Packer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 219 (31 March 2011)

Last Updated: 31 March 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 219

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/3956

GENERAL ADMINISTRATIVE DIVISION		)
	Re		GWENDOLINE PACKER

Applicant

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal

M J Carstairs, Senior Member

Date 31 March 2011

Place Brisbane

Decision

The Tribunal affirms the decision under review.

................[sgd]...............
Senior Member

SOCIAL SECURITY – age pension – assets test – valuation – principal home – whether horse stable and machinery shed are used primarily for private or domestic purposes

Social Security Act 1991, ss 11A, 1118(1)

Re Fakhry and Repatriation Commission [1986] AATA 358

REASONS FOR DECISION

31 March 2011

M J Carstairs, Senior Member

1. Gwendoline Packer is in receipt of age pension. In 2009 Centrelink assessed her assets and reduced her rate of pension because the excess land surrounding her principal home was considered to be used for commercial activity connected with harness racing rather than for private or domestic purposes. Mrs Packer seeks review of the decision.

BACKGROUND

2. Until 2009 Mrs Packer had lived in the Redland Bay area, and her house was an exempt asset as it was her principal home. However, she was not well and her medical practitioner considered it unwise that she continue to live on her own. Mrs Packer wanted to be with her family, who at the time also were living in the Redland Bay area. The family has had a long term interest in harness racing, and property was sought that would meet all the family needs.

3. Mrs Packer contributed the whole of the proceeds of the sale of her house at Redland Bay to the purchase of a half share in a property, some 20 hectares of rural zoned land in the Lockyer Valley, on which there are stables, machinery sheds, and horse yards, and on which there is a 6-bedroom house. Mrs Packer lives in the house with her family, under the same roof as the rest of the house, in a 2-bedroom unit which is an extension. The unit affords her an independent living area.

4. The purchase price of the property was $1,300,000, and Mrs Packer’s share is unencumbered, although her daughter had to borrow for her half-share and has a mortgage. Mrs Packer understood from discussions at the time with Centrelink that her pension would not be affected by the purchase of the property, as the improvements referred to (sheds and horse yards) are close to the house and stand well within the boundaries of the 2 hectares allowed under the Act that may surround a principal home before the rate of pension is affected.

5. However, the legislation is not quite that simple in its operation. Section 1118(1) of the Social Security Act 1991 (the Act”) read with s 11A of the Act exempts a person’s “principal home” from the assets test. The “principal home” is taken as the house plus the land adjacent to the house, to the extent that the land is held on the same title as the house and is used primarily for private or domestic purposes.

6. The only valuation report was compiled by Mr G Townsend of the Australian Valuation Office. He valued the whole property at $1,300,000, which sensibly adopts the then recent purchase price, and indeed that figure is accepted by Mrs Packer. However, Mrs Packer maintained that the sheds and improvements that were within the 2 hectares ought to be excluded. Indeed, she further maintained in earlier stages of the appeal that their use was recreational and they were not part of any business; at the highest it was a family hobby.

7. At the hearing Mrs Packer acknowledged that her granddaughter was now trying to make a career in harness racing. She had been unaware at the time of the Social Security Appeals Tribunal hearing that her son-in-law had lodged an application with the Australian Taxation Office for an ABN for “Turpin’s Racing Stables”. I accept that Mrs Packer has nothing to do with any business arrangements undertaken by other family members.

8. However, the use to which the improvements are put helps to understand how the overall assets are to be assessed.

9. The valuation provided by Mr Townsend was:

• Overall value $1,300,000
• House and curtilage $700,000

The house and curtilage value was based on comparable sales evidence, although Mr Townsend acknowledged that the sales were not directly comparable to the subject land.[1] The remainder assigned was $600,000 for the excess 18 hectares. It seems that no separate valuation of the non-residential improvements was carried out. The approach was to take the value of the 2 hectares and assess it without those improvements adding to the value of that part.

CONSIDERATION

10. Section 11A of the Act provides that the principal home will only include the 2 hectares around the house to the extent that land is used primarily for private or domestic purposes in association with the dwelling-house. That is not the case here. Mr Townsend explained in his report that social security asset testing of the principal home excludes non-residential improvements. He described the improvements in this instance as clearly non-domestic, and also of a superior standard, including mechanical walking frames and a swimming race for the horses, 12 stables with power, and high clearance sheds that allow drive-through access for delivery trucks and fodder. In his opinion, the value of the property remained unaffected by flooding sustained in January 2011 in the Lockyer Valley region, as the property was only mildly affected.

11. Different approaches may be taken to the assessment of the value of land. However, I am satisfied that the approach taken by the Australian Valuation Office is correct in the circumstances and consistent with the Tribunal’s decision in Re Fakhry and Repatriation Commission [1986] AATA 358. That approach is to take the market value of the whole of the real property (the value that would be paid by a willing but not over-anxious purchaser) and obtain the market value of the principal home and its curtilage of 2 hectares, and then deduct the latter figure from the former.

12. Here the difference was $600,000 and Mrs Packer’s half share ($300,000) formed part of her assets and is to be taken into account in setting her rate of age pension.

DECISION

13. The Tribunal affirms the decision under review.

I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of M J Carstairs, Senior Member

Signed: ...................[sgd]..................

Dominique Mayo, Associate

Date of Hearing 7 March 2011

Date of Decision 31 March 2011

Applicant Self-represented

Respondent Centrelink Advocacy Branch

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[1] Document T15