Wilshere and Secretary, Department of Social Services (Social security)

[2025] ARTA 2038

Wilshere and Secretary, Department of Social Services (Social security) [2025] ARTA 2038 (17 July 2025)

Applicants:  Mrs Wilshere & Mr Wilshere

Respondent:  Secretary, Department of Social Services

Chief Executive Centrelink    

Tribunal Numbers:   2025/S193557 & 2025/S193622

Tribunal:  General Member N Foster

Place:Brisbane

Date:17 July 2025

Decision:The Tribunal sets aside the decisions under review and remits the matters for reconsideration in accordance with the order that the combined value of Mrs and Mr Wilshere’s adjacent units at [Suburb] is to be disregarded under the age pension assets test on the basis that these units together constitute their principal home.

CATCHWORDS
SOCIAL SECURITY – age pension – assets test – two adjacent units regarded together as principal home – originally one house, divided and now on separate titles – long ownership of first unit and more recent purchase of second – daily use of both units – legislation does not expressly preclude neighbouring units being treated as one principal home – decision under review remitted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

Statement of Reasons

BACKGROUND

1. This review is about whether the value of Mrs and Mr Wilshere’s assets is above the allowable limit for age pension purposes and, in particular, whether two adjacent units owned by them can be regarded together as being their principal home.

2. Mrs and Mr Wilshere claimed age pension on 20 March 2023.  On 20 October 2023, Services Australia (Centrelink) rejected Mrs and Mr Wilshere’s claims on the basis that the value of their assets exceeded the allowable limit.

3. Mrs and Mr Wilshere requested a review and on 10 December 2024, an authorised review officer affirmed Centrelink’s decisions.  In doing so, the authorised review officer found that a person can only have one principal home for age pension purposes.  As Mrs and Mr Wilshere’s two units were on separate titles, the value of one unit was assessable under the assets test.  When the value of the smaller unit was taken into account, the value of Mrs and Mr Wilshere’s assets exceeded the relevant assets limit of $954,000.

4. Mrs and Mr Wilshere applied to the Tribunal on 4 March 2025.  These applications were heard together on 20 June 2025, with Mrs and Mr Wilshere appearing by telephone.  After obtaining written submissions from Centrelink, the Tribunal made its decision.

CONSIDERATION

What are the relevant law and issues?

1. Under section 44 of the Social Security Act 1991 (the Act), age pension is not payable to a person if their rate would be nil.  Under section 1064 of the Act, the rate of a person’s age pension may be reduced by the value of their and their partner’s assets.  Section 11 defines an asset as property or money.  Despite this, under subsection 1118(1) of the Act, a person’s interest in their principal home may be disregarded when calculating the value of their assets.  Relevantly, paragraph 1118(1)(b) exempts the following:

   … 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 he person's partner reasonable security of tenure in the home …

2. The definition of principal home for the purpose of the assets test is contained in section 11A of the Act.  Relevantly, this section states:

   (1)  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 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; 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.

(2)  The Secretary may determine that land is to be treated, for the purpose of subparagraph (1)(a)(i), as if it were held on the same title document as other land if any of the following apply:

 (a)  the dwelling-house is located on both blocks of land;

 (b)  the dwelling-house is located on one of the blocks of land but that block and the other block, taken together, are a place, or are part of a place, that is protected under a law of the Commonwealth, or of a State or Territory, because of its natural, historic or indigenous heritage;

(c)  the alienation of one of the blocks of land without the other would seriously undermine the function of the house as a dwelling.

Note:  A mere loss of amenity, such as the loss of a swimming pool, garden, tennis court or view, would not seriously undermine the function of a house as a dwelling.

1. As at 20 March 2023, the rate of age pension for a homeowner who was a member of a couple reduced to nil if the value of their and their partner’s assets exceeded $954,000.  The sole matter of contention is whether the two units owned by Mrs and Mr Wilshere – which the Tribunal will refer to as Unit 5 and Unit 6 – can be regarded together as being their principal home, thereby bringing the value of their assets below this threshold.

How should Unit 5 and Unit 6 be assessed for age pension purposes?

1. Mrs and Mr Wilshere’s units, which are on separate titles, are situated next to each other on the ground floor of a unit complex at [Suburb].  Unit 5, which is the larger property, was purchased by Mrs and Mr Wilshere in 1981 and they have occupied it continuously since then.  Mrs and Mr Wilshere own Unit 5 outright and, in a Module R form lodged with their pension claims, valued this property at $1 million as at 20 March 2023.  Unit 6 was rented by Mrs and Mr Wilshere in 2006 then purchased in 2009 with a loan that used Unit 5 as security.  As with Unit 5, Mrs and Mr Wilshere have occupied Unit 6 since they bought it.  In their Module R form, Mrs and Mr Wilshere valued Unit 6 at $900,000.

2. Mrs and Mr Wilshere told the Tribunal that, prior to their building being divided into strata title more than four decades ago, Unit 5 and Unit 6 were the one residence known as “the house” and the other units in the complex were separate holiday rentals.  At some point prior to Mrs and Mr Wilshere’s purchase of Unit 5, a stud wall was erected between it and Unit 6.  As illustrated by a handwritten floor plan provided to the Tribunal, the hallway that extended through both units now ends at this wall.  Although Mrs and Mr Wilshere had intended to knock down the wall across the hallway when they purchased Unit 6, they did not end up doing so because of the expense involved and the legal complexities relating to the strata title.  Instead, they go in and out of their two units by using the properties’ entrances.  Unit 5 has one entrance and Unit 6 has two.  Each unit has its own mailbox but most of Mrs and Mr Wilshere’s mail is addressed to Unit 5.

3. When asked by the Tribunal how the units were used on a daily basis, Mrs Wilshere said that Unit 5 has the bedrooms where she, Mr Wilshere and their adult son sleep.  It also contains the main kitchen, lounge, dining area and a bathroom.  Unit 6 has its own bathroom, which they routinely use.  Unit 6 also has a sewing room/study and a spare bedroom for guests.  Its lounge is used for storage and there is a small kitchenette.  Mrs and Mr Wilshere told the Tribunal that they are in and out of Unit 6 on a regular basis throughout the day and that they have always treated it as being part of their home.

4. In seeking for both Unit 5 and Unit 6 to be exempted from the age pension assets test, Mrs and Mr Wilshere contended that they have always treated the units as a single residence.  Although they were initially led to believe by Centrelink that this would not be an issue, they have since been told that the units cannot be assessed together because they are on different titles.  Mrs and Mr Wilshere told the Tribunal that they cannot put the units back onto the same title and that they do not want to sell up and move elsewhere.  They do not dispute Centrelink’s assessment of any of their other assets.

5. After the hearing, the Tribunal directed that Centrelink provide written submissions on whether neighbouring units on separate titles could be assessed as the one principal home under the Act.  In its submissions, Centrelink contended that Unit 5 and Unit 6 cannot be assessed as the one principal home pursuant to sections 1118 and 11A of the Act.  Rather, Mrs and Mr Wilshere’s principal home was Unit 5 and its associated car park because this is where they lived for approximately 28 years prior to the purchase of Unit 6.  In arguing that Unit 6 and its associated car park was an assessable asset under the Act, Centrelink contended that paragraph 1118(1)(b) specifically only exempts “one residence” and that section 11A does not provide discretion to consider two separate strata lots to be one principal home.  Centrelink also cited departmental policy guidelines in the Social Security Guide (the Guide) about the assessment of a person’s principal home where they own more than one home and to the decision of the former Administrative Appeals Tribunal (the AAT) in Waters and DSS [1991] AATA 334 (Waters), where two units owned by a person on different floors of the same building were found to be separate and distinct residences for the purpose of the Act. 

6. In deciding whether Unit 5 and Unit 6 can be assessed together as Mrs and Mr Wilshere’s principal home for age pension purposes, the Tribunal observes that section 11A of the Act does not specifically define this term.  Rather, the section lists certain things that can be included as part of a person’s principal home.  For example, under paragraph 11A(1)(a), land adjacent to a dwelling-house can be regarded as part of the principal home in certain circumstances, as long as this land is on the same title.  This implies that properties on separate titles, at least when it comes to a dwelling-house and the land around it, cannot be assessed as the one principal home.  However, with regard to units, paragraph 11A(1)(b) of the Act sets out no such prohibition and instead merely states that a person’s principal home includes a garage or storeroom that is used primarily for private or domestic purposes in association with the unit.  In the view of the Tribunal, section 11A of the Act does not expressly preclude neighbouring units, including those on separate titles, from being treated as the one principal home.

7. Centrelink in its written submissions has also referred to paragraph 1118(1)(b) of the Act, which specifically exempts “one residence” from the assets test.  While the Tribunal accepts that this provision would preclude both Unit 5 and Unit 6 from being exempted if they were separate residences, this is not Mrs and Mr Wilshere’s argument.  Instead, they contend that Unit 5 and Unit 6 are the one residence.  Should the Tribunal be satisfied that this is the case, paragraph 1118(1)(b) of the Act would not preclude the value of this one residence from being disregarded under the age pension assets test.

8. As for the portion of the Guide cited by Centrelink in its written submissions, it also does not specifically address the question of neighbouring units.  Instead, the Guide at 4.6.3.30 refers to the situation where a person has more than one home:

   If an income support recipient, or their partner, has more than one home:

   ·    their principal home is the one in which they spend the greatest amount of time, UNLESS

   ·    they spend the same amount of time in each of them, in which case the most expensive home is defined as the principal home.

   The property which is NOT the principal home IS assessed as an asset even when the income support recipient or their partner are living in the property.

   If the income support recipient or their partner spends a considerable amount of time in a home they do NOT own, the home they own is the principal home.

   Example: The income support recipient, or their partner, may live in the home that they own for 5 months a year and live the rest of the year in holiday rental accommodation. The home they own remains their principal home.

   While this is also the part of the Guide cited by the authorised review officer in affirming Centrelink’s decisions, the Tribunal observes that this passage is directed towards a situation where a person spends time between two homes, irrespective of their proximity.  As already noted, Mrs and Mr Wilshere are not contending that they have two homes.  Furthermore, rather than spending time between their two units, Mrs and Mr Wilshere contend that the two properties together constitute the one principal home.

9. This scenario, while not directly addressed by the Act or the Guide, has previously come up in the case law, albeit in different factual situations to the present.  For example, in Ghata and Repatriation Commission [1990] AATA 365, the AAT considered a case where a person who owned a block of flats argued that all of their flats constituted their principal home. In determining that only two of the four flats should be exempt from the assets test, the AAT cited case law that indicated that what constitutes a person’s principal home is a matter of fact and degree. In particular, the AAT found that the actual use to which the flats were put had direct relevance in determining what was the applicant’s principal home. In that particular case, the AAT found that the applicant’s principal home was comprised of the two top-storey flats that they had continuously occupied (and had knocked down the wall in between) but did not include downstairs flats that were occupied by other family members or that had been rented out. (It was unclear from the AAT’s decision whether the various flats were on the same title or not.)

10. Meanwhile, in Waters – the decision cited in Centrelink’s written submissions – the AAT considered a situation where the applicant owned two units that were on separate titles but, unlike the current case, were on different floors of the same building.  The applicant spent part of the day in one unit and most of her time (including overnight) in the other.  In concluding that the units did not form one principal home, the AAT found that the physical separateness of the two units and legal formalities such as their individual titles meant that they were separate and distinct residences for the purposes of the Act.

11. The meaning of principal home has also been considered in situations that are the opposite to the present – namely, where a person has not been living in a part of the building they claim to be their principal home.  In Secretary, DFacS and Kulshrestha [2003] AATA 227, the AAT considered a case where the respondent owned a house that had two discrete living areas with separate entrances that were separated by a lockable door. The respondent lived in one part of the house and rented out the other. On the question of what constitutes a person’s principal home, the AAT concluded:

    It is the place where [the respondent] cooks, eats, sleeps, washes himself and his clothes and generally lives. It is the place where he usually resides and it is the place that he regards as home.

    In that particular case, the person’s home did not include the part that was rented out.

12. Based on this case law, the current Tribunal infers that it is possible for two properties to be regarded as constituting the one principal home under the Act.  As indicated by the AAT decisions, an important factor when determining whether a property forms part of a person’s principal home is how it has been used.  Physical proximity between properties may be a relevant consideration; so too, whether properties are on separate titles or not.

13. In Mrs and Mr Wilshere’s particular case, their units are on separate titles but are next to each other.  Unlike in Waters, the two units are not only physically proximate, they were originally the one property.  Indeed, were the wall that was placed across the hallway of Unit 5 and Unit 6 to be removed, the space would resemble – and actually be – one residence.  In terms of how the properties are used, Mrs and Mr Wilshere sleep, eat and cook in Unit 5 but routinely use the bathrooms in both units.  They also use Unit 6’s other rooms as their own.  While Unit 5 is their main living area, Mrs and Mr Wilshere are in and out of both units during the course of the day, as has been the case for nearly 20 years.  Tellingly – and consistent with Mrs and Mr Wilshere’s assertion that they have always treated Unit 6 as part of their home – this unit has never been rented out or used by them as anything other than an extension of the living area they enjoy in Unit 5.

14. While recognising that it will be rare that the facts of a case will warrant two properties being treated as the one residence, the Tribunal considers that the idiosyncratic history of Unit 5 and Unit 6, the physical proximity and layout of the units and their long and continued use by Mrs and Mr Wilshere as the one home justify such a conclusion.  Accordingly, the Tribunal finds that Unit 5 and Unit 6 should be regarded together as being Mrs and Mr Wilshere’s principal home for age pension purposes.  It follows that, in accordance with subsection 1118(1) of the Act, the value of both Unit 5 and Unit 6 is to be disregarded when determining the value of Mrs and Mr Wilshere’s assets under the assets test.

15. It is common ground that the combined value of Mrs and Mr Wilshere’s other assessable assets as at 20 March 2023 was well below the assets cut-off threshold of $954,000.  Accordingly, the Tribunal will set aside the decision under review and return Mrs and Mr Wilshere’s matters to Centrelink to reassess their age pension claims on the basis that the combined value of Unit 5 and Unit 6 is to be disregarded when calculating the value of their assets under the assets test.

DECISION

The Tribunal sets aside the decisions under review and remits the matters for reconsideration in accordance with the order that the combined value of Mrs and Mr Wilshere’s adjacent units at [Suburb] is to be disregarded under the age pension assets test on the basis that these units together constitute their principal home.

Date of hearing: Friday, 20 June 2025