The pilot of the Piper Seminole reported that he was involved in a near-miss with another aircraft while conducting a practice instrument approach to the Yarrowee navigation aid. As the Seminole was approaching Yarrowee, the pilot established communications with the pilot of a VFR Cessna 177RG conducting airwork over the aid. After each pilot had advised the other of his intentions, the pilot of the Seminole understood that the Cessna was concluding its airwork and departing the area for Ballarat. Subsequently, during the inbound turn of the instrument approach, the pilot of the Seminole reported seeing the Cessna very close to his aircraft and initiated a rapid descent to maintain separation. The pilot of the Cessna later reported that he had the Seminole in sight at all times and did not believe that there was a breakdown in separation. He was unable to recall the details of the communications between the aircraft and could not explain why the pilot of the Seminole understood that the Cessna had departed the area. In the absence of any independent corroboration, such as radar tapes, of either of the two conflicting versions of events, the following is a likely scenario. Based on his communication with the pilot of the Cessna, the pilot of the Seminole believed that his aircraft was the only aircraft in the area. When the Seminole pilot suddenly observed an aircraft close to his own, he may not have had sufficient time to assess the relative flight-paths and thus believed that a collision was imminent. The investigation was unable to determine if the Cessna pilot informed the pilot of the Seminole that he was still in the area and that he was maintaining visual separation. SAFETY ACTION The Bureau of Air Safety Investigation is currently investigating a perceived safety deficiency that has been identified as a result of this and similar occurrences. This deficiency involves the lack of a published requirement for aircraft conducting airwork over a navigation aid not associated with an airport to alert other aircraft prior to arriving overhead the aid. This requirement would provide the opportunity for aircraft to arrange mutual separation. Any recommendation issued as a result of this investigation will be published in the Bureau's Quarterly Safety Deficiency Report.