Effect of Deprivation on Application of Financial Hardship Rules

Last amended: 24 July 2007

Effect of deprivation on application of hardship provisions

Access to the financial hardship rules is denied to people who have:

• disposed of income or
• disposed of assets of more than $10,000 per year or $30,000 in total over a rolling period of 5 years,

for less than adequate financial consideration, unless the Commission makes a written determination to disregard the disposal provisions for hardship purposes.     

Situations where Commission may disregard disposal provisions

Situations where it may be appropriate to disregard the application of the disposal provisions for hardship purposes include:

• a person is in severe financial hardship,
• the hardship is not a direct result of disposing of the income or asset, and
• the person would have qualified for hardship even if they had not disposed of the income or asset.

Example of situation where disposal provisions might be disregarded

If a person disposed of income of $4,000, and had only $1,000 left in available funds, they would still be considered to have satisfied the test of severe financial hardship if the gifting had not occurred. The discretion could then be exercised in favour of the applicant because the severe financial hardship would not be considered to be a direct consequence of the disposal.

Example of situation where disposal provisions would not be disregarded

If a person disposed of realisable assets worth $25,000 and still had $5,000 in readily available funds, the severe financial hardship would be considered a direct consequence of the disposal and the disposal provisions would not be disregarded.

Assessment of disposed income and assets under hardship rules

Where the disposal provisions are disregarded, the pension rate under the hardship rules is determined on the basis that the person still has the disposed income or the deprived asset. Notional income may be assessed against the asset.