Last amended: 10 August 2012
Assessing the principal home
Certain assets to be disregarded relating to the Principal Home
The value of any right or interest of a person, their partner or both of them in the principal home that gives security of tenure is a disregarded asset.
Multiple residences
A person, including a person who is a member of a couple, may only have their right or interest in one residence disregarded for assets test purposes. Where members of a couple (including an illness-separated couple) reside in different homes, the full value of the residences other than the principal home are assessable. Generally, where residence is shared across more than one home, the home of greatest value is determined to be the exempt asset.
Curtilage
Curtilage is the land adjacent to the exempt principal home. A certain amount of curtilage is disregarded for the assets test. The amount of curtilage that is exempt depends on whether the private land use test or the extended land use test is satisfied. Under the private land use test, up to two hectares on the same title as the principal home may be exempt. Under the extended land use test, all land on the same title as the principal home may be exempt.
Home sale proceeds exemption
If the principal home is sold, the value of the proceeds is assessed as an asset, unless the proceeds are likely to be used to acquire a new principal home within 24 months.
The portion of home sale proceeds that the person intends to use in acquiring the new residence will be a disregarded asset. The proceeds can remain a disregarded asset when progressively used for the new home. For example, to purchase land on which they intend to build the new home or to make progress payments for construction of the new home. The asset exemption ceases at the earliest of:
- when the new principal home is acquired,
- when they no longer intend to acquire a new principal home with the proceeds, or
- 24 months from the home sale (unless an extension of up to additional 12 months applies, due to delays beyond the control of the pensioner).
Note: Home sale proceeds, including any portion considered a disregarded asset, remain subject to the deeming provisions under the income test. As of 1st January 2023, only the lower deeming rate will be applied to home sale proceeds intended for acquiring a new home during the exempt period. When a progress payment is made for the construction of the new home, the deductible asset amount and the financial asset value should be reduced accordingly to ensure the correct deeming calculation. The deposit and any progress payments, at the time of being put towards the construction of the new principal home, acquire exempt principal home status.
Delayed occupancy
If the person has acquired their new principal home but is prevented from immediately occupying it, the exemption may continue for a reasonable period. For example, occupancy may be delayed by an existing lease, or if the vendor needs to remain in residence for a period. If the continued exemption period would exceed 24 months from the date the former home was sold, please seek advice from Policy Advisings Income Support,
Assessment where home sold and another purchased on terms
If a person sells their principal home on terms and purchases another residence on terms, only the balance due from the sale that is to be applied to the purchase of the new residence is an exempt asset. The exemption applies for the duration of the terms under respective agreements. Neither the standard 24 month exemption period, nor the extension applies to these cases.
Compensation and insurance payments for a lost or damaged principal home
Compensation and insurance payments received by a person for loss of, or damage to the principal home's buildings, plant or personal effects are a disregarded asset for 12 months from the date that the payment was received. Compensation and insurance payments can be regarded as including payments received outside a formal contract of insurance (for example, to include government grants or public donations) provided these additional payments are intended to compensate the person for loss of or damage to buildings. The exemption applies to any payments of compensation or insurance received, and is not limited to the value of the loss or damage incurred. Compensation and insurance payments received for loss or damage to the principal home's building, plant or personal effects are exempt from assessment for 12 months., regardless of whether those payments are subsequently applied towards the rebu — ilding of the principal home.
If the person uses all or part of the payments received to repair/rebuild their old home or acquire a new home the total value of this payment can remain a disregarded asset even when progressively used to repair, rebuild, buy or build the home, such as for land or buildings. The value of the repair/rebuild, plus the value of the land that is part of the principal home and any previous structure already on that land, is disregarded under the assets test until the earliest of:
- when the home is repaired, rebuilt, renovated or acquired,
- when they no longer intend to acquire a principal home with the proceeds, or
- 12 months from receipt of the compensation or insurance payment (unless an extension of an additional 12 months applies, due to delays beyond the control of the pensioner).
The exemption provision concerning received amounts of insurance or compensation is independent of the exemption provision concerning repairing/rebuilding or acquiring a new home. In the event that there are residual amounts after rebuilding/buying and 12 months has not elapsed, those residual amounts of compensation and insurance payments remain exempt until the end of the 12 month exemption period.
Note: Compensation and insurance payments for a lost or damaged principal home while considered a disregarded asset, are also exempted from the deeming provisions under the income test.
This approach also applies to compensation and insurance payments for lost or damaged real estate property.