Assessment of entry contribution 065-11010010

The contract or agreement entered into by the customer and the retirement village will state the entry contribution amount and the ongoing maintenance or service fees payable. The contract or agreement must be sighted to verify the entry contribution amount.

The entry contribution is always the total amount (or sum of amounts) paid or agreed to be paid under one or multiple contracts for the right to live in the retirement village. That is, unless the customer can provide evidence proving an amount paid does not relate to the purchase of accommodation.

If the customer has moved into a retirement village, and still owns their former home, it is an assessable asset. The former home is assessed from the date the customer enters the retirement village.

Some retirement villages give residents options in the building and decoration of their home. In these cases there would be a base cost for the standard, unfinished unit, and an additional cost for what may be called a 'chattels package'.

This includes items that would be required to make the home suitable for habitation, for example:

• skirtings
• architraves
• bench-tops
• light fittings
• paint
• door fittings
• flooring
• tiling
• bathroom vanities

These are included in the calculation of the entry contribution and added to the base cost if the customer buys these types of fixtures.

The purchase of a garage under a separate contract is assessed as part of the entry contribution if there is a garage allocated or attached to each unit. However, if purchase of a garage is not one of the conditions of entry to the retirement village then the amount paid for the garage is not part of the entry contribution and the garage is assessed as an asset.

Ongoing costs such as general service or maintenance fees which are payable on a regular basis are not part of the entry contribution.

Some retirement villages deduct fixed amounts from the entry contribution. If this is the case, the terms and details of the amounts to be deducted, and when they are to be deducted, will be set out in the entry agreement signed by the resident. This should be taken into account if the customer is assessed as a non-homeowner and being paid under the assets test as the amount assessed as an 'other asset' would be reduced.

The amount paid for the right to live in the retirement village is compared to the extra allowable amount at the time the right was created to determine the customer's homeownership status. The extra allowable amount is the difference between the:

• single homeowner allowable asset level, and
• single non-homeowner allowable asset level

If the entry contribution at the time the arrangement:

• is greater than the extra allowable amount, the customer is considered to be a homeowner and is not eligible for Rent Assistance (RA). The amount the customer paid as an entry contribution is not included as an asset under the assets test
• is equal to or less than the extra allowable amount, the customer is considered to be a non-homeowner and may be eligible for RA. The amount the customer paid as an entry contribution is assessable under the assets test, but is not subject to the deeming provisions and should be coded as 'other assets'

The extra allowable amount applies to singles and each member of an illness separated couple.

For couples who are not illness separated, the extra allowable amount is half each.

A customer is considered illness separated if one or both partners live in a retirement village and they receive a substantial level of care from the retirement village service provider.

The Resources page contains current and historical rates of the EAA.

In situations where the customer is receiving a substantial level of care provided by the retirement village for a period of more than 14 days, the customer may be considered to be in a care situation for the social security assets test. The customer meets the definition of being in a care situation as the retirement village is considered to be a private residence.

If the customer owns their own home and vacates it permanently to enter a care situation in a retirement village, the former home will be exempt from the assets test for 2 years from the date the customer first entered care. The References page contains more information.

If the entry contribution (or part thereof) is paid by another person (for example, a relative) and the amount paid is a gift, and non-homeowners will have the total entry contribution assessed as an asset.

If the amount paid is a loan the customer must repay, it is a debt owing and not included as an asset. The assessable amount of the entry contribution will not include the loan.

However, when determining the homeownership status of the customer, the amount paid by another person does not reduce the entry contribution payable by the customer. The Resources page contains an example of this.

There are some circumstances where the entry contribution paid to the retirement village is contracted as a loan to the retirement village.

Department of Social Services (DSS) have determined these cases should be assessed under the special residence rules and not as a financial investment. If the amount paid is above the extra allowable amount then it is an exempt asset. If the amount paid is at or below the extra allowable amount then it is a non-financial asset and no deeming applies.