Editors --- "Assets test: value of asset; whether unrealisable asset as conservational trust" [2007] SocSecRpr 4; (2007) 9(1) Social Security Reporter, Article 4

• ENCHELMAIER and SECRETARY TO THE DEWR
• Background
• The issues
• Was the property an asset?
• What was the value of the property?
• Was the asset unrealisable?
• Formal decision

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Assets test: value of asset; whether unrealisable asset as conservational trust

ENCHELMAIER and SECRETARY TO THE DEWR

(the Act’)

Decided: 24th November 2006 by P. M. McDermott

Background

In September 2004 Enchelmaier’s newstart allowance was cancelled on the basis that her assets were above the asset limit. She was the registered owner of a block of land at Toowoomba, known as ‘Bundarra’. Enchelmaier appealed against the decision.

In a statutory declaration, dated 19 September 2002, she stated ‘I hereby declare that I do hold and have always held the vacant land at 320 McKenzie Street

Toowoomba as a trustee for the purpose of the conservation of wild life most particularly small birds’. Pursuant to her will, on her death the land was to pass to Toowoomba Field Naturalists Club.

The issues

The issues the AAT addressed were whether the vacant block of land was an asset; and if so, the value of the asset; and whether the asset was an unrealisable asset.

Was the property an asset?

The AAT accepted that as Enchelmaier held legal property to Bundarra, and was free of any encumbrances, it was an asset for the purpose of the Social Security Act 1991(‘the Act’).

What was the value of the property?

Next the AAT turned to examine the method for valuing Bundarra, noting that the Act does not provide for any specific method for valuing assets.

The Federal Court has held that a market value approach should be adopted based on comparable sales and best use to which an asset can be put: Kirkovski v Secretary, DFaCSIA (2004) FCA 790 at [17]. The AAT held that in determining the value of Bundarra it must have regard to the ‘highest and best use that can be made of the property when assessing its market value’.(Reasons, para.22)

The AAT heard evidence from two valuers. One valued Bundarra at $80,000 on the basis that it was parkland. The other valuer considered the market value to be $160,000 after a comparison with sales for property zoned ‘neighbourhood residential’. Bundarra was actually zoned ‘mixed housing’, which allows for higher density housing, however there were a limited number of comparable sales for property zoned ‘mixed housing’. The use of sales of property zoned ‘neighbourhood residential’ resulted in a favourable approach for Enchelmaeir. The AAT accepted the value of $160,000 on the basis that it recognised the ‘best use’ of the property.

Was the asset unrealisable?

Under s.11(2)of the Act an asset is an unrealisable asset if the person cannot sell or realise the asset and cannot use the asset as a security for borrowing. Enchelmaeir argued that she held Bundarra on trust and therefore could not sell or borrow against the property. Referring to her statutory declaration in2002 she argued that she held the land in trust for the purpose of conservation of wild life and in particular small birds. She contended that a trust for the preservation of animals and/or flora is capable of being a valid trust (Attorney-General(New South Wales) v Sawtell (1978) 2 NSWLR 2000).

The AAT expressed reservations about recognising a trust in the form of a statutory declaration, rather than a formally executed declaration of trust under seal.

The AAT noted that in order for there to be a valid charitable trust, it is clear that the trust must be for the public benefit as well as falling within the spirit of the preamble of the Elizabethan Charitable Uses Act 1601(Imp.). The AAT noted that conservation trusts have been upheld where there has been a clearly identifiable public benefit present. Having reviewed the authorities, the AAT held that for a trust for a bird sanctuary to be valid, the land must be of a ‘sufficient area’ and also be ‘suitably situated’.

In Enchelmaeir’s case there was no scientific evidence as to whether Bundarra was of a sufficient size and in a suitable location for the preservation of wildlife. The AAT said that statements of the desirability of preserving the property fell short of being sufficient evidence to base a finding that the property is a suitable location for the preservation of wildlife. Therefore Enchelmaier had not demonstrated the requisite public benefit to show that she held the land intrust.

The AAT did note that even if it had been satisfied that a valid trust existed, the provisions inserted by the Social Security and Veterans’ Entitlement Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000, meant that Enchelmaeir would be attributed with the assets of the trust anyway.

Formal decision

The AAT found that the value of Enchelmaeir’s assets were above the limit for newstart allowance and therefore she was not entitled to payment.

[J.F.]