use test in subsection (3) is satisfied in relation to the land or, if the person is one to whom the extended land use test applies in relation to the land, the extended land use test in subsection (6) is satisfied in relation to the land…
Subsection 11A(3) of the Act provides that only the house and immediately surrounding land of no more than 2 hectares is an exempt asset if the ‘private land use test’ is satisfied in relation to land, as follows:
(a) the area of the land, together with the area of the ground floor of the dwelling‑house, is not more than 2 hectares; and
(b) the land is used primarily for private or domestic purposes in association with the dwelling‑house.
Under subsection 11A(4) of the Act, all of a person’s land that is more than 2 hectares is an exempt asset if the ‘extended land use test’ applies to a person; where the person has reached pension age, is qualified and in receipt of that payment and the dwelling-house has been the person’s principal home for ‘20 years or more continuously’. Under subsection 11A(6) of the Act, the ‘extended land use test’ is satisfied if:
(a) the area of the land, together with the area of the ground floor of the dwelling‑house, is more than 2 hectares; and
(b) the Secretary determines that, given the circumstances of the person to whom the test is applied in relation to the land, the person is making effective use of the land.
Section 55 of the Act states that a person's rate of Age Pension is worked out using ‘Pension Rate Calculator A’ at the end of section 1064 of the Act. This provides a ‘Method statement’ for working out a person's ‘maximum payment rate’. Step 9 in section 1064-A1 requires the application of the ‘assets test’ using ‘Module G’ in section 1064-G1, which is used to ‘work out the effect of a person’s assets on the person's maximum payment rate’. Step 11 in Pension Rate Calculator A set out at section 1064-A1 requires that a person be paid the lower of the ‘income reduced rate’ and the ‘assets reduced rate’.
Step 2 in the ‘Method statement’ for ‘Module G’ at section 1064-G1 requires the identification of a person’s ‘assets value limit’, which is the ‘maximum value of assets the person can have without affecting the person’s pension rate’, enabling a person to receive the maximum rate of Age Pension, or a ‘full pension’. Table G-1 at section 1064-G3 of the Act provides for the calculation of a person’s ‘assets value limit’. For a person who is not a member of a couple and is a ‘homeowner’, the assets value limit is stated to be $250,000, however it is noted in the legislation that this is subject to indexation or annual adjustment in line with Consumer Price Index increases. Accordingly, the applicable ‘assets value limit’ in May 2019, when Mr Sinclair’s Age Pension was cancelled, was $258,500.[19] Therefore, where the asset test applies, if a person’s assets were less than $258,500, they would be entitled to the maximum rate of Age Pension or a ‘full pension’.
[19] Social Security Guide for 20 March to 30 June 2019, page 35.
In this regard, if a person’s assets were higher than the amount of $258,500 in May 2019, they may still be entitled to payment of a reduced rate of Age Pension, or a ‘part pension’. The amount of any reduction, and therefore the amount of Age Pension payable, is calculated with reference to the formula outlined in Module G at section 1064-G1 of the Act. However, where a person’s assets exceed a certain threshold, the person will not be entitled to payment of any amount of Age Pension. As at May 2019, this assets threshold was $567,250.[20] Accordingly, Mr Sinclair’s total assessable assets had to be below the amount of $567,250 in order for him to be eligible to receive a ‘part pension’ in May 2019. To this end, section 44 of the Act provides that the Age Pension is not payable if a person's pension rate would be ‘nil’.
[20] ibid.
Subsection 80(1) of the Social Security (Administration) Act 1999 (Administration Act) provides that a social security payment is to be cancelled or suspended if the Respondent is satisfied that the payment is being, or has been, paid to a person who is not, or was not, qualified for the payment.
Subsection 66A(2) of the Administration Act provides that a person must, within 14 days, inform the Agency of an event or change of circumstances that might affect the payment of a social security payment.
Section 68 of the Administration Act also relevantly provides that the Respondent may give notice to a person in receipt of a social security payment requiring the person to inform the Agency if a change of circumstances occurs. Under subsection 68(5), this change of circumstances is to be specified in the notice where that change might ‘affect the payment of the social security payment’.
For completeness, the Tribunal notes that, under section 179 of the Act, an application may be made to the Tribunal for review of a decision of the AAT1 made under subsection 43(1) of the AAT Act.
The Tribunal finally notes that, although government policy is not binding, it will ordinarily be followed unless there is a cogent reason not to do so.[21] The relevant policy in relation to the Age Pension payment is contained in the Social Security Guide (Guide) and the Tribunal is not aware of any cogent reason for not following the terms of the Guide.
CONSIDERATION
[21] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.
How much of the land is an assessable asset?

The method of calculating the value of a person’s assets to determine eligibility for the Age Pension can be a detailed and dense process under the Act. However, the essential questions to be resolved for the purpose of this review are: what is the value of Mr Sinclair’s land at his Goulburn property that is not exempt from the assets test and does its value make him ineligible for the Age Pension? For the reasons that follow, the Tribunal accepts the independent market valuation of the assessable land at $250,000. Accordingly, the total value of Mr Sinclair’s assessable assets exceeds the maximum allowable limit for payment of any part of an Age Pension, which therefore makes Mr Sinclair ineligible for such payment.
The Tribunal is satisfied that because Mr Sinclair was not a member of a couple at the time of the Agency’s decision to cancel his Age Pension in 2019, pursuant to subsection 1118(1)(a) of the Act, the value of Mr Sinclair’s ‘principal home’ at Northbank is to be disregarded in calculating his assets to determine qualification for the Age Pension. However, under section 11A of the Act, the Tribunal finds that the ‘principal home’ is not the whole of the Northbank property, being an area of 54.52 hectares. Relevantly, under subsection 11A(1), the ‘principal home’ of a person is the land adjacent to the dwelling-house held under the same title document and one that satisfies either the ‘private land use test’ or the ‘extended land use test’ under subsections 11A(3) or (6) of the Act. The Tribunal finds that only part of Mr Sinclair’s property at Northbank can be exempt from any calculation of the value of Mr Sinclair’s assets to determine his eligibility for the Age Pension. This is because only part of Northbank satisfies the ‘private land use test’, in accordance with subsection 11A(3) of the Act, whereby ‘the area of the land, together with the area of the ground floor of the dwelling-house, is not more than 2 hectares’ and the land is used primarily for private or domestic purposes. As a result, the house and land immediately surrounding it (or curtilage) of no more than 2 hectares at Northbank, is an exempt asset. However, pursuant to section 11A of the Act, the value of the balance of the land, being over 52 hectares, is not exempt from being assessed as part of Mr Sinclair’s assets for the purpose of determining his eligibility for the Age Pension. Therefore, the land in excess of the house and surrounding two hectares at Northbank is not part of Mr Sinclair’s ‘principal home’ under the Act and is an assessable asset.
For completeness, the Tribunal finds that, at this stage, the ‘extended land use test’ does not apply to the property at Northbank because it has not been Mr Sinclair’s principal home for ‘20 years or more’; that milestone will be reached in August 2021. Satisfaction of the ‘extended land use test’ would exempt the whole of the Northbank property from being included in an assessment of Mr Sinclair’s assets in order to determine his eligibility for the Age Pension. Once the ‘extended land use test’ applies from next year, Mr Sinclair may seek to satisfy that test, set out in subsection 11A(7) of the Act, and therefore have the whole of Northbank exempted from the assets test in relation to the Age Pension.
How do you value the assessable land?
The method to be used in determining the value of a real property asset is well settled. In Nosek and Secretary, Department of Social Services [2016] AATA 199 at [20] (Nosek), the Tribunal stated that:
The term “value” is not defined in the Act but, for the purpose of social security law, the value of a property is generally taken to be its net market value based on comparable sales and the “best use” to which the asset could be put (see re Woodhouse and Department of Social Security; re Torv and Secretary, Department of Social Security). [footnotes excluded]
This approach was endorsed by the Federal Court of Australia in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 at [17].
In Secretary, Department of Social Security and Langton [1993] AATA 315, the Tribunal reviewed the authorities and commented that the ‘essence’ of the principle enunciated in those authorities is found in the definition of market value adopted by the International Assets Valuation Standards Committee:[22]
Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgably, prudently and without compulsion.
[22] Cited from The Valuer and Land Economist, May 1993.
This definition was replicated almost exactly in the definition of ‘market value’ used by the valuer who completed the Desktop Valuation dated 15 May 2019 and the On-site Valuation dated 4 July 2019 for LMW on behalf of the Agency (together, the Valuations).[23]
[23] Exhibit R1, T8, page 72 and T11, page 91.
In addition, the use of ‘market value’ to determine the value of assets is set out in the Social Security Guide, which provides:[24]
Assets are generally assessed at their net market value...The net market value is the amount a person would expect to receive if they sold the asset on the open market, less any valid debts or encumbrances...
The market value is the point at which a wiling purchaser and a willing, but NOT anxious vendor, would reach agreement.
[24] At Instruction 4.6.6.10 and 1.1.M.40.
In Andriotis and Secretary, Department of Social Services [2014] AATA 390, the Tribunal considered the methodology to be used in the valuation of property and cited the following observations made by the Tribunal in the earlier decision of Evans and Secretary, Department of Social Security [1993] AATA 497 at [8]:
Where there is no sale or indeed a recent sale then the market value is an estimate of what the willing but not anxious buyer would pay the willing but not anxious seller to conclude a sale; Re Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193. It is upon that principle that a qualified and experienced valuer's report would be accepted into evidence and that evidence weighed having regard to the process of arriving at the valuation. Obviously a figure plucked out from the air, albeit by a qualified valuer, is of no use, whereas a valuation done independently by an experienced and competent qualified valuer would carry considerable weight and unless rebutted must be taken as conclusive. It is for the Tribunal to be satisfied that a valuation was supported by the qualities referred to in Re Reynolds. In that event relevant questions are:
-    Is the valuer appropriately qualified?
-    Is the valuer experienced in the sort of valuation under consideration?
-    Was the valuer's state of mind independent for the purposes for which the value was sought?
-    Was the valuation carried out in accordance with accepted practices of the profession?
In addition to the above considerations, in Davies and Secretary, Department of Social Services [2015] AATA 819 at [13], the Tribunal also endorsed the ‘comparison of sales methodology’, that is:
the comparison of sold properties with the subject property with adjustments made for various factors such as locality, nature of the improvements, quality of the improvements and the grounds, zoning, services and the like...
It is apparent from the Desktop Valuation and the On-site Valuation reports that the sales comparison method was the principal valuation method used by the valuer to determine the market value of Northbank. In accordance with the above mentioned authorities, the Tribunal finds that the market value approach, used in the valuation reports, was the correct method for determining the value of Northbank.
The Tribunal is also satisfied, on the evidence, that the relevant assessable land at Northbank was appropriately valued in the Desktop Valuation and the On-site Valuation for LMW by an appropriately qualified valuer. The Valuations were both prepared by Mr Douglas Walker, whom the Tribunal understands (based on his valuation reports) to be a Certified Practising Valuer, and therefore an appropriately qualified valuer for the purpose of conducting the Valuations. The Tribunal is also satisfied that the Valuations prepared by Mr Walker were independent and completed in accordance with the accepted professional standards for a valuer; there was no evidence to displace such a finding.
What is the value of the assessable land?
The Tribunal is satisfied that the value of the assessable land at Northbank was $250,000 as at May 2019. That is, the Tribunal accepts the Valuations performed for LMW and which led to the Agency cancelling Mr Sinclair’s Age Pension because his total assessable assets exceeded the maximum allowable limit.
Since at least December 2010, the assessable land at Northbank had been valued at $60,000. The Agency’s records indicate that Mr Sinclair provided a valuation of Northbank in March 2017 of $550,000 for the house and curtilage, and $60,000 for the assessable land.[25] The valuation of $60,000 for the assessable land did not change from 2010 up until 2019 when a professional valuer carried out a valuation of Northbank. Although the property market in and around Goulburn may be subject to the usual fluctuations associated with property, in addition to the impact of the severe drought experienced in the area and any associated destocking, the Tribunal is satisfied that the value of the property had appreciated from $60,000 in 2010 to $250,000 in 2019. In this regard, and for the avoidance of doubt, the Tribunal does not accept the valuation of the assessable land of $60,000 made in 2017. The land is over 52 hectares in size and located approximately 5 kilometres from the township of Goulburn. It is also, based on the evidence before the Tribunal, able to be subdivided into two 20 hectare lots, which would likely attract a combined sale price above $250,000.
[25] Exhibit R1, T17, page 144.
While Mr Sinclair appeared to accept the total valuation of Northbank undertaken by the valuer, at $1 million, he disputed the associated $250,000 valuation of the assessable land. In essence, Mr Sinclair did not consider that the value of this assessable land had appreciated beyond $60,000, first assigned to this portion of Northbank from at least 2010, and he also sought to understand why a valuation had occurred in 2019. While there was no evidence before the Tribunal about why such a valuation occurred, it is likely explicable by the duration since the last valuation of the property (if one had indeed ever occurred, which was not identifiable on the evidence), including because Mr Sinclair had become its sole owner in 2017, which impacted upon the total value of his assessable assets and rate of Age Pension. Mr Sinclair also took issue with the manner in which he was notified of the cancellation of his Age Pension by the Agency and its processes regarding the revised valuation of his assets.
In an undated letter, Mr Sinclair relevantly stated that:[26]
I believe the process that has happened with my pension is a disregard of process, surely a communication of possible change to my pension would have been the preferred option, not summarily cancelling my pension without notice.
I had to find out when I went to renew my licence, where I found the pension card had been cancelled, then I had to pay for my licence to continue driving…
The reason I challenged the reevaluation [sic] is I believe rural housing and land has dropped in price with the severe drought and having to feed stock has caused me a large loss. Can you please explain how your estimated figures of House and land [curtilage] rose 4% and land [assessable land] has risen 400% from the previous evaluation, which in my opinion is excessive and out of range because the property is on one title and can’t be sold separately.
[26] Exhibit R1, T15, page 104.
Mr Sinclair filed the following two market appraisals in support of his application:
(a)Graeme Welsh Real Estate in Goulburn provided an appraisal dated 14 May 2020 of 2.02 hectares of land at Northbank ‘with no improvement on the land but with building permission to erect a dwelling with no town services supplied’. The market value was said to be between $380,000 and $400,000 based on ‘current market trends’ and ‘recent sales in a similar distance to Goulburn CBD’;[27] and
(b)Angella Storrier Real Estate provided an appraisal also dated 14 May 2020, indicating that a ‘5 acre allotment if subdivided’ at Northbank would sell within a range of $420,000 to $450,000, based on ‘recent sales and current properties on the market’ and taking into account ‘the closeness to town, good soils, gentle contour and an existing demand for such a property’. [28]
[27] Exhibit A2.
[28] Exhibit A3.
The Tribunal accepts the Respondent’s contention that these market appraisals should not be relied upon because the market values attributed to certain allotments at the Northbank property are based on the opinion of a real estate agent and it would be inconsistent with the following accepted principles endorsed by the Tribunal, including in Nosek at [25]:
a real estate agent is not appropriately qualified as a valuer;
a real estate agent is experienced in the sale of properties, but not in the valuation of properties;
a real estate agent's state of mind is not independent of the purpose for which the value is sought. An agent has a contingent interest in earning commission from any sale of the property if they are later contracted by an owner who prefers their valuation; and
the valuation will not be carried out in accordance with accepted practices of the profession.
Additionally, the Tribunal has previously found that valuations provided by the Australian Valuation Office or a professional valuer are to be preferred over valuations performed by real estate agents, local councils, State Valuers-General and applicants themselves, because those sources determine values for different purposes, including to calculate land rates, rather than market value.[29]
[29] Cummins and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 513 (Cummins) and Henderson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 468 (Henderson).
Moreover, the market appraisals do not assist Mr Sinclair’s application before the Tribunal in relation to the value of the assessable land at Northbank, which is an area of more than 52 hectares. The Valuations assessed this 52 hectares of land to be worth $250,000. However, taken together, the two market appraisals provide a value of between $380,000 and $450,000 for 5 acres or just over 2 hectares of land, being a significantly smaller parcel of land than the assessable land at Northbank and representing the area of the exempt land at Northbank, without a dwelling-house. In this regard, Mr Sinclair maintained his valuation of the more than 52 hectares of assessable land at $60,000.
Mr Sinclair contended that, in January 2020, NRMA advised him to insure his ‘home and garage for $842,000’[30] and that ‘to replace house and garages and clear site, and plans and council fees, the insurance they quoted $840,000’,[31] therefore this should be relied upon by the Tribunal in determining the value of Northbank. However, the Tribunal accepts the Respondent’s contention that the reasoning in Cummins and Henderson (referred to above in these reasons), that a professional valuer’s opinion should be preferred over an estate agent, can be extended to support the proposition that valuations provided by insurance providers are to be similarly treated, because insurance providers determine property value for the purpose of calculating insurance coverage and not to assess the market value of a property. The Tribunal agrees with the AAT1 that the NRMA information is not an independent valuation of Northbank, but ‘likely a CPI adjusted amount of previously insured value’[32] for the property and therefore not relevant for the purposes of the Tribunal’s review.
[30] Exhibit R1, T2, page 6.
[31] Exhibit A1.
[32] Exhibit R1, T2, page 7.
The Tribunal had before it the Desktop Valuation and the On-site Valuation performed by a professional valuer for LMW on behalf of the Agency; there were no other valuations from an independent licensed valuer put in evidence in this application for the Tribunal to assess and consider alongside the Valuations. Accordingly, and for the reasons outlined above, the Tribunal accepts the valuation of the assessable land at Northbank at $250,000. This appears to be a reasonable, and now potentially conservative, valuation, including having regard to comparable sales in the area set out in the Valuations and the ability to subdivide this land.
The Tribunal also notes for completeness that Mr Sinclair did not dispute the value assigned to his other assets that are subject to the assets test, which amount to approximately $380,000. When taking into account a value of $250,000 for the assessable land at Northbank, as at 17 May 2019, Mr Sinclair’s total assets exceeded the maximum assets value cut-off limit for a single homeowner of $567,250 under Module G of the Act.
Is Mr Sinclair eligible for the Age Pension?
For the above reasons, the Tribunal finds that Mr Sinclair is not eligible for the Age Pension and was not so eligible at 17 May 2019, when this social security payment was cancelled by the Agency. In accordance with the Act, the Agency cancelled Mr Sinclair’s Age Pension from the date he became ineligible for the social security payment.
Mr Sinclair was granted the Age Pension in 2007. From at least 2010, the Agency had assigned a value of $60,000 to the more than 52 hectares of assessable land at Northbank in Goulburn. Up until 2017, only half of the $60,000 amount was applicable to the calculation of Mr Sinclair’s assets to determine his eligibility for the Age Pension, because he held the property in equal joint shares with his wife. Following Mrs Sinclair’s death in 2017, Mr Sinclair became the sole owner of Northbank. The Agency’s 2010 valuation of the assessable land did not change until 2019, when the market value was determined by a professional valuer to be $250,000.
The Tribunal has found that the market value of the assessable land at Northbank was reasonable and it accepts that valuation for the purpose of determining Mr Sinclair’s eligibility for the Age Pension. The valuation of $250,000 for the assessable land resulted in the total value of Mr Sinclair’s assets exceeding the maximum allowable amount to be eligible for payment of the Age Pension.
As a result, Mr Sinclair’s Age Pension was correctly cancelled by the Agency from 17 May 2019 because, as at that date, his total assessable assets exceeded the maximum allowable amount to be in receipt of the Age Pension and it was therefore not payable to him from that date. The Administration Act provides that cancellation of a social security payment must occur if a person is not qualified for the payment and the date of effect is the date of the change leading to the ineligibility, here being in the days after the 15 May 2019 Desktop Valuation assessed the relevant land as having risen in value which led to Mr Sinclair’s assessable assets exceeding the allowable limit to receive the Age Pension. While the Agency followed the correct process in cancelling Mr Sinclair’s Age Pension and notified him of the cancellation, the Tribunal understands the sudden disruption this can potentially cause to someone who has been receiving that social security payment and its associated benefits for some years. It is regretful that Mr Sinclair experienced this, and reportedly other effects, such as hospitalisation, including due to the delay in receiving notice of the cancellation and being informed by a state government agency of that cancellation, rather than the Agency, due to the delay in receiving formal notification by post.

As previously noted, the ‘extended land use test’ will apply to the whole of the land at Northbank from August 2021. Therefore, if Mr Sinclair meets the extended land use test at that time, the entire Northbank property would not be an assessable asset for the purpose of determining his eligibility for the Age Pension.
DECISION
The Tribunal affirms the decision under review pursuant to subsection 43(1)(a) of the Administrative Appeals Act 1975.

I certify that the preceding 60 (sixty) paragraphs are a true copy of the reasons for the decision herein of Member W Frost.

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Associate
Dated: 24 August 2020

Date of hearing: 27 July 2020

Applicant:

Solicitors for Respondent:

By telephone, with Mr David Garrity

Ms Laura Hinwood, Services Australia