Last updated 22 December 2010

Extended land use test

The extended land use test is designed to enable people of veteran pension age with a long-term attachment to their land to stay in their home into retirement. To satisfy this test, the person must make effective use of productive land to generate an income, if it is within their capacity to do so.

Criteria for extended land use test

Land in excess of two hectares may be disregarded under the assets test if all of the following criteria are satisfied:

• the person is of veteran pension age (whether the person is a veteran or not),
• the person is eligible for a service pension or income support supplement and that payment is payable to the person,
• the land is held on the same title as the principal home,
• the person has lived on the property for 20 years or more, and
• effective use is being made of the land where possible.

Only one member of a couple satisfies extended land use test

The extended land use test may be satisfied for both members of a couple, even if only one of the members meets all of the criteria. However, all of the criteria must be satisfied by at least one of the pensioners only i.e. members of a couple cannot combine separate criteria to satisfy all criteria.

Effect of separation on extended land use test qualification

The exemption continues to apply to the non-qualifying partner if they cease to be a member of a couple for any reason, provided the home is still the non-qualifying partner's principal home and the effective land use test is still being met.

Note: If the non-qualifying partner retains the exemption and becomes a member of a couple with another person, the exemption also applies to the new partner regardless of whether the new partner qualifies.

Example

A veteran and his partner are both granted the exemption under the extended land use test even though the partner is not veteran pension age. The veteran and his partner separate and the partner stays on the property and continues to make effective use of the land. She then marries a pensioner who is under veteran pension age. Even though neither of the couple meet all of the criteria the fact that one of them has the exemption means that the new partner automatically qualifies.

Ceasing to meet the exemption criteria

Land exempt under the extended land use test may cease to meet the exemption criteria when:

• the pensioner leaves the principal home on a permanent basis,
• the principal home the pensioner vacated to enter care is no longer exempt,     More ?
• the pensioner fails to meet the effective land use test, or
• a non-qualifying partner loses eligibility for an income support payment paid by DVA. If the person then qualifies for an income support payment from Centrelink they must qualify under Centrelink's criteria.

What is effective use of land?

Effective use of land means that if the land has a potential commercial use (e.g. as a farm), the person or a family member must be making use of the land in order to generate an income, or the person must be taking action to use the land to capacity. The matters listed in section 5LA(7) of the VEA are taken into account when determining whether effective use is being made of the land. Any income received by the person from the use of the land is assessed under the income test, even if the land is disregarded under the assets test.    

If the land is not being used commercially but has no potential commercial use, the effective land use test is met. For example, the land is:

• not viable,
• scrub land, or
• in a residential area.

When a family member is working the land to its potential, and the income generated from the land is a main source of income for the family, then the effective land use test will be satisfied. The income support recipient must provide correspondence from the family member confirming the arrangement.  Example: The family member writing a letter confirming the arrangement, including the amount of land to be used and an estimate of income to be generated.

If the income generated is not passed to the income support recipient then the income will NOT be taken into consideration as part of the income test.

Note: If the land is in an exceptional circumstances area, as declared by the Department of Agriculture, Forestry and Fisheries, the effective land use test is automatically satisfied.

Merged titles

Where a person combined multiple titles on or before 9 May 2006 (the date of the Budget announcement of the initiative), the whole property may be exempt if the other conditions (age, effective use, 20 year rule) are met. The amalgamation does not prevent the effective land use test from being met.

Where the land was previously held on multiple titles, and these were merged into one title after 9 May 2006, the land may only be able to be exempt if it can be proved that merging the titles improved the person's capacity to generate an income from the land. The effective land use test is failed if:

• the amalgamation of titles prevented the person from selling land (that was previously on a separate title) to support themselves, or
• the purpose of the titles being merged was to gain access to the exemption.

In cases where an amalgamation of titles has occurred the following should be taken into consideration to determine if the effective land use test is satisfied:

• when the amalgamation occurred, and
• whether the amalgamation reduced the potential for the land to support the person, i.e. the land on the separate title can no longer be sold.

Separate titles

In limited situations, more than one title can be regarded as exempt curtilage. Land held on separate titles can be treated as if on one title if:

• the principal home is straddled over two blocks,
• the blocks, taken together, are protected under law (e.g. indigenous heritage), or
• the function of the house as a dwelling-house would be undermined if the other block was alienated. This does not apply if structures such as swimming pools, gardens, tennis courts and garages, etc are situated on the other block, as these are not considered essential for the house to function as a dwelling.

Separate titles and the 20 year rule

The 20 year rule is satisfied if the person:

• has lived on a property made up of multiple adjoining titles for the previous 20 years or more, and
• has continuously lived on that property in more than one dwelling house on different titles for the last 20 years or more.

Example: A veteran has lived on a farm on 3 adjoining titles (Blocks A, B, and C) for more than 20 years. The 3 blocks are regarded as forming  the same farming property. The veteran lived on Block A  for 10 years and built another house on block C, which he has lived in for 10 years. In this case the long term continuous attachment (the 20 year rule) has been satisfied.

Subdivision

In rural farming areas the pensioner will not be required to subdivide their property to satisfy the effective land use test. In rural residential areas the pensioner will not be required to subdivide their property to satisfy the effective land use test. However, if the size of the block is large for the area, market interest is high, subdivision is encouraged by local government regulations, and residential development is the only commercial use of the land, then the pensioner may be required to subdivide in order to meet the effective land use test. The capacity of the pensioner (in terms of their financial position and personal health) to do this will be taken into consideration.

Subdivision - held on a single title

When land has been subdivided but continues to be held on a single title on which the principal home stands it will be assessed under single title rules.