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Assessment and sale of real estate and timeshare asset 108-04130010

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This document outlines information on real estate that may have an asset value and is subject to the assets test. This can be, but is not limited to, an investment property, holiday home, timeshare, a business conducted from the principal home. Property owned under a timeshare arrangement is assessed differently from other real estate.

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On this page:

Error E607CQ - Partner Person Id is not compatible

Maintaining asset values on customer records - REBS screen

New or unrecorded property

Property sold, gifted or disposed of

Real estate for business purposes including business run from the principal home

Timeshare real estate assets

Customer is moving into or out of a property recorded on REBS

Error E607CQ - Partner Person Id is not compatible


Table 1

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Item

Description

1

Action required for error E607CQ

A system error may show if:

  • changes are made to Real Estate/ Business Summary (REBS) screen details, and
  • updates have not been made since the customer’s relationship status changed and the real estate is still recorded as partly or fully owned by the partner

Note: Do not code $1 for the property value or 1% or 0.1% asset owned. This creates issues with the agency’s external contracted valuers, and valuations are still auto requested at a cost to the agency.

If this error occurs when attempting changes to the customer's REBS details:

  • On the Real Estate (RE) screen, print or copy all pages about the impacted property or business, showing the Current Market Value, Event Date and other relevant details. Include all historical pages
  • In the one activity:
    • delete the relevant property from the REBS screen
    • recode on REBS as a new property, using the screen prints to recreate all historical entries on RE, including relevant details such as Valuers Job Number: and the correct % Asset Owned:
    • if system error 'E016RB – Asset valuation source of AVO not valid' shows, recode all AVO entries prior to 28 June 2014 using the Asset Valuation Source type CLI
    • ensure all other Asset Valuation Source: codes match the historical entries
    • if the REVI screen was originally blank, it may be necessary to locate the property details on a previously supplied MOD R or online claim questions
    • finalise the activity
    • DOC the record detailing the updates made, including change in % of ownership and AVO error resulting in alternate coding of CLI

Note: this should not create any overpayment or arrears payment for the customer if no other income and assets updates are completed in the same activity. Once the property details are recoded, REBS should allow updates without the error appearing.

Check the former partner’s record to see if:

  • the property is still being assessed
  • the former partner is deceased see Undoing a death action
  • updates are needed. Do not use the details supplied by the customer to update the ex-partner’s record

Maintaining asset values on customer records - REBS screen


Table 2

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Step

Action

1

There has been a change to the customer's real estate assets

An update is needed because the:

For when the:


New or unrecorded property


Table 3

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Step

Action

1

Customer advises of a new real estate asset

When a customer advises of a new real estate asset, a net market value of the real estate must be established.

If the customer:

2

Establishing a net market value

If the customer advises of a new real estate asset, to establish a net market value of the customer's real estate, direct the customer to the relevant online service or request the following forms, see Requesting information (CLK):

  • Real estate details (MOD R) form, or
  • Income and assets form (for allowance and Parenting Payment customers, request MOD iA, for pension customers request SA369)
  • Business details (MOD F) form. (If the customer's real estate is used for business purposes, issue a MOD F and MOD R)

Note: when a customer is conducting a business from their principal home:

  • only assess as an asset the portion used solely for business purposes:
  • if part of the home is used for both domestic and business purposes, the assets test exempt status of the customer's principal home is retained, so a MOD R is not required

Procedure ends here until documents returned.

3

For medium to large properties

The Rural Property Questionnaire (Q454) is used along with the MOD R. This collects more details from the customer for a third party valuer to accurately value the property.

In most cases, if the property operates as a commercial enterprise, issue the Rural Property Questionnaire (Q454) letter in addition to the MOD R.

A Q454 is not required to be issued for:

  • smaller properties such as hobby farms with minimal farm improvements or bush blocks.
  • where the whole property is exempt because it is:
    • the principal home, or
    • an exempt farm asset

Procedure ends here until documents are returned.

4

Customer is receiving Blind Pension

If the customer is receiving a Blind Pension, only issue a MOD R and/or MOD F if they:

  • are being assessed for Rent Assistance, or
  • have a partner and the partner is not on a means test free payment

In these cases, details are still needed to determine Rent Assistance and/or the partner's rate.

Procedure ends here until documents returned.


Property sold, gifted or disposed of


Table 4

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Step

Action

1

Update REBS

Gifting

If the property has been gifted or sold for less than its value, deprivation may have occurred. For more information, see Assessing deprivation/gifting.

New claims

If the customer advises a property that was previously recorded has been sold or disposed of prior to the new claim and any doubt exists about the accuracy of the details given, evidence can be requested. Note: the Service Officer should annotate the progress of claim DOC to clearly explain why there are doubts if information is requested.

If documents scanned to the customer’s record do not contain all details needed to update REBS, try to contact the customer.

Information needed

If the customer can supply all relevant details of the sale of the home, and value of the property is similar to the monies received from sale, complete updates in one transaction based on their verbal advice.

Verification is only needed if a mortgage, capital gain or other relevant details could not be supplied.

If the funds are in a bank account, they can advise verbally. If the customer has invested the funds in another asset, they must supply documentation to verify the update (for example: share statements, income stream schedule, managed investment statement). For couples, determine what portion of the intended amount each person has invested. See Verifying income and assets

If the customer has advised that the real estate was owned by a sole trader or partnership business, consider whether a new balance sheet may be required. See Assessing sole trader assets or Assessing partnership assets.

If the customer has sold only a part share of the property and still owns some of the property, use the appropriate percentage they now own to update REBS.

Note: for overseas real estate, update the Foreign Income and Assets (FID) screen.

Recode real estate information if the customer's relationship status has changed since the Real Estate (RE) screen was last updated. See Assessing and coding real estate details

If the customer:

2

Customer can provide the information needed to complete the update
  • On the Real Estate/Business Identifying (REBI) screen, update the Principal Home field if appropriate and applicable Country field, if not previously recorded. Update the Sold/Gifted/Ceased field with the valid code using field help ('?')
  • On the RE screen, code the event date field as the date of event (DOV) and update previous coding for later DOVs if applicable % Asset Owned, the Current Market Value $ and the Current House and Curt. $ fields as '0'.
    Note: for overseas real estate, update the Foreign Income and Assets (FID) screen
  • If the customer was receiving income from the property, code the income as zero on the following fields:
    • Gross Annual Income $: '0'
    • Allowable Income Dedns $ pa: '0'
    • Annual Interest $: '0'
  • If the customer made a capital gain when they sold their property, no income is assessed.
  • Code the proceeds of sale, depending on where they have been invested, see Coding income and assets for Centrelink payments and services
  • Request the relevant documents (including documents showing any mortgage on the property). See Requesting information (CLK)
  • Record the details on a DOC
  • Finalise the activity

Procedure ends here.

3

The customer does not have enough information to process now
  • For allowance and Parenting Payment customers, request Income and Assets (MOD iA) form, see Requesting information (CLK)
  • For pension customers, request an Income and assets(SA369) form, see Requesting information (CLK)
  • If ownership percentage has changed, (for example, a part sale and/or mortgage balance needs adjusting), request the customer provide verification, see Requesting information (CLK)
  • Record the details on a DOC
  • Procedure ends here until documents are returned

4

Check the record and complete any updates needed

When the required documents are returned:

  • If the sale was already recorded, confirm the information on the documents matches the customer's record. Cancel the scanned activity if one exists
  • If the sale was not recorded when first advised because of not enough information, record the sale in REBS
    • Select the real estate asset from the REBS screen. On the REBI screen, ensure the Principal Home field is coded. Update the Sold/Gifted/Ceased field with the valid code using field help ('?').
    • On the RE screen code the Event Date field as the date of event (DOV) and the % Asset Owned field as '0'. and the Current Market Value $ field as '0'
    • If the customer was receiving income from the property, code the income as zero on the following fields - Gross Annual Income $ '0', Allowable Income Dedns $ pa '0', Annual Interest $ '0'
    • If the customer made a capital gain when they sold their property, no income is assessed. Update any investments or assets purchased from the proceeds of the sale
  • Record the details on a DOC
  • Finalise the activity

Procedure ends here.


Real estate for business purposes including business run from the principal home


Table 5

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Step

Action

1

Real estate is used for business purposes

Link new real estate to a business when it is unavoidable, for example, a non-primary production business where"

  • there is a liability over all business assets (real estate and other), and
  • the value of the net business assets excluding the real estate is negative.

If linking is unavoidable, enter the details of the business first, then link the real estate to the business record.

Exemptions from the assets test for house and curtilage may apply if:

  • the business real estate is also the customer's principal home and the customer satisfies the extended land use test, or
  • the customer is using part of their principal home solely for the business. In these cases:
    • a valuation is not required
    • it is not coded on the Real Estate (RE) screen
    • use the value of the portion used solely for business, (as listed on a balance sheet or advised by the customer). Code it as a business asset on the Business Details (BUS) screen

Updates are required on the following 3 screens:

For property used for business purposes, the completed MOD F must also be coded, see Assessing and coding the Business details for sole traders and partnerships MOD F.

Go to Step 3.

2

Real estate is not used for business purposes

If a customer's land and principal home on the one title is exempt under the extended land use test, a valuation is not required and the customer's estimate of the property value is acceptable, Assessing house and curtilage.

If the property is sold, gifted or disposed on and already recorded on the customer's record, see Step 2 in Table 4.

For Australian properties

Assess the completed MOD R and update the property on the customer's record, see Assessing and coding real estate details.

Customers who own real estate as 'tenants in common' have their legal share assessed based on the agreed ownership percentage. For example, if a customer owns 40% of the property, use 40% of the whole property value.

For overseas properties

  • Record asset values of overseas real estate on the Foreign Income and Assets (FID) screen with REA in the Type: field.
  • Do not code overseas property on REBS
  • Code the asset value in the relevant foreign currency and the system will convert it to Australian Dollars (AUD)
  • The asset value automatically changes each month with variations in exchange rates
  • See Foreign income and assets for further details
  • Record the details on a DOC
  • Finalise the activity

3

For new claims

Real estate within Australia

For information about when a valuation may be required, see Valuation of real estate and other assets at new claim.

Overseas real estate

For more information about when a valuation request may be required, see Valuation of real estate and other asset.

Centrelink International Services (CIS) may accept alternative source documents for overseas real estate instead of a valuation (for example, Italian tax returns).

Do not refer property owned under timeshare arrangements for valuation. For information on assessing and coding timeshares, see Table 6.

4

Effect of new valuations

A valuation that is higher than a previous valuation, or a customer's estimate, is applied from the first payday after it is received.

When a valuation is lower than a previous valuation, or a customer's estimate, apply the date of effect rules.

Exceptions are where:

  • there is evidence the customer deliberately misrepresented details of the asset, the value may be applied from a date earlier than the valuation date
  • the customer applies for a formal review of a current valuation. In this case, the review of decision date of effect rules apply

The payday definition is in Section 23 (1) on the References page.

Only raise a debt if a person has deliberately misrepresented the details of the asset. When a debt shell is created due to a property value not being updated before the next payday after the valuation is received, this debt should be waived.

5

Further updates required

If the customer has a partially built house that is to be assessed as an asset and the property will not become the customer's principal home, a valuation of the fully constructed property may be required on completion.

Procedure ends here.


Timeshare real estate assets


Table 6

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Step

Action

1

Assessing and coding timeshare assets

The legal structure of timeshare arrangements vary widely and can include a share in holiday homes/units, caravan parks, houseboats, etc. Do not request valuations for timeshare assets.

A MOD R is not required as in most circumstance. If the customer provides evidence of the sale price or recent sale values, these are accepted.

The asset value of a timeshare depends on when it was purchased. If it was purchased:

  • in the last 12 months, use the purchase price
  • more than 12 months ago, use the most recent sale price within that timeshare. Customers should be able to obtain this from the timeshare management

A timeshare asset is purchased, sold or its value changes

  • If the timeshare is already recorded on the Other Assets (OAS) screen this must be ceased. From December 2015, timeshare in a property is assessed as a managed investment on the Direct Investments (SVDI) screen
  • To cease the timeshare assessment on the OAS screen, code the following fields:
    • Event Date today's date. Use the same date of event when coding it as a Direct Investment on the SVDI screen)
    • Total Asset $ 0
    • % Owned Client and % Owned Partner code as '0'
    • Source and DOR as appropriate
    • To recode the timeshare, see Managed investments - adding a new investment
    • Note: any income being assessed from the timeshare investment must also be ceased
  • If recording the timeshare for the first time, see Managed investments - adding a new investment
  • If the timeshare is already recorded as an investment on the SVDI screen, see Managed investments - updating existing investments
  • Once all updates are complete, record the details on a DOC and finalise the activity

Procedure ends here.


Customer is moving into or out of a property recorded on REBS


Table 7

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Step

Action

1

Customer moves into or out of a property they already own (that is currently being assessed as an asset)
  • If the customer was previously a non-homeowner with real estate recorded as an asset, once the property becomes their principal home, it is no longer assessed unless there is excess land that is not exempt as curtilage. Go to Step 3
  • If the customer has moved out of their principal home, which is recorded on REBS, go to Step 2
  • If the customer has sold their previous home, see Sale of principal home
  • If the customer has sold their previous principal home and intends to use all or part of the proceeds of sale to renovate and move into a property they own which is recorded on REBS:
    • The amount from proceeds of sale intended for renovation is exempt under the assets test if the renovations occur before they move into the new principal home. Once the former REBS coded property is their principal residence, no asset test exemption applies to any proceeds from the sale, see Sale of principal home
    • The new principal home should no longer be assessed unless there is excess land that is not exempt as curtilage. Go to Step 3
  • If the customer has sold their home with the intention of buying another, they have the following options:
    • have the temporary home exempted from the assets test and the proceeds of the sale of their principal home assessed as an asset. Go to Step 3
    • have the proceeds of sale been exempted for an initial 12 or 24 months (depending on the date of sale) and the temporary home still assessed as an asset. Note: from 1 July 2007, the former home exemption may be extended for another 12 months if certain criteria are met. Go to Step 6
  • If the customer was previously a homeowner and has moved into the property recorded on REBS, the property on REBS becomes the principal home and the previous home becomes an asset, go to Step 7

2

Customer has moved out of a property they own (that is currently being assessed as an asset on REBS)

If the customer’s previous principal home was being assessed under the assets test, for example the land size is greater than 2 hectares, the full property may be considered an asset under the assets test when they move out.

If the customer has not sold or gifted the property, update the property details from the date the customer vacated to move to their new home:

  • REBI screen – change Principal Home: from Y to N
  • RE screen
    • Curtilage Type: make field blank
    • Current House & Curt.$: change to 0

Go to Step 5.

3

Do the home and curtilage rules apply to the real estate?

From 1 January 2007, the assets test assessment for the principal home and curtilage was amended to a single title rule. There are 2 curtilage categories used to determine a customer's allowable house and curtilage concession:

  • private land use test
  • extended land use test

A grandfathered savings provision for real estate may apply.

Do the home and curtilage rules apply to the real estate the customer is moving in to?

4

To take the new principal home off the REBS screen

If the property is no longer assessable, update the REBI screen as follows:

  • Principal Home field
  • Sold/Gifted/Ceased field with 'NAA' (no assessable asset value)
  • Source and Date of Receipt fields; code as appropriate, then 'C' for correct
  • press [Enter] to apply the updates. Pressing [Enter] again navigates to the Real Estate (RE) screen
  • on the RE screen:
    • code the Date of Event field as the date of event (DOV)
    • code the % Asset Owned field as '0' and the Current Market Value $ field as '0'
    • if the customer was receiving income from the property, update following fields:
    • % Income Owned '0'
    • Gross Annual Income $ '0'
    • Annual Interest $ '0'
    • Allowable Income Dedns $ pa '0'
    • Source and DOR is already displayed, code 'I' to insert

Go to Step 5.

5

Further updates required
  • If applicable, change the address on the Address Details (AD) screen. For more information, see Changing address
  • Update the Home Ownership field on the Accommodation Circumstances (AC) screen to 'HOM - fully owns home'
  • If customer is sharing with another person, who is not a close family member or partner, see The Living Arrangements question set
  • If applicable, code the full proceeds of the sale on the Savings Summary (SVS) screen as:
    • Direct Investments (SVDI), or
    • Savings Bank Accounts (SVP)
  • Note: ensure the proceeds are only recorded once, so the asset is only assessed once
  • Update the Source and DOR fields as appropriate
  • Record details on a DOC
  • Finalise the activity

Procedure ends here.

6

Customer chooses to have the proceeds of the sale of their principal home exempted and the temporary home still assessed as an asset

The portion of the proceeds of sale, which the customer intends to use to purchase, build, rebuild, repair or renovate a new principal home are an exempt asset for up to:

  • 12 months from the date of sale for sales before 1 January 2023, with an extension of up to 24 months total in some circumstances
  • 24 months from the date of sale for sales from 1 January 2023 onwards, with an extension of up to 36 months total in some circumstances

Most of the time, this date will be the property settlement date, and the lower deeming rate is applied when the funds are invested in financial assets. For further details see Sale of principal home.

The asset test exemption may be extended for up to an additional 12 months if the customer has a continuing intention to apply the proceeds of the sale to purchase, build, rebuild, repair or renovate a new principal home and have:

  • made reasonable attempts to obtain a new principal home, and
  • been making those attempts within a reasonable period (i.e., 6 months) after selling the principal home, and
  • experienced delays beyond their control in obtaining a new principal home

All of the above criteria must be met for the customer to gain an extended principal home sale proceeds exemption For further details see Sale of principal home.

Update the customer's record

Any money intended for purchasing land or building another home

Land already owned (outright or mortgaged) by the customer on which they intend to build a new principal home, may be exempt from the assets test once the principal home sale proceeds have been received.

If the customer uses the proceeds of sale to purchase a block of land on which they intend to build a new principal home, the land may be exempt from the assets test for up to 12 or 24 months depending on the date of sale.

Note: The maximum total asset value that may be exempt is the value of the sale proceeds of the old principal home.

  • If a new block has been purchased:
    • Adjust the balance of the proceeds of sale with the purchase price of the block of land see Sale of principal home
  • If a block of land is already owned, coded on REBS and is no longer assessable:
    • select the real estate asset from the REBS screen
    • on the Real Estate/Business Identifying (REBI) screen, update the Sold/Gifted/Ceased field with 'NAA'
    • on the Real Estate (RE) screen, code the % Income Owned field as '0', code the % Asset Owned field as '0' and the Current Market Value $ field as '0'
  • If the customer was receiving income from the block of land, zero the income:
    • % Income Owned: '0'
    • Gross Annual Income $: '0'
    • Annual Interest $: '0'
    • Allowable Income Dedns $ pa: '0'

Note: for overseas real estate, update the Foreign Income and Assets (FID) screen

    • Update the Source and DOR fields as appropriate
    • Record details on a DOC
    • Finalise the activity

Procedure ends here.

7

The property on the REBS screen becomes the principal home and the previous home becomes an asset
  • Update the real estate asset if the property is no longer assessable:
    • select the real estate asset from the REBS screen
    • on the Real Estate/Business Identifying (REBI) screen, update the Sold/Gifted/Ceased field with 'NAA'
  • Code the Real Estate (RE) screen:
    • Event Date field as the date of event (DOV)
    • % Income Owned field as '0', code the % Asset Owned field as '0' and the Current Market Value $ field as '0'
      Note: for overseas real estate, update the Foreign Income and Assets (FID) screen
  • If the customer was receiving income from the property, code the income as zero in the following fields:
    • % Income Owned: '0'
    • Gross Annual Income $: '0'
    • Annual Interest $: '0'
    • Allowable Income Dedns $ pa: '0'
  • Change the address on the Address Details (AD) screen. For more information, see Changing address
  • As this property is now an assessable asset, issue a MOD R for details of the previous home. See Requesting information (CLK). Upon receipt of the completed MOD R, update property details on the customer's record
  • If the customer is sharing with another person, who is not a close family member or partner, see The Living Arrangements question set
  • Update the Source and DOR fields as appropriate
  • Record details on a DOC
  • Finalise the activity

Procedure ends here.