Editors --- "Assets test: whether adjacent lot is 'principal home" [2005] SocSecRpr 10; (2005) 7 Social Security Reporter, Article 10

• DAVIS and SECRETARY TO THE DFaCS
• Background
• Legislation
• Caselaw
• Findings
• Formal decision

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Assets test: whether adjacent lot is 'principal home

DAVIS and SECRETARY TO THE DFaCS

(2005/114)

Decided: 8th February 2005 by P.M. McDermott

Background

Davis was a pensioner living in a home on a suburban lot in Clayfield. The property was described on a 1920certificate of title as “subdivisions 11 and 12”. A house was built to one side leaving one half effectively vacant and with both parcels registered under one certificate of title. Davis’s parents owned the land from1946, and Davis was the registered proprietor from 1983.

In March 2003, Davis determined to sell one half of the land and in reliance on the existing subdivision, sought separate title references while at the same time placing one lot on the market. The newly-identified parcel with its own street address was notified to the Department and was sold in January 2004.

The question before the Tribunal was whether the land from March 2003 to the date of sale was an asset or exempt because it remained part of the principal home for that period.

The Department had decided that obtaining separate references and placing the property onto the market removed the parcel from the principal residence exemption, as it was no longer primarily used for private or domestic purposes. In his decision, the ARO set out the Department’s argument;

...from March2003. The property became a commercial property and had a buyer become interested on that day or shortly afterwards, there would be nothing to stop a contract of sale being drawn up, for settlement at a later date subject to the rates notice being issued and paid; and for this reason this property is considered an asset from 20 March 2003. (Reasons, Para. 7)

Legislation

Section 11(5) of the Social Security Act 1991 (the Act) defines principal home to include, ‘(a) ...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 two hectares’.

Caselaw

The AAT referred to the Explanatory Memorandum, cited in Earlam and Secretary, Department of Social Security (DSS) [1991] AATA 204; (1991) 24 ALD 606 at 608,

This rule is of particular importance where a person owns two connected blocks of land and one block contains the person’s home. It is not intended that the other block will be treated as part of the curtilage of the home.

While in Eardlam, the issue was the proximity of odd-shaped blocks with inter-linked access and usage, in Loubeand Secretary, DSS (S86/41, unreported), a house was built across two blocks. In both cases, the lots were all included in the principal home.

Findings

Applying a purposive test, the AAT found the block was still primarily used for private or domestic purposes and that did not over-ride Davis’s intention to sell. Reid and Secretary, DFaCS [2000} AATA 59 was distinguished on the grounds that the case dealt with rural acreage purchased with the intention of subdivision.

Accordingly, the lot was not an asset at the relevant time. The AAT said:

...there was no basis for Centrelink to regard the property as being “a commercial property” after the block was registered under a separate title reference and listed for sale. There was no evidence ...of any change of use of the property after March 2003until it was sold (Reasons, para. 12).

The Tribunal found that arranging a sale of part of a lot did not create a disentitling asset, even when, as in this case, significant funds were expended in the preparation process.

Formal decision

The AAT remitted the matter to the respondent with the direction that the relevant block of land was part of Davis’s principal home until it was sold in January 2004.

[J.S.]