Stratford and Secretary, Department of Employment and Workplace Relations
[2006] AATA 410
•12 May 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 410
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2005/649
GENERAL ADMINISTRATIVE DIVISION ) Re GRAEME STRATFORD Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Dr KS Levy, Member Date12 May 2006
PlaceBrisbane
Decision The Tribunal sets aside the decision under review and in substitution decides that, based on the present law and the evidence submitted to the Tribunal:
(a) The applicant’s assessable assets exceed the statutory asset value limit;
(b) The applicant was obliged to inform Centrelink of the changed values to his property; and
(c) There is no contingent interest or other reason which exists so that the applicant could be exempted from the provisions of the Act; and
(d) Therefore the applicant is not eligible for partner allowance with effect from 30 May 2005.
................[Sgd]..............................
Dr K Levy
Member
CATCHWORDS
SOCIAL SECURITY – partner allowance – unrealisable asset – financial hardship – value of asset above limit – ineligible for maximum rate of partner allowance.- decision set aside and substituted.
Social Security Act 1991 ss 11, 771, 1118, 1131
Re Reynolds & Secretary, Department of Social Security (1986) 11 ALN 193
Fakhry & Repatriation Commission (1987) 11 ALD 75
Bramwell v Repatriation Commission (1998) 51 ALD 56
Bantick & Secretary, Department of Family and Community Services [2003] AATA 472
Re Reynolds & Secretary, Department of Social Security 1986 11 ALN 193,Cody v JH Nelson Pty Ltd (1947) 74 CLR 629.
REASONS FOR DECISION
12 May 2006 Dr KS Levy, Member Introduction
1. This is an application by Graeme Stratford (the applicant) for a review of a decision of the Social Security Appeals Tribunal (SSAT) dated 20 September 2005. The SSAT affirmed decisions of Centrelink to cancel a partner allowance in respect of the applicant under the Social Security Act 1991 (the Act). The original decision of Centrelink was dated 30 May 2005 and the decision was affirmed by an Authorised Review Officer (ARO) whose decision was dated 29 July 2005. Centrelink made those decisions as delegate of the Secretary, the Department of Employment and Workplace Relations.
2. On appeal to the SSAT, that Tribunal set aside the decision under review and sent the matter back for reconsideration with directions that the Australian Valuation Office (AVO) conduct another valuation of the applicant’s property, and that a physical inspection was to be conducted. Consequent upon that valuation, the applicant’s entitlements to partner allowance and his partner’s rate of pension were to be recalculated.
3. The applicant lodged an application to review the SSAT decision on the last day of the appeal period for lodgement of an application with the Administrative Appeals Tribunal. That application was made before the order of the SSAT was fully implemented. The grounds of this appeal include a further AVO valuation and physical inspection of the subject property (which had not been completed at least by the cessation of the period for lodgement of an appeal to this Tribunal); that there was no change to the applicant’s income or assets that required reporting to Centrelink; and that since suspension/cancellation of his partner allowance, he is not able to convert assets to be self supporting. It may appear that the Tribunal is effectively being asked to review the decision of the ARO. However, as this Tribunal is required by section 43 of the Administrative Appeals Tribunal Act 1975 to undertake a merits review of the original decision, that is, the SSAT decision, and will consider all evidence afresh. (Re Bantick and Secretary, Department of Family and Community Services [2005] AATA 472), this Tribunal has proceeded on the basis that the decision of the SSAT is under review.
4. The applicant seeks favourable consideration of the rules for financial hardship. In addition and critically, the applicant argues that the revaluation of his property has resulted in an inequity and that the incremental increase in value is an “intangible asset”, which cannot be traded separately from the whole of the property.
5. The applicant was self represented and was accompanied by his partner Ms Joy Morton. The respondent was represented by its advocate, Mr Rick McQuinlan.
Evidence
6. The following documents were admitted:
(a)Exhibit 1 the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
(b)Exhibit 2 Centrelink Statement of Facts and Contentions and Authorities dated 7 March 2006
(c)Exhibit 3 letter from Centrelink to Mr Stratford dated 29 December 2005
(d)Exhibit 4 submissions prepared by the applicant dated 7 February 2006
(e)Exhibit 5 form submitted to SSAT (received in AAT 7 December 2005) and letter by applicant to SSAT dated 18 August 2005
(f)Exhibit 6 Statement of Facts and Contentions by the applicant dated 22 March 2006
7. The applicant’s partner, Joy Morton, was entitled to aged pension prior to the decision which is the subject of the appeal. Also, the applicant was granted partner allowance on 12 May 2000. At all relevant times, Mr Stratford and Ms Morton have been a “member of a couple” for the purposes of the Act.
8. The applicant had an awareness of the need to advise of changed circumstances. He had his partner allowance ceased on one previous occasion but this was reinstated following a successful appeal to the SSAT on 10 December 2004. Subsequently, a review was conducted in May 2005 to determine the continuing eligibility of the applicant to partner allowance. He was contacted on 26 May 2005 to provide information about the value of his property at Lot 66 on Crown Plan SL 845, County of Stanley, Parish of Whiteside, being an area of 39.66 ha. While he refused to supply information on that date to the enquirer who claimed to be from the Surfers Paradise office of Centrelink, he shortly after attended the Strathpine Centrelink office and provided relevant information in a completed form Module R (T4, folio 29). He stated the value of his Kurwongbah property was $200,000 for the whole of the property and that the house and curtilage of 2 ha was valued at $160,000.
9. On 30 May 2005, an on-line valuation was received from the AVO by Centrelink, in respect of the property owned by Mr Stratford and Ms Morton. This valuation was put at $650,000. Of this amount, the house and curtilage was valued at $350,000 (T7, folio 32). The combined asset value which was assessable for eligibility for partner allowance was then $300,000 [the total of the property value assessed ($650,000) less the value of the house and curtilage ($350,000)]. The amount assessable ($300,000) was to be compared with the combined asset value limit for a member of a couple at that date ($217,500; T31, folio 86).
10. On 30 May 2005, a decision was made to suspend Mr Stratford’s partner allowance (T6, folio 31). That decision, rather than a decision to cancel payments, was made on the basis that it was expected that Mr Stratford may wish to appeal that decision.
11. On 8 June 2005, there was an interview between the applicant and an officer of Centrelink at Strathpine office. It was noted that there were State Government and Local Council restrictions on development and use of much of the land. At the conclusion of that interview, the applicant and his partner were left with two options as outlined by the Centrelink officer:
(a)Accept the decision; or
(b)Sell the house and property at Kurwongbah.
Neither of these options has been acceptable to the applicant.
12. A revised AVO valuation was completed on 21 June 2005 which amended the original valuation of the property’s house and curtilage from $350,000 to $400,000. The total value of the whole property remained at the original valuation of $650,000 (T17, folio 57). Therefore the excess or accessible amount to determine eligibility for partner allowance was therefore reduced to $250,000 for the value of the house and curtilage.
13. The respondent submitted that as a result, the original decision maker affirmed, on 1 July 2005, the decision to cancel Mr Stratford’s partner allowance. The respondent submitted that despite the variation in the AVO’s valuation that Mr Stratford’s combined assets still exceeded the asset limit, thus, disentitling him from receiving partner allowance. The combined assets were calculated as follows:
Excess curtilage for Kurwongbah property $250,000
Financial investment (shares) 137,824
Other assets (car, household and personal effects) 7,000
TOTAL $394,824
14. The respondent noted that the new asset limit for partner allowance effective from 1 July 2005 was $223,000.
15. That decision was then subject to review by an Authorised Review Officer (ARO). (See T15, folio 55 and T20, folios 60-61). On 1 August 2005, the ARO affirmed the original decision maker’s decision. Mr Stratford’s partner allowance was cancelled with effect from 8 August 2005.
16. Mr Stratford then applied to the SSAT for review on 18 August 2005. On 20 September 2005, the SSAT set aside the Centrelink decisions and referred the matter back for reconsideration and further valuation by the AVO, which was to include a physical inspection of the property. Consequent upon that inspection, Centrelink was to recalculate Mr Stratford’s entitlements.
17. On 20 October 2005 the applicant lodged an application with this Tribunal. Following the lodgement of the present application, however, the AVO conducted a physical inspection of Mr Stratford’s property on 16 November 2005. It subsequently revised the AVO valuation on 15 December 2005 and determined that the value of the house and curtilage should remain at $400,000, but revised the total value of the property down from $650,000 to $600,000. The excess amount above the value of the house and curtilage, which would be the amount assessable, was therefore $200,000 in respect of the applicant’s land.
18. The applicant demonstrated that as a result of the revaluation of his land, his partner allowance prior to 30 May was $340.10 per fortnight. His partner’s age pension was $400.47 per fortnight. Following the revaluation of their land, Mr Stratford’s partner allowance had been cancelled and Ms Morton’s entitlement to age pension had then been reduced to $60.10 per fortnight. He emphasised there was a reduction in benefits for them jointly of $680.47 per fortnight.
19. However, as at 15 December 2005, the valuation of their assets which were taken into account in determining eligibility were as follows:
Value of the whole property $600,000
Value of house and curtilage (up to 2 ha) 400,000
Excess value of land which is assessable $200,000
Financial Investments 137,824
Household and personal effects 7,000
TOTAL $344.824
20. The respondent provided evidence that their combined asset value for the purpose of determining whether partner allowance is payable, as at 30 May 2005, was $217,500. The respondent therefore contends that the decision to cancel partner allowance was correct.
21. The applicant contends that land owners whose properties are greater than 2 ha should be exempt from the effect of any increased valuations on the assessable portion of their asset values. He maintained that this was an unfair penalty as owners such as himself and his partner were not permitted by the Local Government regulations to subdivide and sell that excess land. He also submitted that an expectation that he should be required to re-arrange his financial affairs and even to sell him home is unreasonable as the excess land is inseparable from his principal home and place of residence.
22. The applicant also made reference to section 8 of the Act dealing with “income” and the “income test definition”. He also referred to the Guide to Social Security Law relevant to income and asset reviews.
23. The applicant does not contest that as 30 May 2005, the total real assets, or the value of his land and improvements (including the house) was $650,000. Nor does he contest the value of the financial investments ($137,824) and the value of other assets ($7,000) as at that date. He says the total value of his assets as at 30 May 2005 were $794,824. He says however, any addition to the value of the existing property should be disregarded for the purposes of calculation of his partner allowance. He has argued that only when the asset is sold, can the proceeds of sale be regarded as a cash asset.
24. The respondent referred the Tribunal to the Administrative Appeals Tribunal decision in Re Reynolds & Secretary, Department of Social Security (1986) 11 ALN 193 and Fakhry & Repatriation Commission (1987) 11 ALD 75 and submitted that those decisions are authority for the proposition that the value of the house and curtilage land should be assessed on the basis as if it were hypothetically capable of being sub-divided. The respondent also argued that the provisions to access the financial hardship rules in terms of section 1131(1) of the Act have previously been rejected and were determined separately from this appeal. The respondent therefore argued that that issue was not a question to be determined by this Tribunal and in any event, the Secretary’s view was that the asset hardship rules had no application to Mr Stratford because of the quantum of available funds to himself and his partner.
Findings of Fact
25. On the basis of the evidence before it, the Tribunal made the following findings of fact.
(a)The applicant and his partner own the property described as Lot 66 on Crown Plan SL 845, County of Stanley, Parish of Whiteside in the Pine Rivers Shire in south east Queensland;
(b)The applicant and his partner reside on that property;
(c)The applicant had received a partner allowance from 12 May 2000 to 30 May 2005;
(d)The increased valuation provided by the AVO of 15 December 2005 is the valuation effective as at 30 May 2005;
(e)The applicant believes that the valuation system is unfair and that it should not apply to unrealisable assets as in his case;
(f)The applicant did not provide a valuation from any other valuer, and nor did he dispute the total value of the AVO valuation.
Consideration
26. The Tribunal has, in reaching its decision in this matter, taken account of all of the evidence submitted by both the applicant and respondent and also considered all statutory and case law relevant to this matter.
27. The role of the Tribunal in making its decision is to review the merits of the decision before it (section 43 Administrative Appeals Tribunal Act 1975). The Tribunal conducted a de novo hearing (Bramwell v Repatriation Commission (1998) 51 ALD 56 at 60 (see Weinberg J) and in reaching its decision, the Tribunal stands in the shoes of the original decision maker to consider all evidence and legal authorities afresh (Bantick & Secretary, Department of Family and Community Services [2003] AATA 472 at 23). It is clear that the Tribunal is charged to make a decision based on the law as it presently stands.
28. In considering the relevant legislative provisions, the applicant has referred the Tribunal to section 8 of the Act dealing with income and the income asset definition. The questions for the Tribunal pertain to asset values and therefore the Tribunal determines that that provision is not relevant to the present considerations.
29. The relevant legal provisions are as follows:
“Sect 11 - Assets test definitions
Principal home
11(5) A reference in this Act to the principal home of a person includes a reference to:
(a)if the principal home is a dwelling‑house—the private land adjacent to the dwelling‑house to the extent that the private land, together with the area of the ground floor of the dwelling‑house, does not exceed 2 hectares; or
(b)if the principal home is a flat or home unit—a garage or storeroom that is used primarily for private or domestic purposes in association with the flat or home unit.
Sect 771HF
Assets test—allowance not payable if assets value limit exceeded [see Appendix for CPI adjusted figures]
771HF(1) A partner allowance is not payable to a person if the value of the person’s assets exceeds the person’s assets value limit.
Note: The value of the person’s assets is only half the combined value of the person’s assets and the assets of the person’s partner (see subsection (3)).
771HF(2) A person’s assets value limit is worked out using the following Table:
Assets value limit table
Column 1
Item
Column 2
Person’s situation
Column 3
Assets value limit
1.
Person or partner a homeowner
$108,250
2.
Neither person nor partner a homeowner
$164,000.00
Note 1: For homeowner see section 11.
Note 2: The assets value limits in column 3 are indexed annually in line with CPI increases (see sections 1191 to 1194).
771HF(3) The value of the person’s assets is taken to be 50% of the sum of the value of the assets of the person and the value of the assets of the person’s partner. (Figures from T3, folio 20)
Sect 1118
Certain assets to be disregarded in calculating the value of a person’s assets
1118(1) In calculating the value of a person’s assets for the purposes of this Act (other than sections 198H, 198HA, 198HB, 198J, 198JA, 198JB, 198K and 198L, subparagraph 501E(1)(d)(iv), Division 1B of Part 3.10 and sections 1125, 1126, 1133 and 1135A), disregard the following:
…
(b) if the person is a member of a couple—the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home;
…
(h) the value of any contingent, remainder or reversionary interest of the person (other than an interest created by the person, by the person’s partner or by both of them);”
30. A partner allowance may be payable unless the value of the person’s assets exceed the statutory assets value limit (see section 771 HF(1)). The assets value limit, in the case of Mr Stratford is $108,750 (see item 1 of Assets Value Limits Table in section 771HF(2)). Therefore, this is the threshold amount applicable to Mr Stratford. The combined asset value in respect of the applicant and Ms Morton is $217,500. In determining the asset value of a person, certain assets are to be disregarded. Section 1118(1)(b) states that is a person is a member of a couple, any interest in the principal home of the person’s partner or of both of them shall be disregarded. The extent of the interest in the “principal home” is provided for in section 1118(1)(b) is defined section 11(5) to include the dwelling house to the extent that the private land which surrounds it does not exceed 2 ha. Therefore, the value of the balance of a person’s property which exceeds 2 ha can be taken into account in assessing whether a person’s assets exceed the assets value limit for the purpose of determining eligibility for social security benefits, which in this case, is partner allowance.
31. The valuation of Mr Stratford’s property is not, itself, in contention. That valuation took account of a number of factors including “…area of the land, type, size and condition of improvements; comparable zoning; views; services connected and access” (Exhibit 2, Annexure C page 8). However, the applicant takes issue with the manner in which the value of the property is applied in assessing the area of assessable land. The respondent, on the other hand, argues that on the basis of legal precedents, valuations of the house and curtilage land and correspondingly, the value of the assessable portion, must be treated as if it were hypothetically capable of being subdivided. In Re Reynolds & Secretary, Department of Social Security 1986 11 ALN 193, it refers to the valuation being undertaken based on “…what amount the applicant as a hypothetical but not unwilling seller could obtain for his property from a hypothetical desirous purchaser. Second, to obtain the market value of the applicant’s principle home and curtilage of 2 acres by assessing what amount the applicant, as a hypothetical and not unwilling seller could obtain for that property from a hypothetical desirous purchaser, as if that property were capable of subdivision. Third, to disregard the value of the home and curtilage by deducting the market value of the home and curtilage from the market value of the whole, the difference is then the value of the property to be taken into account for the purpose of assessing the applicant’s rate of pension”.
32. The approach outlined in the above case is, on the face of it, logical and reasonable. I note however, in attachment D to exhibit 2 that there are two mortgages listed as being held against the property. Those two mortgages are recorded as at the date of the search of that property in the records of the Department of Natural Resources and Mines, Queensland on 25 November 2005. Both of those mortgages were registered to two different banks - one on 13 June 1985 and one on 14 June 1985. They are therefore over twenty years old and as neither the applicant nor respondent made any reference to those mortgages, the Tribunal accepts that they are of insignificant value in relation to the calculation of the net value of the property concerned.
33. The Tribunal also notes that the AVO valuation is in accordance with guidelines required by the Department of Employment and Workplace Relations. The applicant provided no other valuation which would challenge the values provided, apart from valuations recorded in the Department of Natural Resources and Mines. These latter valuations are of unimproved capital value, and not of market value, which is the basis upon which the Department makes its assessments (see Guide to Social Security Law 4.6.6.10).
34. One of the applicant’s major objections to the manner of evaluations is based upon his argument and reliance upon section 1118(1)(h) – “the value of any contingent, remainder or reversionary interest of the person (other than an interest created by the person, by the person’s partner or by both of them);” the applicant endeavours to demonstrate that his circumstances amount to a “contingent interest” as provided for by the above sub-section. He argued that:
“…means that the increase in the unimproved value of the property is a fortuitous event. It should be disregarded because we did not create this additional interest, but that the general real estate market created the increase. As a consequence, the State Government determined and imposed reviewed unimproved value, which did not take into account the rezoning of the property by the South-East Queensland regional plan". (See T27, folio 76).
35. The applicant further tries to draw an analogy using a hypothetical asset test to a motor vehicle. He refers to obtaining a loan on the basis of the whole motor vehicle security rather than a part of it, such as the engine which could be valued separately and sold separately.
36. The Tribunal finds that the arguments submitted do not advance the applicant’s case. Further, the mechanism used for valuation by the Department and as set out in Reynold’s case, is merely an analytical approach to focus more clearly, in a modular way, on the respective and relevant element of the values of the applicant’s property. These values are then extrapolated so as to be able to apply in a sensible way, what the law prescribes as the amount for which an applicant should be exempted.
37. The Tribunal does not accept that the submission made is a “contingent interest” as provided for in section 1118(1)(h). That sub-section must be read as a whole, which refers to a “contingent, remainder or reversionary interest of the person ….” While a contingent interest in an accounting or legal sense often refers to an interest of some uncertainty, the wording in this subsection has a specific legal meaning. While there was no evidence that the applicant’s land is subject to a remainder or reversionary interest, the term contingent, remainder or reversionary “interest” must be read subject to the ejusdem generis rule. This means the term contingent must be read within the category or genus specified in the Act before that term can be applied (see Cody v JH Nelson Pty Ltd (1947) 74 CLR 629. There is no evidence to support any argument that the term in this technical legal sense, is relevant in this case.
38. However, even if this rule was not to apply, one would need to show either that the valuation was subject to great uncertainty, or that a condition precedent needed to occur before at least some estimate of the contingent interest could be accepted. There is no condition precedent which would be applicable in this case and although the valuation of land may fluctuate from time to time and the absolute value at any time in the future may be uncertain, the fact that it is of some considerable value, and that the valuation at present is of the order as specified by the AVO, is of little uncertainty. The applicant himself accepts the current total evaluation.
39. The applicant’s contention that the valuation should be disregarded until such time as it is sold and so that it might then be regarded as a cash asset, is an idiosyncratic view and is absurd in the present context. The applicant agrees that the value of his property in total is at least $600,000 and he even accepted that the value of $650,000 was appropriate. There are financial investments of $137,824 and household and personal effects of $7,000. Based on the total value of the property of $600,000, the combined assets of Mr Stratford and Ms Morton would therefore be $744,824. The applicant argues that his total assets at 30 May 2005 were $794,824 (see paragraph 1 exhibit 6). The logical extension of this argument is that if the asset could be recognised only when it was sold, it would ignore all of the principles of accounting and valuation and recognition of assets. If it was also to be recognised only when an asset was sold, then rather than the applicant and his partner’s assets being $794,000 as at present, they could perhaps in future years be double that amount or more. The argument that one could continue to grow investments, particularly valuable real estate assets of this magnitude yet still draw on taxpayers’ funds, would clearly be contrary to the purpose of the legislation and the intention of Parliament.
40. The Tribunal therefore determines that the applicant’s arguments about the method of valuation in order to determine partner allowance is unimpressive and is not a reasonable basis of valuation in the current context. That does not alter the situation that the applicant and his partner may be asset rich but have access to minimal liquid assets, and the idea of having to sell their property is undoubtedly unattractive to them. But there is clearly a capacity to convert some assets to enable the applicant and his partner to provide adequately for themselves. There are no circumstances which would alter this capacity to support themselves. The fact that the value of their assets effectively went up by $450,000 in May 2005 places them in an advantaged position comparatively with others who seek social security benefits.
41. The Tribunal therefore finds that, based on the present law and the evidence submitted to the Tribunal:
(a)The applicant’s assessable assets exceed the statutory asset value limit;
(b)The applicant was obliged to inform Centrelink of the changed values to his property;
(c)There is no contingent interest or other reason which exists so that the applicant could be exempted from the provisions of the Act; and
(d)Therefore the applicant is not eligible for partner allowance with effect from 30 May 2005.
I certify that the 41 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Member
Signed: J. Mills
Legal Research OfficerDate/s of Hearing 22 March 2006
Date of Decision 12 May 2006
The Applicant was self represented
For the Respondent Mr R McQuinlan, Departmental Advocate
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