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Other Disregarded Assets

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Last updated: 26 September 2011

Asset test exempt income streams

The value of an asset test exempt income stream is a disregarded asset for assets test purposes.    

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Partially asset test exempt income streams

Half of the value of a partially asset test exempt income stream is a disregarded asset for assets test purposes.    

 

Foreign superannuation pensions  

The value of any foreign superannuation pension is a disregarded asset for assets test purposes.

Superannuation funds, approved deposit funds and deferred annuities

The value of a person's investment in a superannuation fund, an approved deposit fund or a deferred annuity is a disregarded asset until the person:

Assessing decoration awards for valour

Provided it is not used for the purposes of investment or as a hobby, the value of any medal or other decoration awarded for valour that is owned by a person is a disregarded asset. This includes medals and other decoration awarded to someone else beside the owner.

Assessing aids for disabled

If a person, their partner, or a dependent child of either, is a disabled person, the value of the following is to be disregarded:

  • any of the person's personal property that is designed for use by a disabled person,
  • any part of the person's personal property that is attributable to modifications made to that property to enable it to be used by disabled persons, and
  • modifications to a car for use by a disabled person, but not the vehicle itself.

If DVA provided the person with a motor vehicle under the Vehicle Assistance Scheme, the value of that vehicle is also a disregarded asset.    

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Vehicle Assistance Scheme

Chapter 6.4

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Amounts paid under a home equity conversion agreement

An amount received by a pensioner within the preceding 90 days which is paid to or on behalf of that person or their partner under a home equity conversion agreement is a disregarded asset to the extent that the total amount owed by the person or by the person and their partner under home equity conversion agreements from time to time does not exceed $40,000.     

 

Payments made in respect of prisoners of war during World War II

The 2001 Australian Government Budget provided for a one-off payment of $25,000 to all Australian service personnel and civilians who were held captive by Japan during World War II or their widows or widowers who were alive on 1 January 2001.

This $25,000 one-off payment is disregarded under the assets test by allowing it as a deduction from the value of the person's total assets for life.     

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See the Compensation (Japanese Internment) Act 2001, Item 12. This item covers both those under the Act – civilians and widows, and those under the Veterans' Entitlements (Compensation – Japanese Internment) Regulations 2001, that is, veterans.

Compensation (Japanese Internment) Act 2001

Veterans' Entitlements (Compensation – Japanese Internment) Regulations 2001

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If the recipient of the payment remarries, the $25,000 continues to be disregarded and is deducted from the joint assets of the recipient and their partner, during the recipient's lifetime. The assets test exemption does not transfer to another person, including the widow/er, upon the death of the recipient of the payment.

The payment is regarded as an exempt lump sum under the income test.     

The same does not apply to ex-gratia payments made:

  • to British groups held prisoner by the Japanese during World War II or their surviving widows/widowers, or
  • by a Commonwealth or allied country to those surviving Japanese internment or their surviving widows/widowers.

These payments are regarded as an exempt lump sum for income test purposes, but if the money received from these payments is invested, used to acquire assets or disposed of, then the subsequent investment, asset acquisition or disposal is assessed using the appropriate income and assets test rules.     

 

National Disability Insurance Scheme amounts

NDIS amounts  held by, or on behalf of, an NDIS participant to pay for future disability expenses under their NDIS plan are an exempt asset.

The assets test exemption also applies to any actual returns earned, derived or received on NDIS amounts.

The calculation of the disregarded NDIS asset amount is –

  • the sum of the NDIS amounts received, and any return on those amounts,

 LESS

  •  those amounts spent in accordance with the person’s NDIS Plan.


 

 

An income stream is an asset-test exempt income stream if it is purchased before 20 September 2007 and satisfies the characteristics of the following sections in the Veterans' Entitlements Act 1986:

A disregarded asset is one that is not included when calculating the value of a person's assets under the assets test, irrespective of it's value.

 

For a full legislative definition see Section 52 of the VEA.

 

 

One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL).

A partially asset test exempt income stream is an asset test exempt income stream that has only 50% of its value assessed under the assets test.

Foreign superannuation pension has the meaning given by subsection 5L(1) of the VEA.  It is a pension presently payable from a foreign superannuation fund.

A superannuation fund is defined in the VEA as being:

  • a fund that is or has been a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993 in relation to any tax year; or
  • an Australian superannuation fund (within the meaning of the Income Tax Assessment Act 1997) that is not a complying superannuation fund mentioned in paragraph (a) in relation to any tax year; or
  • a scheme for the payment of benefits upon retirement or death that is constituted by or under a law of the Commonwealth or of a State or Territory; or
  • an RSA within the meaning of the Retirement Savings Accounts Act 1997; or
  • any of the following funds (unless the fund is a foreign superannuation fund):
  • a fund to which paragraph 23(jaa), or section 23FC, 121CC or 121DAB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 2) 1989) has applied in relation to any tax year;
  • a fund to which paragraph 23(ja), or section 23F or 23FB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of paragraph (a) of the definition of superannuation fund in former subsection 27A(1) of the Income Tax Assessment Act 1936) has applied in relation to the tax year that started on 1 July 1985 or an earlier tax year;
  • a fund to which section 79 of the Income Tax Assessment Act 1936 (as in force at any time before 25 June 1984) has applied in relation to the tax year that started on 1 July 1983 or an earlier tax year.

An approved deposit fund as defined in section 5J(1) of the VEA means a fund that is an approved deposit fund for the purposes of Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1993.

Aproved deposit funds are investment vehicles created specifically for the investment of eligible termination payments up to age 65.

 

 

A DA as defined in section 5J(1) of the VEA means an annuity that is a deferred annuity for the purposes of Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1993.

A DA is an investment vehicle created specifically for the investment of eligible termination payments up to age 65, which also allows the investor to commence an annuity payment no later than age 65.

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

Qualifying age is defined in section 5Q(1) of the VEA and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:

  •       60 years for a male,
  •       for females subject to age equalisation (refer to the table in section 5QA VEA).

A person's 'partner' is someone who is a member of a couple with that person.

Section 5F(1) of the VEA defines dependent child as having the same meaning as in the Social Security Act 1991.  For income support purposes, dependent child is defined as:

Child under 16 years

  •       the pensioner has legal responsibility either alone or jointly with another person for the day to day care, welfare and development of the young person AND the young person is in the pensioner's care, or
  •       the young person is not a dependent child of someone else AND the young person is wholly or substantially in the pensioner's care.

A child under 16 years cannot be considered a dependent child if:

  •       they are not a full-time student, and
  •       their weekly income from any source is more than the amount specified in section 5(3)(c) of the Social Security Act.    

Child 16 years or older

A young person who has turned 16 years but is under 22 years can still be a dependent child of the pensioner if:

  •       they are wholly or substantially dependent on the pensioner, and
  •       their income in the financial year will not exceed the personal income limit, and
  •       they are receiving full-time education at a school, college or university.

A child over 16 years cannot be considered a dependent child if:

  •       they receive a social security pension or benefit such as youth allowance, or
  •       their personal income is more than the amount specified in section 5(4)(b) of the Social Security Act.    

Income includes earning from casual, part-time or full-time earnings.

Note: the meaning of a dependent child for DVA income support pension purposes is not the same as the meaning for Family Tax Benefit purposes.

 

 

The Department of Veterans' Affairs.

Has the same meaning as in the National Disability Insurance Scheme Act 2013, and means an amount paid under the NDIS in respect of reasonable and necessary supports funded under a NDIS participant’s plan.

Has the same meaning as in the National Disability Insurance Scheme Act 2013, and means a person with disability who meets the access requirements to become a participant in the NDIS.

Has the same meaning as in the National Disability Insurance Scheme Act 2013 and is the plan agreed between an NDIS participant and a Disability Care Australia planner setting out the reasonable and necessary supports the participant requires to achieve their goals and aspirations and describing how these supports will be provided.