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Disregarded Assets Relating to Interests

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Assessing life interests

    

The value of any life interest of a person is a disregarded asset unless it was created:

  • by the person,
  • by the person's partner, or
  • on the death of the person's partner.

When the life interest is in a person's principal home, the value of the interest is a disregarded asset.

Assessing contingent, remainder or reversionary interests

    

The value of any contingent, remainder or reversionary interest is a disregarded asset unless it was created by:

  • the person,
  • the person's partner, or
  • both the person and their partner.
Assessing granny flat interests

    

A person's granny flat interest in their principal home is a disregarded asset if the interest was acquired:

Sale leaseback interest

    

A person's right or interest in a sale leaseback home is a disregarded asset (i.e. the person is taken to be a home owner) if the:

Actuarial valuations

Actuarial valuations are required for the following:


A life interest arises when a pensioner:

  •       acquires the right to use assets or the income produced by those assets, or
  •       transfers a non-exempt asset to another person, but retains an interest in the asset, or
  •       is created by the will of a deceased individual.

A life interest remains current until the pensioner:

  •       dies,
  •       sells the asset, or
  •       formally surrenders the asset.

 

 

The principal home has the meaning given by subsection 5LA(1) of the VEA and subsection 5LA(2) of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.

  • the residence itself (e.g. house, flat, caravan),
  • permanent fixtures (e.g. stoves, built-in heaters, dish-washers, light fittings and affixed carpets),
  • [glossary:curtilage:DEF/Curtilage] (i.e. two hectares or less of private land around the home where the private land use test has been satisfied, or all land held on the same title as the person's principal home where the extended land use test has been satisfied), or
  •       any garage, shed, tennis court or swimming pool used primarily for private purposes provided it is on the same title as the principal home.

 

 

A granny flat interest exists if a person has established a right to accommodation for life, or a life interest in another person's private home.

Granny flat interests are established by the following methods:

  • transferring title of the pensioner's principal home to a relative and retaining a right of occupancy for life;
  • providing funds for the construction of a granny flat in which the pensioner has a right to reside for life on a relative's property;
  • providing some or all of the purchase price of a property which will usually be registered in a relative's name but in which the pensioner has a right to reside for life; or
  • the terms of an estate.

Refer to Section 5MA(2) of the VEA for the full definition.

 

 

The "extra allowable amount" is the difference between the property owner assets value limit and the non property owner assets value limit which applies to the person.

As the property and non property owner assets value limits are indexed or adjusted on an annual basis, the extra allowable amounts also increase annually.

The assets value limits applied to this formula are the limits applicable at the time the person made the [glossary:entry contribution:DEF/Entry contribution] to enter the [glossary:special residence:DEF/Special Residence].

 

Refer to Section 52N of the VEA for the full definition.

 

 

A life interest arises when a pensioner:

  •       acquires the right to use assets or the income produced by those assets, or
  •       transfers a non-exempt asset to another person, but retains an interest in the asset, or
  •       is created by the will of a deceased individual.

A life interest remains current until the pensioner:

  •       dies,
  •       sells the asset, or
  •       formally surrenders the asset.

 

 

The principal home has the meaning given by subsection 5LA(1) of the VEA and subsection 5LA(2) of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.

  • the residence itself (e.g. house, flat, caravan),
  • permanent fixtures (e.g. stoves, built-in heaters, dish-washers, light fittings and affixed carpets),
  • [glossary:curtilage:DEF/Curtilage] (i.e. two hectares or less of private land around the home where the private land use test has been satisfied, or all land held on the same title as the person's principal home where the extended land use test has been satisfied), or
  •       any garage, shed, tennis court or swimming pool used primarily for private purposes provided it is on the same title as the principal home.

 

 

A contingent interest happens when the interest in an asset is dependent (contingent) on an event happening. The event may never happen.

A remainder interest is created when the owner of an asset transfers the legal title of the asset to another person and retains, or grants to a third person, an interest in the asset for life or a specified length of time. The interest held by the person is called a remainder interest. The person does not gain the benefit of their interest until the original owner's interest ends.

A reversionary interest happens when the owner of an asset grants an interest in the asset to another person for life or for a specified length of time. Ownership of the asset is not transferred.

When the other person's interest in the asset expires, the interest is returned (reverts) to the owner.

Valuable consideration is defined as receipts not in money form but capable of being valued in money terms.