C05/2011 Flood and Cyclone Affected Clients - Income Support Assessments

Amends DI No.

N/A

Replaces DI No.

N/A

Purpose

This Departmental Instruction outlines the arrangements for income support pension assessments, including Australian Valuation Office (AVO) property valuations, for clients affected by recent floods in Queensland, New South Wales and Victoria, and clients affected by Cyclone Yasi.

There is no change to the pension assessment practices for clients who are not affected by these events.

This Departmental Instruction remains in force indefinitely, with the advised arrangements for affected clients continuing to apply while clients remain affected by the flood and cyclone events.

Property valuations -

AVO advice

DVA assessment of the property valuations of clients in affected areas will follow the agreement reached between the AVO and Centrelink in this area.

Initial advice from the AVO (pre cyclone Yasi) was that property valuations within affected areas would be suspended until 4 February 2011, following which the situation would be reviewed.

The latest advice from the AVO is that AVO valuers may now, at their discretion, undertake requested property valuations in affected localities where it is safe for that valuation to proceed.

Requests for AVO valuations of properties in affected areas may be submitted in the normal manner.  The AVO will advise if it is possible for the valuation to proceed.  Where the valuation cannot proceed immediately, the AVO will retain the request and complete the valuation at a later date.

Bulk AVO property valuation exercise

Departmental Instruction DI C04/2011 Property Valuation Exercise – 2010/2011 Financial Year issued on 4 February 2011 provides general advice on the arrangements for AVO property valuations under the annual bulk exercise undertaken over the period December 2010 – May 2011.

The AVO has advised that 17 properties have been identified in flood affected areas.  This advice of affected properties pre-dates any impacts from Cyclone Yasi.

Where the floods and cyclone have affected a property valuation covered by the AVO bulk valuation exercise, the arrangements in this Departmental Instruction apply.

Client estimates of property value may be accepted

Where AVO valuations are delayed, a client's estimate of property value may be accepted.  Applying a client's estimate of property value is likely to arise most frequently with new pension claims, and with pensioner-initiated reviews (PIRs).

Where a client's estimate is used in the pension assessment, an AVO valuation should be scheduled within 6 months, with the client's estimate only held until the AVO response is received.  A review date should be set in DRS as a reminder.

A client's estimate of property value may be supported by documented evidence of the condition of the property.  In considering the client's estimate, the standard of proof is that of reasonable satisfaction i.e. that the delegate is satisfied that the stated value is more likely than not to be true.

Apart from the client's self-evaluation, a further consideration may include the use of council rates advices, which state the unimproved capital value of the property (land only).  A Businessline was issued in January to provide guidance to staff in the event that documentation has been lost.

Where a client's estimate has been applied to the pension assessment, pending a later AVO assessment, the client should be informed.  Free text input to the pension advice letter should include the following –

“Your valuation of the property provided on x/x/2011 has been used in your pension assessment, pending a valuation by the Australian Valuation Office at a later date.  Please notify the Department if any improvement or repairs have been undertaken, which affect the value of the property”.

Use of Assessment Text should be made to record the fact that a client estimate has been used in the assessment and a note should be recorded in the client's VIEW record (electronic minute) using the “Income Support” topic detailing the valuation used, the reason (flood or cyclone) and when the review has been scheduled.

Client estimates – date of effect

For the purposes of applying a client's estimate of the value of flood and cyclone affected properties, favourable pension variations are effective from the date of the flood or cyclone event.  Pension adjustments should be back-dated to this date, including those cases of delayed confirmation from the pensioner that their property value has been affected.

The operative date of effect rule in VEA subsection 56G(3), Date of effect of favourable determinations – Other determinations allows the favourable amending determination to apply from an earlier date.  The known date of the property loss or damage should be used and the client's advice should be accepted where the delegate is satisfied that this date falls within the known disaster period.

In these extreme cases, the pension variation is not regarded as resulting from a pensioner's notified change of circumstances (subsection 56G(2)), which only allows a pension increase from the later date of notification.  The impact of the natural events on property values within the identified affected areas was known to the Department in advance of the confirming advice received from individual pensioners.  This date of effect practice will also avoid disadvantaging pensioners who have been unable, through exigent circumstances, to promptly advise DVA of changes in their situation.

New claims

The general position outlined in the CLIK Policy Library at 11.1.4/Date of Effect of AVO Valuations, is that the new claim determination should be withheld until the AVO property valuation is received.

This policy does not apply for new pension claims from flood and cyclone affected clients.

The published policy approach is intended to avoid new claims being initially determined on the basis of a client's valuation, where AVO valuations are not delayed by circumstances and are available quickly.  As AVO valuations will be delayed for new claims in flood affected areas, a client's estimate of property value is acceptable, and the initial claim determination should not be delayed.  An AVO valuation should be scheduled within the following six months.

New claims – date of effect

The client's estimate of property value for a new claim applies from the effective date of claim, where the flood or cyclone event preceded the claim.  An adjustment will be necessary where the flood or cyclone event occurred after the date of grant, to reflect the later date of reduction in assessable property value.

Pensioner initiated reviews

Client estimates of property value may be accepted, as above, for pensioner-initiated reviews.  An AVO valuation should be scheduled within the following six months.

Where the affected property is already valued as part of the annual AVO bulk valuation exercise, the valuation advised through that exercise is not applied.  The AVO's response to the scheduled request for valuation within six months is preferred.  The premise behind the annual AVO bulk exercise, to systematize a large number of property valuations and to apply standard dates of effect, is not relevant for the specific revaluation of affected properties.

For this reason, the date of effect applying to the AVO annual bulk valuation exercise, being the beginning of the first pension period in July following the IFA/AFA indexation, is not applicable to an affected property.

Pensioner– initiated reviews – date of effect

The client estimate is applied from the date of the flood or cyclone event, and is maintained in the assessment until the AVO valuation is received.

On receiving the amending AVO valuation at a later date –

For higher property valuations – the date of effect of the pension reduction is the date that the amending determination is made (or a later day, as specified in the determination) following receipt of the AVO valuation (section 56H, Date of effect of adverse determination);

Note – for pension reductions which move a pensioner from the income test to the assets test, or to nil payability, the date of effect (measured from the time the pensioner is advised of the variation) is extended by three months.  This extension allows pensioners affected by increasing property value some time to rearrange their financial affairs, and applies to individual and targeted property valuations, as well as to the AVO annual bulk exercise.

For lower property valuations – the date of effect of the pension increase is the date of determination, or a later or earlier date, as specified in the determination (section 56G(3), Date of effect of favourable determinations – Other determinations).

Circumstances which may support the use of an earlier date for the AVO valuation, and the backdating of the pension increase, are those where the client's initial estimate of property value was used in the absence of a more reliable AVO valuation, but where the later AVO assessment shows the client's estimate to be manifestly incorrect (too high).

Section 57 reviews

Section 57 reviews on hand relating to objections against property valuations will need to address the property valuation at the date of the objection, and the lower valuation following the flood or cyclone event.

The date of effect provisions for section 57 reviews (section 57C – Date of effect of certain review decisions) allow a substituted decision to take effect from a date as specified in the review determination.

Assessments for aged care purposes

The Department of Health and Ageing has confirmed that client estimates of property value in affected areas may be accepted if a valuation is not able to be done by the AVO.

Valuation requests should be lodged as per the usual process.  Where the AVO indicates that a valuation is not yet possible, the valuation provided by the client should be used for the purposes of the aged care asset assessment.

Compliance Reviews

Compliance reviews should generally be avoided for clients located in identified flood or cyclone affected areas, or who otherwise substantiate that they have been affected by a flood or cyclone event.

However, those reviews initiated by a known event (such as bereavement reviews) and which proceed based on an established timeframe should continue.

Assessment of insurance moneys received

The procedures for assessing insurance and compensation payments received for flood-related loss or damage are contained in TRIM document 1113950E, Key References for Flood Related Issues.  The procedures also apply for loss or damage from Cyclone Yasi.

Determining flood/cyclone dates

In view of the extended duration of the flood and cyclone impacts, a client's advice of the actual date that they were affected can be accepted, where the delegate is satisfied that this date falls within the known duration of the events.

Flood victims not in identified post code areas

Clients who can establish to the delegate's satisfaction that they have experienced flooding, in areas outside the identified post codes or from more recent flooding events, are also covered by this Instruction.

Other natural disasters

The procedures outlined in this Departmental Instruction recognise that the impact of extreme weather events on property valuations must be identified and acted upon quickly, to avoid disadvantaging pension recipients who are assets-tested.

Delegates have the discretion to apply the same valuation procedures to pensioners whose property is affected by other extreme events, such as bushfire, where it is not appropriate to rely on the usual AVO valuation requests.

Role of delegates in determining property value

It is a requirement that delegates arrive at their own decision on the value of a property, having taken the necessary steps to inform themselves of the value of a property, and acting on the best information available to them.

The arrangement by which property valuations are obtained from the AVO is longstanding, with AVO valuations being readily accepted, and generally preferred, on the basis of the AVO's expertise in this field.

However, where a delegate receives information from a source other than the AVO which suggests a different valuation, with that information accepted as reliable and accurate, it is within the delegate's authority to accept the different valuation.

The assessment test which applies to the available evidence of property value is that the delegate is reasonably satisfied (that the evidence is more likely than not to be true).

On this basis, a client's documented evidence that a property is severely flood-damaged, is uninhabitable and has reduced market value, may be preferred to a current AVO valuation, where the evidence provided by the client meets the test of reasonable satisfaction.

Contact

The contact person is Brian Butler, Benefits, Payments and Rehabilitation Policy, on extension 16110.