Last amended: Proceeds from sale of home
VEA ? [2]
Where a person sells their principal home [3], the sale proceeds received are assessed as follows:
If the person intends to use the proceeds from the sale of their former principal home to acquire a new principal home:
For the home sale proceeds to be treated as a disregarded asset, the person must intend to:
More ? [10]
Home sale proceeds that are being treated as a disregarded asset, can remain disregarded when proceeds are used for the incomplete new principal home. For example, when part of the proceeds are used to buy land where the home will be built or to pay for progressive building costs.
If the person intends to build their new principal home on vacant land they already own, then that land and any partially completed buildings may be considered as part of their disregarded assets. However, the total disregarded asset value cannot exceed the amount received from the home sale, eg remaining proceeds to be used for new home + land value + buildings = home sale proceeds received.
If it is not certain that a pensioner intends to use the sale proceeds to acquire a principal home within twelve months, evidence should be sought. Documents that indicate an intention to acquire a residence include: a contract for purchase of real estate, a building contract, a letter from a solicitor providing conveyancing services, a written statement from a real estate agent, or a statutory declaration by the pensioner.
Other factors to be considered will be the term of any temporary accommodation agreement entered into by the pensioner (whether it is of no more than 12 months' duration), and accessibility of the home proceeds if invested (a long-term fixed deposit might indicate that there is no real intention of using the funds to acquire a home within twelve months).
A pensioner sells their principal home for $300,000 and intends to build a new principal home for $250,000. The $250,000 portion that they intend to use for the new home is a disregarded asset for up to twelve months from the home sale date. The remaining $50,000 is immediately assessed as a financial asset. However, the entire $300,000 is assessed for deemed income.
If towards the end of the twelve months exemption, the home is not yet completed due to delays beyond the control of the pensioner, an extension of up to an additional twelve months may be possible.
More ? [11]
The exemption of the proceeds as a disregarded asset may be retained for those periods where the person is prevented from immediately occupying the new principal home. For example, occupancy may be delayed by an existing lease, or if the vendor needs to remain in residence for a period. However, 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 [12],
VEA ? [13]
If a person sells their principal home on terms and purchases another residence on terms, only the balance due from the sale which 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 twelve-month exemption period, nor the extension applies to these cases.
Where a person gifts their principal home, the value of the property must be assessed according to the deprivation provisions. No period of exemption will apply.
More ? [14]
The principal home has the meaning given by subsection 5LA(1) [33] of the VEA and subsection 5LA(2) [33] 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 disregarded asset is one that is not included when calculating the value of a person's assets under the assets test, irrespective of its value.
For a full legislative definition see Section 52 of the VEA [34].
A person is a homeowner if they have a right or interest, which gives reasonable security of tenure in the principal home.
Refer to sections 52Q and 52R of VEA for the definition when determining if a person is a considered to be a homeowner when living in a special residence.
A person is also considered to be a homeowner if they have sold their home in the previous 12 months and intend to use part or all of the proceeds to purchase another home.
An asset means any property, including property outside Australia.
Rent Assistance is an allowance which may be paid to a service pensioner, income support supplement (ISS) or veteran payment recipient to assist in meeting the cost of rental accommodation.
To receive rent assistance a pensioner must be paying rent (other than Government rent) for accommodation in Australia, and the amount paid must exceed a certain threshold.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16118%23comment-form
[2] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn295
[3] https://clik.dva.gov.au/%23
[4] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn296
[5] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn297
[6] clikpopup://DEF/Assets value limit (AVL)
[7] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn298
[8] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn299
[9] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn300
[10] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn301
[11] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn302
[12] mailto:PAIS@dva.gov.au
[13] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn303
[14] https://clik.dva.gov.au/book/export/html/16118#tgt-cspol_part9_ftn304
[15] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[16] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn295
[17] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1023-disregarded-assets/disregarded-assets-relating-principal-home
[18] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn296
[19] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/954-deeming-savings-investments/deemed-income-savings-investments
[20] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn297
[21] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/922-basic-principles-assessment/homeowners-basic-assessment-rules
[22] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn298
[23] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/51-rent-assistance/512-eligibility-criteria-rent-assistance/property-owners-and-rent-assistance-eligibility
[24] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn299
[25] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/927-departure-principal-home/extension-home-proceeds-exemption
[26] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn300
[27] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn301
[28] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn302
[29] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn303
[30] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/968-deprivation-related-home-and-accommodation-transfers
[31] 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
[32] https://clik.dva.gov.au/book/export/html/16118#ref-cspol_part9_ftn304
[33] http://clik.dva.gov.au/legislation-library
[34] http://www.comlaw.gov.au/Series/C2004A03268