Sutcliffe and Secretary, Department of Social Services (Social services second review)
[2018] AATA 382
•17 January 2018
Sutcliffe and Secretary, Department of Social Services (Social services second review) [2018] AATA 382 (17 January 2018)
Division:General Division
File Number(s): 2017/3798
Re:Mr Mark Sutcliffe
APPLICANT
Secretary, Department of Social ServicesAnd
RESPONDENT
DECISION
Tribunal:
Ms Anna Burke, MemberDate of decision: 17 January 2018
Date of written reasons: 22 February 2018
Place:Melbourne
For the reasons provided during the hearing, the Tribunal affirms the decision under review.
[sgd]........................................................................
Member
SOCIAL SECURITY – Age Pension – reduction in rate – cancellation of pension – income and assets test – acquisition of property from a testamentary estate – value of asset to be determined by market value – decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975
Social Security Act 1991
Social Security (Administration) Act 1999Cases
Cummins and Secretary Department of Families Housing Community Service and Indigenous affairs [2011] AATA 513
Secondary Materials
Guide to Social Security Law (The Guide)
REASONS FOR DECISION
Ms Anna Burke, Member
INTRODUCTION
Mr Sutcliffe (the Applicant) is seeking a second tier review of the decision made by the Secretary of the Department of Social Services (the Respondent) to reduce and then cancel his age pension pursuant to section 79 and 80 of the Social Security (Administration) Act 1999.
On 26 August 2016 the Department of Human Services (Centrelink) reduced Mr Sutcliffe age pension and then on 24 January 2017 cancelled his age pension on the basis that his assets exceed the asset cut-off limit. Centrelink is the service provider for the Department of Human Services.
The application was heard on 17 January 2018, Mr Sutcliffe was self-represented and Mr James Henderson, government lawyer in the Freedom of Information and Litigation Branch of the Department of Human Services appeared for the Respondent.
The Tribunal provided an oral decision at the hearing affirming the decision under review. Mr Sutcliffe has subsequently requested written reasons for the decision in accordance with s 43(2A) of the Administrative Appeals Tribunal Act 1975, these are those reasons.
BACKGROUND
On 2 August 2010 Mr Sutcliffe was granted an age pension; his principal place of residence was recorded as a flat he owned in South Yarra, Victoria.
On 19 July 2011 Mr Sutcliffe inherited his late mother’s property in Bellambi, NSW.
On 28 July 2011 Mr Sutcliffe provided Centrelink with a real estate details form in which he indicated he owned two properties listing 100% unencumbered ownership of the property in Bellambi, NSW. This property had an estimated market value of $370,000, in which he did not live and was receiving no rental income from the property.
On 26 August 2016 Centrelink reduced Mr Sutcliffe’s age pension on the basis that they assessed the market value of property in Bellambi NSW had increased to $415,170.
On 1 September 2016 Mr Sutcliffe objected to the decision to reduce his age pension by $90 a fortnight. Mr Sutcliffe sought information about how the decision had been made, he did not accept that the government could arbitrarily determine an increase in the value of his asset as his asset’s value is determined solely by the Crown not the government.
On 5 December 2016 Mr Sutcliffe wrote to Centrelink that he was presently holidaying at his non-principal residence at Bellambi, NSW. Mr Sutcliffe complained that Centrelink had not properly responded or acknowledged his objections to the arbitrary cut in his age pension payment. He indicated that he provided evidentiary proof that the value of his non-principal residence was $135,000 as recorded in the contract of sale when his mother purchased the property in 1998.
On 20 January 2017 MVS Valuers Australian Pty Ltd conducted an indicative valuation summary of the property at Bellambi NSW for Centrelink assessing market value of the property at $625,000.
On 24 January 2017 Centrelink cancelled Mr Sutcliffe’s age pension as his total assets were $647,500, which exceeded the assets test cut-off limit.
On 24 January 2017 a departmental Authorised Review Officer (ARO) reviewed the decision to reduce and then cancel Mr Sutcliffe’s age pension on the basis that his assets now exceeded the limit for age pension affirming the original decision.
On 22 May 2017 the Social Security and Child Support Division of the Tribunal (AAT1) affirmed the decision of the ARO to reduce and then cancel Mr Sutcliffe’s age pension.
On 27 June 2017 Mr Sutcliffe sought a review of the AAT1 decision by this division of the Tribunal. He disagrees with the decision made as he did not believe the information he had provided had been taken into account, the law was not applied correctly, the first hearing was terminated abruptly at the end of one hour and he did not have adequate opportunity to elaborate on his case sufficiently.
THE ISSUES IN CONTENTION
The issues in contention are whether Mr Sutcliffe’s:
(a)rate of age pension was correctly reduced from 26 August 2016 based on assessment of his assets, in particular his property at Bellambi, NSW; and
(b)whether his age pension was correctly cancelled from 24 January 2017 based on assessment of his assets, in particular his property at Bellambi, NSW;
Relevant Legislation and Issues
Section 43 of the Social Security Act 1991(Cth) (‘the Act’) provides that a person is qualified for an age pension if:
(1) A person is qualified for an age pension if the person has reached pension age and any of the following applies:
(a) the person has 10 years qualifying Australian residence;
(b) the person has a qualifying residence exemption for an age pension;
…
Section 44 of the Act provides that a Age pension not payable if pension rate nil:
(1) Subject to subsection (2), an age pension is not payable to a person if the person’s age pension rate would be nil.
(2) Subsection (1) does not apply to a person if the person’s rate would be nil merely because an election by the person under subsection 915A(1) (about quarterly energy supplement) or 1061VA(1) (about quarterly pension supplement) is in force.
Section 55 of the Act provides for how a person’s age pension rate is worked out:
(a)if the person is not permanently blind—using Pension Rate Calculator A at the end of section 1064 (see Part 3.2);
Module A—Overall rate calculation process
Method of calculating rate
1064‑A1 The rate of pension is a daily rate. That rate is worked out by dividing the annual rate calculated according to this Rate Calculator by 364 (fortnightly rates are provided for information only).
Method statement
Step 1. Work out the person’s maximum basic rate using MODULE B below.
Step 1A. Work out the amount of pension supplement using Module BA below.
Step 1B. Work out the energy supplement (if any) using Module C below.
Step 3. Work out the amount per year (if any) for rent assistance in accordance with paragraph 1070A(b).
Step 4. Add up the amounts obtained in Steps 1, 1A, 1B and 3: the result is called the maximum payment rate.
Step 5. Apply the ordinary income test using MODULE E below to work out the income reduction.
Note: Module F contains provisions that may apply to working out the ordinary income of a person, and the ordinary income of a partner of the person, for the purposes of disability support pension.
Step 8. Take the income reduction away from the maximum payment rate: the result is called the income reduced rate.
Step 9. Apply the assets test using MODULE G below to work out the reduction for assets.
Step 10. Take the reduction for assets away from the maximum payment rate: the result is called the assets reduced rate.
Step 11. Compare the income reduced rate and the assets reduced rate: the lower of the 2 rates, or the income reduced rate if the rates are equal, is the provisional annual payment rate.
Step 12. The rate of pension is the amount obtained by:
(a) subtracting from the provisional annual payment rate any special employment advance deduction (see Part 3.16B); and
(b) if there is any amount remaining, subtracting from that amount any advance payment deduction (see Part 3.16A); and
(c) adding any amount payable by way of remote area allowance (see Module H).
Module G—Assets test
Effect of assets on maximum payment rate
1064‑G1 This is how to work out the effect of a person’s assets on the person’s maximum payment rate:
Method statement
Step 1. Work out the value of the person’s assets.
Note 1: For the treatment of the assets of members of a couple see point 1064‑G2.
Note 2: For the assets that are to be disregarded in valuing a person’s assets see section 1118.
Note 3: For the valuation of an asset that is subject to a charge or encumbrance see section 1121.
Step 2. Work out the person’s assets value limit (see point 1064‑G3 below).
Note: A person’s assets value limit is the maximum value of assets the person can have without affecting the person’s pension rate.
Step 3. Work out whether the value of the person’s assets exceeds the person’s assets value limit.
Step 4. If the value of the person’s assets does not exceed the person’s assets value limit, the person’s assets excess is nil.
Step 5. If the value of the person’s assets exceeds the person’s assets value limit, the person’s assets excess is the value of the person’s assets less the person’s assets value limit.
Step 6. Use the person’s assets excess to work out the person’s reduction for assets using points 1064‑G4 to 1064‑G7 below.
Note 1: See point 1064‑A1 (steps 9 and 10) for the significance of the person’s reduction for assets.
Note 2: The application of the assets test is affected by provisions concerning:
· disposal of assets (sections 1123 to 1128);
· retirement villages (sections 1145 to 1157);
· financial hardship (sections 1129 and 1130);
· the pensions loans scheme (sections 1133 to 1144).
Value of assets of members of couples
1064‑G2 For the purposes of this Module:
(a) the value of the assets of a member of a couple is to be taken to be 50% of the sum of:
(i) the value of the person’s assets; and
(ii) the value of the person’s partner’s assets; and
(b) the value of the assets of a particular kind of a member of a couple is to be taken to be 50% of the sum of:
(i) the value of the person’s assets of that kind; and
(ii) the value of the person’s partner’s assets of that kind.
Assets value limit
1064‑G3 A person’s assets value limit is worked out using Table G‑1. Work out the person’s family situation and home ownership situation. The assets value limit is the corresponding amount in column 3.
Table G‑1—Assets value limit
Column 1
Column 2
Column 3
Assets value limit
Item
Person’s family situation
Column 3A
Either person or partner homeowner
column 3B
Neither person nor partner homeowner
1.
Not member of a couple
$250,000
$450,000
2.
Partnered (partner getting neither pension nor benefit)
$187,500
$287,500
3.
Partnered (partner getting pension or benefit)
$187,500
$287,500
Note 1: For member of a couple, partnered (partner getting neither pension nor benefit) and partnered (partner getting pension or benefit) see section 4.
Note 2: For homeowner see section 11.
Note 3: Items 2 and 3 apply to members of illness separated and respite care couples.
Note 4: The assets value limits are indexed or adjusted annually in line with CPI increases (see sections 1191 to 1194 and 1203).
Pension reduction for assets in excess of assets value limit
1064‑G4 A person’s reduction for assets is worked out using Table G‑2. Work out which family situation applies to the person. The reduction for assets is the amount per year worked out using the corresponding calculation in column 3.
Table G‑2—Reduction for assets
Column 1
Item
Column 2
Person’s family situation
Column 3
Reduction
1.
Not member of a couple
2.
Partnered (partner getting neither pension nor benefit)
3.
Partner (partner getting pension or benefit)
Note 1: For member of a couple, partnered (partner getting neither pension nor benefit), partnered (partner getting benefit) and partnered (partner getting pension) see section 4.
Note 4: For assets excess see point 1064‑G5 below.
Assets excess
1064‑G5 A person’s assets excess is the value of the person’s assets less the person’s assets value limit.
1064‑G7 In calculating a person’s assets excess under point 1064‑G5 disregard any part of the excess that is not a multiple of $250.
SUBMISSIONS
The applicant
Mr Sutcliffe in his written submission to the Tribunal stated:
I consider that there are several issues to be considered, the first of which is whether the proper beneficial provisions of the Social Security Act have been broken by an unjustified financial swindle concerning the government’s control over price inflation, especially over the land and property prices, and then the application of inflated hypothetical prices to the disadvantage of needy social service recipients, and directly to the unjust enrichment of the government. This criminal strategy of the government seems to be based upon a widespread misconception the government can do anything it likes with complete impunity, including replacing the truth with any lies that seems appropriate on the day. The publication of these lies amounts to propaganda that has confused the public perception of realities. Price inflation does not increase wealth or real value. Price inflation does not justify increased taxes or decreased social responsibility for the care of disadvantaged members of the community. Price inflation does not justify “Rebalancing the Assets Test”, because people who are already at a disadvantage do not have a greater capacity to support themselves.
…..
Property is protected from theft by the law that is universal in its respect for private rights of people, except only where corrupt political or other swindling influence occurs to distort the true property right. The Marxist-Leninist theory is embraced by some, with a motto is “To each according to his need, from each according to his ability.” In the communist system everything of real value must be owned by the commune, but even then there is still some private ownership allowed over personal things, and a family home will be an example of a right to private property, a private living space for a family. Australian is a country where the common law of England prevails. Private property is held by legal title which cannot be abrogated, except where the Crown has the right to escheat. Property owners are advised to pay their property rates and taxes to the crown promptly to avoid reclamation by the Crown, but there are no lawful rates and taxes on privately owned personal chattels, only upon land, real estate.
It is not lawful for any swindler to extract an unjust enrichment due to privately owned property. The owner of the property holds the legal title, and he is called the lord of his own land. He alone has the right to put a price upon his own property, or not to put a price on it. A property that is priceless is one that cannot be bought by anyone at all; it is not for sale at any price. There is no purchaser except the Crown alone who can demand a land property of an owner when the owner is not willing to sell it, or who can demand to purchase at a lower price the seller is willing to accept. Only the Crown has such a special relationship with the land that can resume land for public purpose against the will of an entitled owner. The compulsory acquisition of land for public purpose by a Government authority of the crown is a special case. It is distinct from the common law that applies to the ordinary transaction. Ordinary transactions are governed by common law. The value of an item purchased legally is the value that is agreed privately between buyer and seller, according to the common law of Contract and the Principal Privity of Contract. There is no other influence upon the private contract, and the private contract cannot influence any other contract or relationship or agreement. It is not lawful to use the sale price of one property in a transaction as the value of the different property in a different transaction.
I’m not equivalent or equal to the Crown. I am a loyal subject to the Crown. I am subject to the rule of the Crown. What the Crown does is not under my control or influence, and I pay my rates and taxes to the Crown as the Crown demands. I have no influence over how the Crown establishes its sources of taxation income. But the government is not the same as the crown, it is a corporation and an incorporated person and its rights and duties are in the law the same as mine. The government must obey the law the same as everyone else. In fact, I do have a right to appeal to the Crown for protection against all manner of unfair criminal practice. That is the law of the land. Officers of the Crown have a duty to protect the people against all manner of criminal conduct, including the extortion of monies or benefits by unscrupulous persons, by any and every unscrupulous swindle.
Hence I do defend my right to claim a fair pension under the Social Security Act. And I do appeal all the decisions to reduce and eliminate my age pension payment. The value of my property at 15 Kells Crescent, Bellambi NSW is $135,000 plus an allowance for a small improvement to the property made by my dear mother before she died. I estimated total value of $150,000 based on the cost price.
I refute the suggestion that I have a greater capacity to support myself due to my ownership of property at 15 Kells Crescent, Bellambi NSW. The ownership of the property is a privilege earned by my mother, inherited by myself. The ownership of the property is also responsibility; there is significant cost involved due to the maintenance costs, government charges and other fixed and variable costs. I do not demand more of the Australian welfare system than is fair, but I do require that it should be administered fairly, and not used as a way to facilitate the extortion of the values of a pensioner’s property and social security entitlements…….
At the hearing, Mr Sutcliffe again reiterated that the Respondent had failed to comply with the requirements of the crown and drew heavily from his written submissions. He was adamant that he had a right to a roof over his head, that the value of any property could not be derived by any other means than a contract of sale and that his property in Bellambi, NSW was not an asset which he could dispose of to provide for his day-to-day living expenses.
The Respondent
The Respondent reiterated that a person’s assets are valued in line with the assets test in module G of the Act and whilst the Act did not specify how a person’s assets are to be valued the guide to Social Security law, the Federal Court of Australia (Federal Court) and the Administrative Appeals Tribunal have over time reiterated the proposition that:
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 willing purchaser and a willing, but not anxious vendor would reach agreement.
The Respondent cited numerous cases in respect of the determination of what constitutes the determination of an assets value in particular Cummins and Secretary Department of Families Housing Community Service and Indigenous Affairs [2011] AATA 513, where the Tribunal stated:
The act does not specify how assets are to be valued for the assets test. Over the years, however, the Tribunal and the courts have established authority for the valuation of real estate through determining a market value based on comparable sales and the best use of the property.[1] That approach has been widely followed in the Tribunal and was accepted by the Federal Court in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790. The market value of a property was addressed by the High Court in Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418. Griffin CJ (at 4320 put it as follows:
In my judgement the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e. whether there was on that day a willing buyer, but inquiring ‘What would a man desiring to buy the land have to pay for it on that day to a vendor willing to sell for a fair price but not desirous to sell’
The approach - that the market value is the price a willing, but not eager, purchaser and a willing but not anxious, seller would arrive at on the day in an arms-length transaction, with both sides informed and the property appropriately marketed – has been followed since.
The Respondent also pointed to decisions in Cummins and Henderson which made clear that the Federal Court and the Tribunal over many years had preferred valuations provided by the Australian Valuation Office or professional valuers to that provided by real estate agents, local councils, state valuers and applicants themselves.
Therefore the Respondent submitted that MVS was an independent professional valuer and its market value of the property at Bellambi should be preferred over that of Mr Sutcliffe’s. Consequently as MVS had valued the property at $625,000 this resulted in Mr Sutcliffe’s assets exceeded the assets cut off limit and his age pension had been reduced and cancelled accordingly.
CONCLUSION
The Tribunal understood the emotional attachment Mr Sutcliffe had to his mother’s property in Bellambi but as it was not his principal place of residence, it was an asset and had to valued for determination of his age pension entitlement.
The Tribunal had put to Mr Sutcliffe that whilst there is an accepted human right to shelter there was not an accepted right that an individual had access to two roofs over their head. The community would not consider Mr Sutcliffe’s need for a holiday house which he referred to as a ‘bolthole’ as a universal right. The Tribunal accept Mr Sutcliffe’s argument that he could not be forced to sell any asset to provide for his daily living expenses however the Tribunal did not accept his correlating argument that he therefore was entitled to an age pension.
The Tribunal accepted the argument put by the Respondent that the rationale for the income and assets test of the Act was described in the explanatory memorandum to the Social Security and Veterans Entitlement Legislation Amendment (Private Trusts and Private Company’s Integrity of Mean Testing) Act 2000 which stated:
Social security pension and allowance payments are intended for people who, because of age, disability, unemployment, or caring responsibilities, are unable to adequately support themselves. Social security payments are targeted to those most in need through assets and income tests – together known as the ‘means test’. The means test is the fairest way to ensure that the limited taxpayer funds available for social security expenditure goes to those in greatest need.
The assets test is based on the principle that people with substantial assets apart from their home should use those assets either directly or to produce income to meet day-to-day living expenses before calling upon community resources for income support through the social security system.
The Tribunal took Mr Sutcliffe to his original declaration of real estate details in which he indicated the market value of the property at Bellambi was $370,000 and not the amount of $135,000/$150,000 he now asserted. Mr Sutcliffe advised the Tribunal he had given a great deal of thought and consideration to the value of private property over time and was now adamant that the only true value of a property was that enshrined in contract.
The Tribunal then enquired of the value of Mr Sutcliffe’s principal place of residence in South Yarra to which he attested he had purchased it in 1970 for $40,000 and that it was currently valued at $625,000. This indicated to the Tribunal that Mr Sutcliffe had an appreciation of market value.
The Tribunal did not accept any of Mr Sutcliffe’s arguments in respect of the method of valuation of property. It was simply preposterous to propose that a property had a stagnant value in time based on a sales contract. The Tribunal preferred the established case law that Mr Sutcliffe’s property at Bellambi was an asset that should be valued by an independent valuer based on the notion of market value: “that of a willing but not eager purchaser and a willing but not anxious seller would arrive at on the day in arms-length transaction”.
The Tribunal afforded Mr Sutcliffe abundant time to express his argument, reference to case law and his expansive view on the Crown before it made its oral determination that the original decision be affirmed.
DECISION
The decision under review is affirmed.
I certify that the preceding 33 (thirty-three) paragraphs are a true copy of the written reasons for the decision of Ms Anna Burke, Member
[sgd]........................................................................
Dated: 22 February 2018
Date of hearing: 17 January 2018 Applicant: Self-represented Advocate for the Respondent: Mr James Henderson
Government Lawyer FOI and Litigation Branch
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