For participation in RAFS to be allowed, the farmer's (and his or her partner's) income for the three years preceding the date of legal transfer of the property must have been less than the maximum rate of age service pension.
There was an exception to this rule. The exception is where the farm property was transferred after 30 June 2001 and the transfer was allowed under the limited additional time given to finalise the transfer available to certain farmers. The additional time to finalise the transaction was allowed because they were unable to transfer the property on or before 30 June 2001 due to circumstances beyond their control. NB specified time limits for finalising the action apply to this group.
The income years for the exception group are 1997-1998, 1998-1999 and 1999-2000.
The Income details for the three years prior to the date of farm transfer are required to determine whether the person satisfies the Farmers' income test. The date of claim is not relevant for the Farmer' Income Test.
If the farm was transferred after 30 June 2001, the 3 income test years to be used to calculate the person's income are the 1997-1998, 1998-1999, 1999-2000. The maximum basic rate to be used to calculate a person's maximum basic entitlement is to be the maximum basic rate that applied 30 June 2001.
The Farmers' Income Test had no impact on the rate of pension payable. This test was used solely for RAFS eligibility purposes. Normal income and assets tests rules continue to apply to the rate of pension payable.
Section 49J(1) [2] VEA - Application of requirement
Section 49J(4) [2] VEA - Definition of maximum basic rate of age service pension
Last amended: 18 August 2014
In the assessment of non-farm income for the Farmers' Income Test, deemed income was not calculated on financial assets. Income from financial assets was assessed using the actual income amount received, as disclosed on the income tax return.
The table below sets out the income that should be assessed for various forms of financial assets:
Financial Asset |
Income to be assessed |
Bank accounts, cash deposits, debentures, loans etc. |
Interest paid |
Shares and managed investments |
Dividends or distributions paid plus capital gains |
Imputation credits and foreign tax credits |
Nil |
Annuities and other income streams |
Net taxable income as shown on tax return |
If the farmer or their partner had disposed of any assets during the three years prior to divestment, no income was assessed, as no actual return would have been received.
If the person was able to qualify for a pension or allowance by using RAFS however, a reduction in pension could still apply through assessment of gifts under the deprivation provisions.
When calculating income, the following payments would not be assessed as income:
All other non-farm income normally assessable under the pensions income test would be taken into account under the Farmers' Income Test.
Income from a farming business would have been determined using the same assessment methods used when determining income for income test purposes.
Where the farm business was run by the farmer as a sole trader, farm income included the net profit or loss made in each year. The net profit would have been adjusted for any tax deductions claimed that were not allowable reductions from business income.
Where the farm business was run by the farmer as a partner in a partnership, farm income included the farmer's (and if a member of a couple, their partner's) share of the net profit or loss made in each year. The net profit would have been adjusted for any tax deductions claimed that were not allowable reductions from business income for VEA purposes.
Where the farm business operated through a trust or private company, an assessment of actual income distributions, dividends, directors fees etc would need to be made.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16307%23comment-form
[2] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[3] https://clik.dva.gov.au/user/login?destination=node/16301%23comment-form
[4] https://clik.dva.gov.au/book/export/html/16307#tgt-cspol_part5_ftn156
[5] https://clik.dva.gov.au/book/export/html/16307#ref-cspol_part5_ftn156
[6] https://clik.dva.gov.au/user/login?destination=node/16306%23comment-form
[7] https://clik.dva.gov.au/user/login?destination=node/16186%23comment-form