Wolter and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2011] AATA 830
•24 November 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 830
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2011/2533 &
GENERAL ADMINISTRATIVE DIVISION ) 2011/2535 Re DANIEL AND JUNE WOLTER Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr P McDermott, RFD, Senior Member Date24 November 2011
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ............Sgd].............................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Age pension – Assets test – Adjoining land owned by applicants included in calculation of payment – Grandfathering provisions not applicable – Adjoining land not principal home – Adjoining land assessable asset – Net market value of land included in value of assets for purposes of assets test – Decision under review affirmed
Families, Community Services and Indigenous Affairs and Veterans’ Affairs Legislation Amendment (2006 Budget Measures) Act 2006 (Cth) Schedule 1, cl 19
Social Security Act 1991 (Cth) ss 11, 55, 1064, 1118Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579
Re Torv and Secretary, Department of Social Security [1992] AATA 185
Re Woodhouse andDepartment of Social Security [1987] AATA 73REASONS FOR DECISION
24 November 2011 Dr P McDermott, RFD, Senior Member
INTRODUCTION
1. This application by Mr and Mrs Wolter (“the applicants”) raises the issue of whether the asset value of a property can be disregarded for the purposes of calculating age pension.
BACKGROUND
2. The applicants reside in a home which is built on a block of land which is sufficiently described as Lot 60, RP 91590.[1] The applicants also own the adjoining vacant block of land described as Lot 59, RP 91590. The applicants have confirmed that Lot 60 was purchased in 1969 and Lot 59 was purchased in 1972. No part of their home is erected on Lot 59. There is an above ground swimming pool erected on Lot 59. Lot 59 is also used for the parking of various vehicles.
[1] In these reasons, which are a matter of public record, it is not necessary to disclose the address of the residence.
3. On 18 July 2007 the Australian Valuation Office (AVO) assessed Lot 59 as having a market value of $275,000. The applicants were granted disability support pensions with effect from 7 June 2007, taking into account the asset value of Lot 59. The applicants are now in receipt of the age pension.
4. The applicants have had a number of discussions with Centrelink. On 8 June 2010, Mrs Wolter contacted Centrelink to raise issues about Lot 59 and its assessment as an asset. On 16 August 2010, Mr Wolter confirmed that his home was on Lot 60 and that Lot 59 was on a separate title deed.
5. On 6 October 2010 the Australian Valuation Office assessed Lot 59 as having a market value of $230,000. This decision led to the increase of the applicants’ age pension, as well as the payment of arrears to them.
6. On 12 November 2010, the applicants sought review of the decision of Centrelink to include Lot 59 in their assessable assets for the purposes of calculating their age pension.
PRIOR DECISIONS
7. On 9 December 2010 an authorised review officer made a decision to pay age pension to the applicants at a reduced rate on the basis that Lot 59 was an assessable asset.
8. On 17 May 2011 this decision was affirmed by the Social Security Appeals Tribunal.
9. On 27 June 2011, the applicant sought further review of the decision by this Tribunal.
RELEVANT LEGISLATION
10. This application is subject to the operation of the Social Security Act 1991 (Cth) (“the Act”).
11. Under s 55 of the Act, a person’s rate of age pension is calculated using the Pension Rate Calculator A at the end of s 1064 of the Act.
12. Section 1064-A1 of the Act provides a method statement for working out a person’s maximum payment rate of age pension. Step 5 provides for the ordinary income test in Module E and Step 8 provides for an income reduced rate. Steps 9 and 10 provide for the assets test in Module G and the assets reduced rate. Step 11 requires that a person be paid the lower of the income reduced rate and the asset reduced rate.
13. Section 1064G of the Act provides a method statement for working out the effect of a person’s assets on the person’s maximum payment rate.
14. Under ss 11 and 1118 of the Act, the combined assets of a couple are to be taken into account as assessable assets when working out the rate of pension, unless they can be treated as an ‘exempt asset’.
15. The principal home of a person is disregarded under s 1118(1)(b) of the Act. It provides:
1118 Certain assets to be disregarded in calculating the value of a person's assets
(1) In calculating the value of a person's assets for the purposes of this Act (other than sections 198F to 198MA (inclusive), Division 1B of Part 3.10, Division 2 and sections 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;
…
16. The principal home of a person is defined in s 11A of the Act as follows:
11A Principal home definition for the purpose of the assets test
Principal home
(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.
…
Is grandfathering available?
17. One of the issues raised by the applicant is whether grandfathering is available in this case. At the hearing I stated that if the applicants had been in receipt of social security benefit immediately prior to 1 January 2007 their position would certainly be different. This is recognised in section 4.6.80 of the policy document entitled Guide to Social Security Law. The amendments to the definition of ‘principal home’ in s 11A(2) of the Act would not have applied to them because of the transitional provisions found in Schedule 1, clause 19 of the Families, Community Services and Indigenous Affairs and Veterans’ Affairs Legislation Amendment (2006 Budget Measures) Act 2006 (Cth). As the applicants were not in receipt of social security benefit on 31 December 2006, grandfathering is not available.
Can Lot 59 be treated as part of the principal home?
18. Another issue is whether Lot 59 can, under social security law, be treated as being part of the principal residence of the applicants.
19. The principal home of the applicants is certainly an asset that is disregarded in calculating the value of a person’s assets: s 1118. The principal home is built on Lot 60. The tenor of the evidence of the applicants is that Lot 59 is part of their home. They park vehicles, including a caravan, on Lot 59. The difficulty faced by the applicants is that Lot 59, which is adjacent to Lot 60, is on a different title document and cannot be regarded as part of the principal residence because of the operation of s 11A(1)(a)(i) of the Act.
20. However, Lot 59 can be treated as being held on the same title document as Lot 60 if any of the circumstances in s 11A(2) of the Act exist. The evidence given by Mr Wolter is that the dwelling-house is not located on both blocks. Mr Wolter emphasised that the local authority ensured that any house was built within the confines of a block. Accordingly, s 11A(2)(a) does not apply. There is no evidence that the property is protected by any law because of its natural, historic or indigenous heritage. Accordingly, s 11A(2)(b) does not apply. I am not satisfied that the alienation of Lot 59 would seriously undermine the function of their house as a dwelling in terms of s 11A(2)(c) of the Act. A note to that provision indicates that the mere loss of amenity, such as the loss of a swimming pool, would not seriously undermine the function of a house as a dwelling. The loss of parking for vehicles on Lot 59 would also not seriously undermine the function of the house as a dwelling.
21. I therefore conclude that Lot 59 cannot, under social security law, be treated as being part of the principal home of the applicants.
VALUE OF LOT 59
22. There is no provision in social security law which provides how an asset has to be valued. This Tribunal has consistently held that it is required to assess the net market value of the property based on comparable sales and the “best use” to which the asset could be put: see Re Woodhouse andDepartment of Social Security [1987] AATA 73; Re Torv and Secretary, Department of Social Security [1992] AATA 185 and Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579. This approach has been approved by the Federal Court of Australia in Kirkovski v Secretary Department of Family and Community Services [2004] FCA 790, where Bennett J remarked (at [17]):
Under the Social Security Act 1991 (Cth) there is no statutory provision specifying any method for the valuation of assets. The test which seems to have been applied by the AAT in a majority of cases is a net market value approach based on comparable sales and the ‘best use’ to which the asset could be put (see Fong and Secretary Department of Family and Community Services [2002] AATA 172; Re Emberts and Repatriation Commission (1988) 16 ALD 19).
23. In determining a value for Lot 59 I must base any decision on evidence that has been placed before me. The applicants have been quite candid in stating that they do not know the market value of Lot 59. The only valuation that I have is the AVO valuation.
24. While the applicants have not themselves put forward an estimate of the market value of Lot 59, they have taken issue with the methodology of the AVO valuation. They point to the fact that Centrelink has advised the AVO that Lot 59 has an area of 648m2, whereas the material from the State Government is that both Lot 59 is of a lesser area. In view of this submission of the applicants I called for the full valuation report from the AVO concerning Lot 59. A valuation report from the AVO, dated 3 November 2010, was admitted in evidence at an adjourned hearing of this application.[2] That report discloses that the valuer proceeded to value Lot 59 on the basis that the lot has an area of 539m2, so the valuer certainly did not proceed on the assumption that the lot has an area of 648m2.
[2] Exhibit D.
25. The valuation report from the AVO dated 3 November 2010 discloses that the valuer had considered sales data from six properties before finalising the report. Three of those properties, which were sold between April to June 2010, are in the same suburb as Lot 59 and each have an area of 539m2. These properties have been assessed as having analysed land values of $245,000, $235,000 and $240,000. The valuer has assessed Lot 59 as having a lesser value then these lots, with a value of $230,000, based on the highest and best use of the property. In his reasons for the valuation, the valuer stated that the Lot 59 has a narrow frontage of 13.4m, which is considered to restrict the ability to develop the site. The valuer remarked that access onto and off the property is more difficult due to the higher volume of traffic passing the property. The valuer has also noted that improvements on the land have limited added value to the land. He has also noted that the achievable value of improved properties in the then-present market has reduced the hypothetical residual value of vacant land in the area. In my opinion, the valuer has fairly assessed the market value of Lot 59.
26. On 27 October 2011 the applicant obtained recent advice from a real estate agent, who advised that Lot 59 could be sold for $175,000 to $180,000. I accept that there has been a decline in real estate values since August 2010. What is material is the market value of the property in about August 2010. I find that the value of Lot 59 was $230,000 at August 2010. The respondent has quite properly advised the applicants that they can seek a revaluation of Lot 59 in view of the decrease in property values.
DECISION
27. I affirm the decision under review.
I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member
Signed: ............[Sgd].................................................
Research AssociateDate/s of Hearing 12 October 2011
Date of Decision 24 November 2011
Applicants were self-represented
Solicitor for the Respondent Rick McQuinlan, departmental advocate
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