Unrealisable assets under the Assets Test hardship provisions 108-04120050

The customer nominates the asset they want disregarded. If the asset is a property that:

• is listed for sale, go to Step 2
• is jointly owned with another person who refuses to sell, go to Step 3
• has a legal restriction or court order preventing the sale of the asset, such as assets frozen by the court, go to Step 4
• is subject to a pending property settlement, go to step 5
• if the asset is a loan to an entity, go to Step 6
• If the asset is attributed assets in an entity the CAO must determine the level of realisable assets in each entity – go to Step 7

If it is not clear whether the asset should be considered unreasonable to sell, refer to Level 2 Policy Helpdesk.

Request evidence that the property is on the market and the current asking price.

For a customer's property to be considered unrealisable when it is on the market, check if the asking price is reasonable. An asking price up to 10 per cent higher than the valuation obtained by Services Australia can be accepted as reasonable.

The property must be listed with a real estate agent or a recognised online real estate sales platform, such as realestate.com.au or domain.com.au.

Platforms such as Gumtree and Marketplace are not acceptable.

Has the customer provided evidence the property is on the market and the current asking price?

• Yes, go to Step 8
• No, request evidence that the property is on the market and the current asking price

If customer has left their home due to domestic or family violence, do not ask them to provide evidence from the other owner. Grant a temporary vacation exemption period.

Has the customer provided evidence the other owner refuses to sell the asset?

• Yes, go to Step 8
• No, request proof from the other owner, such as a statement, when the statement is received, go to Step 8
• No, and the other owner refuses to provide any proof, request other evidence, such as a pending property settlement or legal action, go to Step 9

Has the customer provided evidence that the asset is unable to be sold due to legal reasons?

• Yes, go to Step 8
• No, request evidence. For example, a copy of the court order or other legal documents
• The evidence must state that the property cannot be sold
• Go to Step 9

Has the customer provided evidence the asset is currently part of a pending property settlement preventing it from being sold?

• Yes, go to Step 8
• No, request the customer to provide evidence that they have started property settlement proceedings, and the subject asset is part of the pending property settlement.
• This could include a solely owned asset, if it is included in the property settlement. Evidence can include a letter from solicitor or court documents
• Go to Step 9

If the customer is not the sole controller of the entity, have they taken legal action to recover their loan?

If the customer is the sole controller, discuss forgiving the loan. If it is possible to forgive the loan without tax implications, this action must be taken.

If customer states the loan cannot be forgiven, request a letter from the accountant stating the reason the loan cannot be forgiven. This letter must include what the tax implications are in forgiving the loan and the relevant section of the Income Tax Assessment Act.

Has the customer provided any evidence of any action taken to recover or forgive the loan (as above), or the inability to do so?

• Yes, go to Step 8
• No, request evidence of any legal action taken to recover the loan, or the ability/inability to forgive the loan

An entity’s underlying assets need to be determined if they are unrealisable or realisable.

Has the customer provided evidence to confirm the underlying entity assets are unrealisable?

• Yes, go to Step 8
• No, request supporting evidence to confirm the underlying entity assets are unrealisable. This could include a letter from the accountant or proof that the assets are on the market

• Yes, go to Table 3, Step 1
• No,
• non-pension customer - request further evidence OR if further evidence was requested but not supplied, reject claim
• pension customer - request further evidence OR if further evidence was requested but not supplied reject claim, go to Table 2 Step 1

• For allowance customers, the asset cannot be considered unrealisable
• For pension customers, go to Table 2

Unlike the test for allowance customers, the hardship test for pension customers allows a test of whether it is unreasonable to expect a customer to sell or borrow against an asset.

• If a pension customer has a long-term attachment to a property on which they have lived for 20 years or more, they cannot subdivide and keep the portion on which the home is situated, go to Step 2
• If the property is a farm and the claimant has been a farmer for at least 20 years and still farms the property, go to Step 3
• If the asset is a farm or some other business and there is a temporary but substantial reduction in income due to factors beyond their control, go to Step 4
• The asset is a farm and a family member is working the farm property, go to Step 5
• If the asset is a house which is not their principal home but in which a near relative lives and:
• the near relative has resided in the house for a substantial period (at least 10 years), or
• the near relative has previously provided care for the customer in the house, which was formerly the customer's home, or
• the customer is providing accommodation for a child with a disability to promote the child's independent living, or
• the near relative has dependent children, and the income of the near relative and partner is not more than the permissible income free area for additional family payment, go to Step 6
• If the asset is the customer’s principal home, and they are temporarily overseas, and unable to return to Australia for reasons beyond their control, go to Step 7

If none of these apply the asset cannot be disregarded, as is it not considered to be unrealisable.

If it is not clear whether the asset should be considered unreasonable to sell, refer to Level 2 Policy Helpdesk

Has the customer provided any evidence of their 20 year continuous attachment to the property and of the inability to subdivide the property and retain the portion on which the home is situated?

Note: ensure that the extended land use test cannot be applied.

A period of less than 20 years is accepted if there are unforeseen circumstances, e.g. a couple purchased a farm and then one partner died. Accept that the surviving partner has a long-term attachment to the property even though they may not have lived there for 20 years.

• Yes, go to Step 8
• No, Request proof of 20 year continuous attachment and proof that sub-division is not allowed

For the asset to be disregarded the pensioner needs to have been a farmer for at least 20 years (not necessarily on this farm), currently working the farm, and they could not sell some of the land without affecting the viability of the farm and/or significantly affecting their income from the farm.

A period of less than 20 years is accepted if there are unforeseen circumstances, e.g. a couple purchased a farm and then one partner died. Accept that the surviving partner has a long-term attachment to the property even though they may not have lived there for 20 years.

If a farm is being operated by a person other than the customer or a family member it could be considered reasonable to expect the customer to sell the property to ease their financial situation.

Has the customer provided any evidence that they have been a farmer for at least 20 years and still farms the property? Or where applicable, evidence that the property is unable to be subdivided and sold without affecting the viability of the farm?

• Yes, go to Step 8
• No, request:
• latest income tax returns
• proof of farming for 20 years
• if applicable, evidence that the property is unable to be subdivided and sold without affecting the viability of the farm

Has the customer provided any evidence that a farm/business has had a temporary but substantial reduction in income due to factors beyond their control?

• Yes, go to Step 8
• No, request:
• income tax returns for the last 2 years
• a statement detailing the reasons for the reduction in income
• evidence the reduction in income is because of factors outside the customer’s control

For the asset to be disregarded the customer must provide any evidence of:

• the family member working the farm to capacity
• the family member working the farm for at least 10 years
• the farm is the main source of the family member's livelihood

Note: A period of marginally less than 10 years may be accepted where the family member has worked the property continuously since leaving school.

Has the customer provided evidence as listed above?

• Yes, go to Step 8
• No, request:
• latest income tax returns for the family member and their partner
• evidence the family member has been working the farm for more than 10 years

For the asset to be disregarded, the customer’s circumstances must meet one of the following criteria:

• the near relative has resided in the house for a substantial period (at least 10 years)
• the near relative has previously provided care for the customer in the house which was formerly the customer's home
• the customer is providing accommodation for a child with a disability to promote the child's independent living
• the near relative has dependent children, and the income of the near relative and partner is does not exceed the allowed income free area for additional family payment

If the property is occupied by a near relative, consider the financial circumstances of the near relative when assessing if would not be reasonable to expect the customer to sell the property.

If the near relative could get comparable alternative accommodation for an amount which does not exceed 20 per cent of their (and partner’s) gross income, it should be accepted that it would be reasonable for the customer to sell the property.

Has the customer provided any evidence to meet the relevant criteria above?

• Yes, go to Step 8
• No, request any relevant evidence, for example:
• how long the near relative has lived in the property
• the care the near relative provided to the customer in that property
• the near relative’s dependent children, proof of income for the near relative to determine that it does not exceed the FTB income limit
• how the customer is providing this property to assist a disabled child to live independently
• proof of income for all adult occupants

Has the customer provided any evidence of why they cannot return to Australia?

• Yes, go to Step 8
• No, request evidence of the reasons they are unable to return to Australia, for example, doctor’s reports, official travel documents

• Yes, go to Table 3 Step 1
• No, request further evidence. Note: if further evidence was requested but not supplied, the asset cannot be considered to be unrealisable

When assessing whether an asset is considered unrealisable, consider whether the customer borrowing funds against the unrealisable asset is a practical option. Always take the customer’s full circumstances into consideration

To assess a customer's ability to borrow against assets, consider the following factors:

• Their ability to meet periodic repayments
• The type of assets involved
• Whether their financial position is likely to improve in the future

A customer would only be expected to borrow from banks, finance companies and similar institutions. They would not be expected to enter into a loan agreement which required payment above the prevailing interest rates charged by such institutions on secured loans.

A customer would only be expected to approach the institutions where they normally invest, or any government body set up to assist those specific customers

Evidence of attempts to borrow on assets is required only where it is apparent the customer would have the capacity to meet periodic repayments or their financial position will improve in the future and, may be able to get a loan which does not require regular repayments. Letters from accountants, solicitors or managers of financial institutions may be accepted as evidence of an inability to borrow.

For example, a customer whose business is running at a loss, has no other income, and whose financial position is unlikely to change soon, can be accepted as being unable to borrow further funds without any further evidence.

A customer who owns substantial business assets and whose financial position will improve soon could be expected to obtain a loan by offering their business assets as security. They would be required to show reasonable action has been taken to obtain a loan and has been unable to do so.

Could the customer borrow against the asset?

• Yes, but the customer has not attempted to borrow against the asset - the asset is not considered to be unrealisable. Advise the customer that the asset is not able to be considered as being unrealisable unless they have attempted to borrow money against the asset from a financial institution described above.
• Yes, and the customer has already tried to borrow funds against the asset – Proceed with the claim.

Note: If the customer is successful in borrowing funds against the asset, any funds the customer receives, may need to be included when assessing the Severe Financial Hardship criteria.

• No, the asset is considered to be unrealisable. Proceed with the Asset Hardship claim.