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Unrealisable Assets - Farm
Last amended: 24 March 2006
Unreasonable to expect the person to sell their farm
Circumstances where it might be unreasonable to expect a person to sell their farm would include the following:
- the asset is a farm and the pensioner has been a farmer for at least twenty years (not necessarily on this farm) and the pensioner is working the farm and they could not sell some of the land without affecting the viability of the farm and/or significantly affecting their income from the farm (see exception), or
- the person lives on a farm or land which is greater than two hectares, the person has lived there for at least twenty years and the property cannot be subdivided to allow the person to retain the portion their principal home is on (see exception). More ?
An occupancy period of less than twenty years may be accepted if a person would, except in unforeseen circumstances:
- have continued to live on the property for an indefinite period, and
- not have sought payment of a pension.
An example of where a shorter occupancy may be accepted would be where a couple purchased a farming enterprise and five years later the husband died leaving a widow and children. It may be accepted that the widow has a long term attachment to the property.
Farm used by family member
A person's farm used by a family member, who has been actively involved in operating that farm for at least ten years (see exception), is an unrealisable asset if the test of reasonableness shows it is unreasonable for the farm to be:
- leased to another person, or
- used for another purpose.
Note: A slightly shorter period can be accepted if the family member has worked the property continuously since leaving school.
Applying the reasonableness test
In order to establish whether a farm being used by a family member is classed as an unrealisable asset, a reasonableness test is applied to establish whether or not it is reasonable that the farm not be sold. The table below outlines how the reasonableness test is used to make this distinction.
If the person's farm:
the reasonableness test is satisfied, and the farm is considered an unrealisable asset.
the reasonableness test is not satisfied, and the farm is not considered an unrealisable asset.
Farm operating efficiently or to full capacity
Financial statements and income tax returns for the previous two years will usually show whether a farm is run efficiently or to full capacity. If necessary, a delegate can contact an agricultural expert from the State or Territory Department of Agricultural or equivalent for advice. A farm is generally not run efficiently or to full capacity if financial statements show a substantial reduction in stock carried or land used for crops.
Where a farm is comprised of several parcels of land, it is reasonable to expect a person to sell some of the land if:
- the viability of the enterprise, and
- the income of the person is not likely to be significantly affected.
According to section 5L of the VEA a family member, in relation to a person, means:
- the partner, father or mother of the person, or
- a sister, brother or child of the person, or
- another person who, in the Commission's opinion, should be treated as one of these relations for the purposes of this definition.
Please note, the definition of a parent is further defined in section 10A of the VEA.
An asset of a person is an unrealisable asset if:
- the person cannot sell or realise the asset and cannot use the asset as a security for borrowing, or
- the person could not reasonably be expected to sell or realise the asset and could not reasonably be expected to use the asset as a security for borrowing.