Last amended: 21 March 2014
VEA → [2]
A person disposes of an asset or income when they:
It is not considered that disposal of income has occurred if a person:
The free area is $10,000. Any disposition amounts over this are included as an assessable asset or ordinary income. The $10,000 applies to all dispositions that year accumulative. The $10,000 applies to an individual or a couple combined.
The rationale for this limit is that it allows people to provide reasonable support and assistance to others, including children and family, without any impact on income support payments.
* For example, a spouse receiving a payment similar in nature to WWP, such as the New Zealand Surviving Spouse Pension or the United States Dependency and Indemnity Compensation, can forfeit this payment to qualify for the higher payment of PSP. It is only the receipt of these payments which are similar to WWP (rather than entitlement) which precludes payment of PSP. The forfeited amount is not to be held as deprivation.
The purpose of the means testing provisions is not to restrain a person from reasonably spending money for another person's benefit from time to time in the way any other member of the public might on a day-to-day basis (for instance, buying a coffee or lunch for somebody, purchasing icecreams or small toys for the grandchildren). However, the $10,000 free area can be reached through an accumulation of smaller gifts, and so it is the obligation of an income support recipient to notify DVA of any gift made that is more that trivial. If a person is in doubt about whether a particular gift needs to be reported, it is advisable for them to notify DVA.
It is not necessary that the course of conduct results in an immediate reduction in asset value. A reduction in asset value occurring at a future time, that is still directly or indirectly a consequence of the person's course of conduct, is a disposal of asset value. For example, a decision to transfer legal title to an asset at a future date will be deprivation, with the deprived amount to be held from that future date.
VEA → [4]
For disposals of assets that occurred prior to 1 July 2002, the $10,000 disposal limit refers to assets disposed of during a pension year or within five pre-pension years. Assets disposed of by a person in receipt of, or eligible to receive a service pension, income support supplement or social security pension were assessed for the full five years from the day the disposition took place.
More → [5]
VEA → [6]
For disposals of assets that occurred on or after 1 July 2002, the tax year [3] and rolling period [3] rules replace the pension year and pre-pension year rules. The $10,000 limit applies to all assets disposed of during a tax year and a $30,000 limit applies over a rolling period of up to 5 tax years. Assets disposed of are assessed for the full rolling period applicable from the day the disposition took place.
More → [7]
VEA → [8]
If, during the five year period, adequate consideration for a gifted asset is received, or the gifted asset is returned, the value of the asset will no longer be held as a deprived asset. This will apply from the date that the person notified the department of the return or receipt of adequate consideration. The asset may still be included in the pension assessment, depending on how it is used.
Example: A person gives $40,000 to a family member and receives nothing in return. Consequently, $30,000 is held in the person's pension assessment as a deprived asset, and will remain there for five years from the date of the gift. Two years after the gift, the family member returns $30,000 to the person. The $30,000 is no longer assessed as a deprived asset. However, if the funds are used to purchase a car, then the value of the car will be included in the pension assessment. If the funds are invested, they will be assessed as a financial asset and will be deemed.
The value of a partial return or consideration can also be removed from the deprived asset amount in the person's pension assessment. When only a partial value is removed from the assessment, it is important the original gifting date remains the same, to ensure that the 5 year gifting period is not extended or reduced.
VEA → [9]
An asset is disposed of if a person:
Adequate financial consideration is not accepted as having been received when a person disposes of an asset or income to a family member:
Adequate financial consideration may be accepted if a person transfers:
VEA → [12]
A disposal of an asset or income will be disregarded if the disposal took place:
Please note that the above applies to disposals both before and after 1 July 2002. The second dot point is policy only when applied to disposals on or after 1 July 2002. A legislative amendment is being prepared to request inclusion of this policy in legislation.
A 49 year old person has no plans for retiring and makes a gift of more than $10,000 to his family. The person has a car accident and becomes a paraplegic. The money given away to his family would be disregarded as he qualified for an income support pension due to an unforeseen circumstance.
The asset value of a life interest [3] is generally disregarded for the assets test. Any income it produces, however, is assessable. Surrendering the value of a life interest disposes of both the asset and its income. If a person surrenders the value of a life interest, the asset value must be obtained from the Australian Government Actuary (AGA). The AGA valuation is the amount of disposition.
Deprivation provisions do not apply:
Disposition of assets
Part IIIB, Division 11, Subdivision B [13] VEA
Income Test - disposal of ordinary income
Part IIIB, Division 7 [14] VEA
Pension Year
Section 5L(9) [16] VEA
section 5L(9A) [17] VEA
Pre-pension Year
Section 5L(10A) [18] VEA
Section 5L(10B) [19] VEA
For adequate financial consideration to be received when disposing of an asset [3], 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 [3], 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.
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
A Social Security payment refers to the following:
A tax year means:
[glossary::]http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401614?OpenDocument [41]
or
[42]http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401745?OpenDocument
If there is a disposition of assets on or after 1 July 2002, the rolling period is the period comprising the tax year in which the relevant disposition took place and such (if any) of the 4 previous tax years as occurred after 30 June 2002. This means that disposals that occurred prior to 1 July 2002 are not counted in the rolling period. Subsection 52JB(4) VEA [43] (for individuals) and subsection 52JD(6) VEA [43] (for members of a couple) define the rolling period relevant to the $30,000 disposal of assets 'free area' rule.
Valuable consideration is defined as receipts not in money form but capable of being valued in money terms.
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) [43] of the VEA for the full definition.
In relation to deprivation related farm transfers, a close relative means the pensioner's:
This definition may be extended by Commission [3] to include other family members [3] who have worked unrewarded on the farm.
According to Section 5E(2) [44]of the VEA [44]a person is a member of a couple, if they are:
The term “partnered” is also commonly used.
According to Section 179 [43]of the VEA [43], the Commission is a body corporate under the name of Repatriation Commission.
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/16126%23comment-form
[2] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn535
[3] https://clik.dva.gov.au/%23
[4] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn536
[5] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn537
[6] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn538
[7] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn539
[8] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn540
[9] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn541
[10] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn542
[11] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn543
[12] https://clik.dva.gov.au/book/export/html/16126#tgt-cspol_part9_ftn544
[13] clik://LEGIS/VEA/SubDiv B/Div 11/Part IIIB
[14] clik://LEGIS/VEA/Div 7/Part IIIB
[15] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn535
[16] clik://LEGIS/VEA/section 5L(9)
[17] clik://LEGIS/VEA/section 5L(9A)
[18] clik://LEGIS/VEA/section 5L(10A)
[19] clik://LEGIS/VEA/section 5L(10B)
[20] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn536
[21] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/963-disposal-date-deprived-income-and-assets
[22] https://clik.dva.gov.au/compensation-and-support-reference-library/departmental-instructions/2002/c282002-disposal-assets-rule-changes-2002
[23] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn537
[24] clik://LEGIS/VEA/section 5Q(1)
[25] clik://LEGIS/VEA/section 52JB(4)
[26] clik://LEGIS/VEA/section 52JD(6)
[27] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn538
[28] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn539
[29] clik://LEGIS/VEA/section 52FAAA
[30] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn540
[31] clik://LEGIS/VEA/section 52E
[32] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn541
[33] 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
[34] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn542
[35] 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
[36] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn543
[37] clik://LEGIS/VEA/section 52J
[38] clik://LEGIS/VEA/section 52JB
[39] clik://LEGIS/VEA/section 52JD
[40] https://clik.dva.gov.au/book/export/html/16126#ref-cspol_part9_ftn544
[41] http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401614?OpenDocument
[42] http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401745?OpenDocument
[43] http://clik.dva.gov.au/legislation-library
[44] http://www.comlaw.gov.au/Series/C2004A03268