C32/2005 Property reviews - income test to assets test

Purpose

This instruction is to provide information on the correct determination of the date of effect for reduction or cancellation of pension, due to revaluation of a property other than the client's principal home.  The information only relates to cases where the client will be moved from the income test to the assets test, or from the income test to nil.

It should be noted that this applies only to those pensioners paid under the Veterans' Entitlements Act 1986 (VEA), not to age pension recipients paid under the Social Security Act 1991 (SSA).

Background

On 11 December 2003 a Commission Decision (CM5536) was made as part of the Income Support Enhanced Compliance Review Program.  In this decision the Commission endorsed the policy for determining the date of effect as three months from the date of the decision for pensioners moving from the income test to the assets test or from the income test to nil, due to property reviews.

This decision is in accordance with s56H (2) of the Veterans' Entitlements Act 1986 (VEA) which states that “the adverse determination takes effect on: (b) if another day is specified in the determination - on that day”.

Commission decision applies to all cases

This three month extension applies not only to those clients who are reviewed under the bulk valuation exercise conducted by the Australian Valuation Office (AVO) between November and April each year, but also includes those clients who are individually reviewed and have an AVO valuation undertaken on a property (including excess curtilage) that is not their principal home.

Rationale

The effect of this Commission decision is to allow time for those pensioners whose property has been revalued to rearrange their circumstances if they choose.

Income tested pensioners who are adversely impacted by a property revaluation may not have access to sufficient liquid assets to supplement their reduced/cancelled pension entitlement.

The Commission decision provides this group with a maximum three month period, commencing from the date of the new pension rate determination, to make arrangements for an alternative income stream before they are impacted by the property revaluation outcome.

Affected clients

This policy only applies in circumstances where the property affects the pension entitlement to the extent of moving the pensioners from the income test to the assets test or cancels their pension altogether.

Procedure difference

The procedures outlined in The Procedure Library Part 12/chapter 7/section 5 relating to income tested property owners are the correct procedures to be followed.

It appears that in some cases these procedures are only being used following the bulk valuation exercise undertaken by the AVO as mentioned above.

These procedures are to be used for all income tested property owners, whether revaluation occurs through bulk or individual reviews, where the new assessment results in the pensioner being transferred from the income test to the assets test.

The Policy Library Part 11/chapter1/section 4 Date of Effect of AVO valuations will be updated to reflect this change.

Contact Officer

If you would like further clarification of any part of this Departmental Instruction please contact Chris Rake of Income Support Policy on extension 14773 or at e-mail address christine.rake@dva.gov.au.