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5.6.9 Pension Bonus and Retirement Assistance for Farmers
Last amended: 22 April 2014
Pension bonus impact
The pension bonus scheme (PBS) is designed to encourage a person to defer retirement. Contrary to this, the retirement assistance for farmers scheme (RAFS) encourages farmers to retire. Special rules apply to farmers registered under the pension bonus scheme, who subsequently apply for RAFS. These special rules are designed to allow them to utilise the benefits of both schemes.
Timing of pension bonus and RAFS activities
In order for a person to access both schemes a person must:
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Step |
Action |
|
1 |
First register under the pension bonus scheme, |
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2 |
then accrue at least one bonus period before divesting their farm, and |
|
3 |
then claim pension and bonus immediately |
Access to pension bonus scheme and RAFS
If a person registered under the pension bonus scheme then applies for assistance under RAFS they can give their farm away. By doing so, the gifting of the farm is disregarded under the disposal of assets rules.
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Impact on bonus from giving away farm
The act of giving away the farm impacts on the bonus amount, which is calculated taking into account deemed income under the income test and the asset value under the assets test that would be maintained on the deprived value of the farm if RAFS were not enacted. The gift of the farm is not considered a gift for the purposes of a disposal preclusion period for PBS.
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Retirement Assistance for Farmers Scheme (RAFS)
The pension bonus scheme closed to new entrants on 20 September 2009. Existing members can continue in the scheme under the rules that existed prior to 20 September 2009. The pension bonus scheme provided an incentive for older Australians to remain in the workforce and defer receipt of income support pension. The incentive was a bonus, payable if all eligibility criteria and rules were satisfied.
The pension bonus was a once-only, tax-free lump sum payable to a person who, on reaching their special date of eligibility, voluntarily deferred retirement for at least one year and registered as a member of the scheme. The pension bonus was claimed at the same time as claiming pension and is calculated using the annual rate of basic pension payable at grant, multiplied by the bonus periods accrued.
According to subsection 5P(1) of the VEA, a farm means any land that is used:
- For the purposes of a farm enterprise; or
- In connection with a farm enterprise.
Disposal of assets is generally referred to as deprivation. Deprivation occurs where a person disposes of an asset and/or income for less than the value of the asset and/or income.
One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their income increases above a certain threshold known as the income free area (IFA).
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).