Deprivation is assessed if a pensioner does not receive adequate financial consideration [2] and:
If the person acquires the right to accommodation for life [2] in the property, this may be accepted as adequate consideration. However, this is not automatic. The person must establish that through disposing of the asset [2] they have created a granny flat [2] interest in the property, by exchanging financial consideration for the right to accommodation for life. The reasonableness test is then used to determine whether the value of the granny flat interest can be regarded as adequate consideration.
More → [6]
In some cases there may be doubt about whether a granny flat interest has been established and whether the pensioner has security of tenure in their home after a transfer of title. Where doubt exists, there may be value in requesting that a family provide some form of written documentation. This could take the form of a letter signed by family members that certifies that a right to accommodation for life [2] has been established.
If a person creates a granny flat right after 22 August 1990, the value of the property transferred to establish that right will be counted as an entry contribution [2] to a retirement village. A reasonableness test [2] will apply to determine whether deprivation provisions [2] will apply.
More → [7]
When a person transfers a farm but retains a life interest in a dwelling, the dwelling is not considered deprivation, but rather the principal home, which is an exempt asset. The gifted farm is a deprived asset unless it meets certain criteria under:
If a person owns a property and allows people (other than family members [2]) to occupy the property with no or low rent being paid, then disposal of income [2] has occurred, as there has not been adequate financial consideration, and the actions have made the income less than it could have been.
Disposal of income does not apply where a person has entered residential aged care, and is paying a daily accommodation payment [2] or a daily accommodation contribution [2], an accommodation charge or an accommodation bond by periodic payments, and is renting out their former residence.
More → [14]In order for the amount of disposition to be determined, investigation is necessary to ascertain what would be a reasonable amount of rental considering the age, location and condition of the property, as well as the property market in the area. This amount may then be reduced by 1/3. This is because 1/3 of the rental income earned can be accepted as being used for expenses associated with maintaining the property as a rental property, making it exempt from assessment. The deprived income amount can also be reduced by any valuable consideration that a pensioner may receive from work undertaken by the tenants which increases the asset value of the property.
More → [15]
Deprived rental income is not to be found where a pensioner's real estate property is occupied on a rent-free (or low rent) basis by a family member [2]. The Repatriation Commission decided on 6 February 2007 that disposal of rental income does not arise where the following conditions are satisfied:
A person owns three houses, one of which he lives in. His friends occupy the other two with no rent being paid. It has been estimated that the properties could earn approximately $360 per week. The purpose of this arrangement is to enable his friends to save a deposit to purchase the homes from him. As the person has not received any financial consideration and has undertaken a course of conduct that diminishes his ordinary income, the person has disposed of income.
Granny flat provisions apply if the pensioner retains the right to occupancy in the home for life or acquires a life interest [2] in the home.
More → [16]
Deprivation provisions may apply if a pensioner transfers property to a relative in exchange for a certain amount per year for life in the form of an annuity. The value of the annuity is treated as consideration. An Australian Government Actuary valuation is required for annuities. If the value of the annuity is below the value of the property, deprivation of assets may have occurred.
More → [17]
Retirement Assistance for Farmers Scheme (RAFS)
Section 49B(2) VEA [22]
Retirement Assistance for Sugarcane Farmers Scheme (RASFS)
Section 49R(5) VEA [22]
General Provisions of Deprivation
Section 9.6.2 General Provisions of Deprivation [20]
Income Streams
Chapter 10.5 Income Streams [43]
For adequate financial consideration to be received when disposing of an asset [2], a person must receive value in the form of money or assets. Adequate financial consideration can be accepted when the amounts received reasonably equate to the market value of the asset. It may be necessary to obtain a valuation from a property valuation service provider.
When disposing of income [2], in order for adequate financial consideration to be received, the person must receive money, goods or services which approximate in value to the rate of disposed income. If a person disposes of an income producing asset and receives adequate financial consideration in money or money's worth for the asset, then it can be accepted that they have received adequate financial consideration for the disposal of both the income and the asset.
The principal home has the meaning given by subsection 5LA(1) [45] of the VEA and subsection 5LA(2) [45] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
A right to accommodation for life provides a right to security of tenure. It enables a person to continue to live in a property that they regard as their principal home, on an ongoing and permanent basis, until they die or choose to leave. This right is distinct from, and does not require, a share of legal ownership of the property, and may arise from arrangements such as a granny flat agreement or through a will.
An asset means any property, including property outside Australia.
A granny flat interest exists if a person has established a right to accommodation for life, or a life interest in another person's private home.
Granny flat interests are established by the following methods:
Refer to Section 5MA(2) [45] of the VEA for the full definition.
A right to accommodation for life provides a right to security of tenure. It enables a person to continue to live in a property that they regard as their principal home, on an ongoing and permanent basis, until they die or choose to leave. This right is distinct from, and does not require, a share of legal ownership of the property, and may arise from arrangements such as a granny flat agreement or through a will.
An entry contribution is the amount paid or agreed to be paid by a person for the right to live in a:
If a person lives in a home subject to a sale leaseback agreement, the entry contribution is the balance of the amount still to be paid by a buyer, at the date of a sale leaseback agreement.
Refer to Section 52M of the VEA for the full definition.
A test of reasonableness is applied to a granny flat [2] entry contribution [2]. The premise behind the reasonableness test is that in some circumstances the value of a lifetime accommodation interest may exceed the value of the principal home [2] being transferred. The reasonableness test uses an approximation of actuarial values, based on life expectancy [2], to estimate the value to the person of the life accommodation interest.
According to section 5L of the VEA [46]a family member, in relation to a person, means:
Please note, the definition of a parent is further defined in section 10A of the VEA [46].
Disposal of income refers to a course of action that either destroys, disposes or diminishes income or a source of income, without receiving something of equivalent value for the income source forgone, for the purposes of obtaining an income support payment advantage.
See section 48 VEA [46], also refer to income support payment [2].
A payment for accommodation costs worked out by converting the refundable accommodation deposit (RAD) to a daily amount, which is payable as a periodic amount by aged care residents.
A payment for accommodation that accrues daily and is payable as a periodic amount by aged care residents for whom the Government is also making a contribution.
According to section 5L of the VEA [46]a family member, in relation to a person, means:
Please note, the definition of a parent is further defined in section 10A of the VEA [46].
A life interest arises when a pensioner:
A life interest remains current until the pensioner:
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16040%23comment-form
[2] https://clik.dva.gov.au/%23
[3] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn564
[4] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn565
[5] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn566
[6] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn567
[7] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn568
[8] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn569
[9] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn570
[10] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn571
[11] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn572
[12] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn573
[13] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn574
[14] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn575
[15] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn576
[16] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn577
[17] https://clik.dva.gov.au/book/export/html/16040#tgt-cspol_part9_ftn578
[18] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation
[19] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn564
[20] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/962-general-provisions-deprivation
[21] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn565
[22] https://www.comlaw.gov.au/Series/C2004A03268
[23] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn566
[24] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/926-reasonableness-test
[25] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn567
[26] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn568
[27] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn569
[28] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/55-retirement-assistance-farmers-scheme-rafs/557-valuation-farm-assets/retaining-life-interest
[29] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn570
[30] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/510-retirement-assistance-sugarcane-farmers-scheme-rasf/5107-valuation-sugarcane-farm-assets/retaining-life-interest
[31] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn571
[32] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/969-deprivation-related-farm-transfers
[33] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts/10316-primary-production-private-trust-company-issues-01012002/other-primary-production-issues
[34] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn572
[35] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/925-special-residence-assessment-rules/granny-flat-arrangements
[36] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn573
[37] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn574
[38] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/927-departure-principal-home/entering-care
[39] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn575
[40] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income/1016-income-property/disposaldeprivation-rental-income
[41] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn576
[42] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn577
[43] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams
[44] https://clik.dva.gov.au/book/export/html/16040#ref-cspol_part9_ftn578
[45] http://clik.dva.gov.au/legislation-library
[46] http://www.comlaw.gov.au/Series/C2004A03268