Assessing house and curtilage 108-04070030

The principal home and the private land (curtilage) adjoining the home may not be considered an asset under the assets test.

Legislation about assets test assessment for the principal home and curtilage includes a single title rule, private land use test and concession known as extended land use test or extended curtilage.

Regardless of payment type, all new claimants from 1 January 2007 are assessed under the single title rule.

Curtilage amount is limited to land on the same title document as the home, to a maximum of 2 hectares (but there is no size limit if eligible for extended curtilage concession). Note: single title documents may have more than one parcel of land included.

Exceptions to land being held on one title document

Three exceptions exist to the rule requiring land adjacent to the principal home to be held on one title document:

• Where the dwelling-house is located on both blocks of land
• Where all or part of the blocks of land are protected by a law because of the land's natural, historic or Indigenous heritage, or
• Where the alienation (sale) of one of the blocks would seriously undermine the function of the house as a dwelling

Under the 3 exceptions land held on more than one title document can be treated as if it were held on the same title document as the person's dwelling-house.

Unless the extended land use test applies, the private land use test is applied to determine if the principal home and up to the first 2 hectares (5 acres) of adjacent land meet both of the following:

• on one title (Note: a title document may have more than one parcel of land included), and
• the land is used wholly or partly for private or domestic purposes, that is, not entirely for commercial purposes

If the land is used primarily for commercial purposes, then the private land use test is not satisfied, and the land is an assessable asset. Refer to ‘Business premises located in customer’s principal home’ below, if part of the principal home or surrounding land is used for business purposes.

Examples of how to assess land, rooms, and dual occupancies depending on their usage, can be found on the Resources page.

If the customer satisfies the private land use test, the land up to 2 hectares is exempt from the assets test.

If the property is larger than 2 hectares (5 acres) and the customer does not meet the extended land use test criteria, the value of the excess land must be determined. The customer is required to provide:

• a valuation of the home and surrounding 2 hectares
• a valuation of the home and all surrounding land on the title

A grandfathered savings provision for real estate allows adjoining titles to be considered curtilage, if they were or should have been assessed as such immediately before 1 January 2007 under the prevailing policy. Savings provisions cease when the customer's payment cancels for any reason, or the property ceases to be the home after 1 January 2007.

If the principal home and adjacent land is on one title and is over 2 hectares, the extended land use test may allow the whole property (on that title) to be exempt from the assets test if all following criteria are met:

• The customer is Age Pension age and in receipt of or qualified for Age Pension, or qualified for Carer Payment (CP), and the payment is payable.
  Note: where one partner qualifies for the concession, the customer's partner will also qualify, even if the other partner is a social security income support recipient or a Department of Veterans' Affairs income support recipient who is under Age Pension age or service pension age. If the relationship status changes in future (for example separation or becomes a widow/widower), the partner's concession is saved providing they continue to live in the home and are making effective use of the land
• The customer has long term 20 year continuous attachment to the land as their principal home (temporary absences less than 12 months do not break the 20 year period)
  Note: for partnered customers, the Age Pensioner or Carer Payment recipient of Age Pension age is required to be the person who has the long term 20 year continuous attachment to the land, not the partner who is under Age Pension age or service pension age
• The customer makes effective use of productive land to generate income, taking into account their capacity to do so.
  Note: unlike the private land use test, there is no requirement for the land to be used for private or domestic purposes. See Resources for additional information and examples of effective use of productive land

If the customer does not meet the extended land use test, and the principal home and adjacent land is on one single title and is more than 2 hectares, only the surrounding 2 hectares is assessed as curtilage.

Business assets not included in value of land exempted under the extended land use test

To avoid all doubt, the assets test exemption of land under extended land use test does not include the value of commercial or business assets, or structures and improvements, such as:

• plant
• stock
• machinery
• equipment
• machinery sheds

As the business assets are not subject to indexation, if the entire property has been exempted under the extended land use test, these assets should be recorded as Other Assets on the real estate (RE) screen. See Assessing and coding real estate details.

Any room located in a customer's principal home that is used purely for commercial purposes, that is not also used for domestic purposes, should be assessed as an asset.

If there are distinct areas of the property used for business purposes, these areas are not part of the principal home and are NOT exempt. This would include leasing out part of the property.

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.

Where a farm property is used for crop production any crops that are not yet ready for harvest will be exempted with the land under the curtilage concession, because they cannot be sold separately to the land itself. This includes sugar cane, orchards, vineyards and all other crops.

Generally, once the crop is ready for harvest it will become assessable and the income generated from the sale of the crop will be assessed via the latest tax returns for the farming enterprise.

Where extended land use test applies, any orchard or crop on the home title will be exempt. Therefore, it will not be necessary to obtain valuations of the crop where there is only one title.

Where the private land use test applies, any crop or orchard will be assessable once it is ready for harvest, regardless of whether it is on the 2 hectares surrounding the principal home. Therefore, it may be necessary to obtain valuations where the crop is ready for harvest.

A forest that is ready for harvest, but not yet harvested, has an assessable asset value.

Where extended land use test applies, forest on the home title will be exempt. Therefore, it will not be necessary to obtain valuations of the crop where there is only one title. If a plantation was ready for harvest, but the customer did not take any action to realise that value, a decision would need to be made whether the customer was still meeting the effective land use test.

Where the private land use test applies, a forest that is ready for harvest is assessable, regardless of whether it is on the 2 hectares surrounding the principal home. Therefore, a valuation may be required.

A dual occupancy home built on the same title document as the customer’s home may not be part of their principal home. This is determined by factors such as who paid the construction costs and whether it is rented. For information on how to code dual occupancy homes, see Step 7 of Table 1 under the Process tab in Determining homeowners and non-homeowners.

Crop supply contracts are business arrangements between the grower and the purchaser, they are not attached to the land and can be sold separately, for example, grape supply contracts. They will be assessed as primary production business assets.

If a principal home property has more than 1 title and they are amalgamated into 1 title with a total area under 2 hectares, then under the private land use test all of the land is now exempt and deprivation does not apply.

If a principal home property originally had 2 or more titles which are then amalgamated into 1 title with a total area of over 2 hectares, this may impact whether or not the extended land use test can be applied based on the effective use of productive land. Services Australia considers the date of the amalgamation and whether the amalgamation reduces the potential for the land to support the customer.

If the principal home property titles were amalgamated before 9 May 2006, this will not be considered to prevent the customer from meeting the effective use of productive land criteria and so the extended land use test may still be able to be applied (if all other criteria are met). In this situation, deprivation will not apply.

If the principal home property titles were amalgamated after 9 May 2006, the agency will consider how amalgamation affects the ability of the customer to support themselves, and the reason for the amalgamation of the titles.

If the amalgamation of the titles was involuntary (a council/government requirement), this would not be considered to prevent the customer from meeting the effective use of productive land test.

If the amalgamation was voluntary and increases the ability of the customer to generate income (for example zoning requirements to operate a specific business), the effective use of productive land test would be met and the extended land use test may still be able to be applied (if all other criteria are met).

Also, deprivation will not apply to the amalgamation of the titles if the amalgamation of titles reduces the ability of the customer to support themselves. For example, if they cannot sell the land individually, the effective land use test will not be met. The home property would then need to be assessed under the private land use test. However, deprivation will not be applied.

If a customer amalgamates the titles of 2 or more assessable parcels of land (where the principal home property is not included), and the result is that the total property value is reduced, deprivation may apply. To determine whether or not deprivation applies, see Deprivation where voluntary amalgamation result in reduced value. If it applies, deprivation would be calculated by deducting the new property value from the combined total value of the previous titles and deducting any available and allowable gifting limit.

The Resources page has examples of amalgamation.

These curtilage concessions also apply to the principal home if it is held in a private trust, private company or held through a rural leasehold. The controller of the private trust or company and the title holder of the leasehold property, are able to access the grandfathering title concession and the extended curtilage concession, on the same basis as customers who own their principal residence directly. Rural leaseholds include both perpetual leaseholds and pastoral leases.

Customers who own real estate as 'tenants in common', will have the legal share assessed under the assets test based on the agreed ownership percentage. For example if a customer owns 60% of the property then 60% of the whole property value is assessable. This differs from customers who own real estate as joint tenants with one or more people. In this case, the property will be assessed in equal proportions. Home and curtilage will then be exempt from the assets test in both these cases, if the real estate is considered to be the principal home.

Information for assessing real estate is collected from the Real estate form (MOD R) and supporting documentation. Note: only one MOD R needs to be issued if multiple titles are adjoining. Relevant documents may include evidence of a mortgage on the property, latest council rates/valuation, certificate of title or another title document. A title document must be supplied for any home property where house and curtilage applies and the property comprises multiple titles. All relevant title documents for multiple title properties are required to provide correct valuations for exempt and assessable portions of the property.

Relevant documents to prove 20 year continuous attachment to determine if the extended land use test applies may include:

• evidence of a mortgage on the property
• historical council rates/valuations
• historical utility accounts
• solicitor and legal documents
• electoral roll documents
• Australian Taxation Office (ATO) documents
• a statement from the customer stating a 20 year attachment to the land
• certificate of title, or
• another title document

Documents to prove effective use of productive land may include any contracts relating to the rent or use of the land, taxation or other business documents that indicate the land is being used productively or a counter statement, stating the land use for more formal arrangements.

For any excess land that is not exempt under either the private or extended land use tests, primary production aggregation may apply. Real estate is assessed as a primary production assets or a non primary production asset so that negative net primary production assets can be offset against other primary production assets under the primary production aggregation rules.

Note: real estate owned via shares in a private company will be assessed via trust and company rules.

Curtilage is the land around the house and for social security purposes is the land that is similarly exempt from the assets test. Before 1 January 2007, curtilage was limited to 2 hectares (5 acres) of adjoining land that is used primarily for private or domestic purposes, although this may be across more than 1 title. These rules applied to all income support payments and no other concession apart from 2 hectares was available.

The policy intent was that curtilage (private land) is the normal size house block for the area, with an upper limit of 2 hectares. Therefore, if a property is greater than 2 hectares, then the excess land would not be considered to be part of the principal home and therefore would not be exempt from the assets test.

If the property (including any of the first 2 hectares) was in any way related to a business, including leasing out part of the property, then it may not be exempt. The income and asset value of the business also needed to be assessed from income tax returns and financial papers.

Water licences and rights vary from state to state and areas within states. In some areas the term Water Rights refers to Water Licences and Water Allocation owned by the landholder. In other areas, Water Rights refers to the Allocation or Licence only.

An owner of a land parcel may apply for a Water Licence for the land parcel or parcels. Water Licences and interim Water Licences are usually attached to specific land holdings. Water Licences are assessed with the land value and included in the total value of the real estate, because previously they could not be sold or traded, and had a relatively low value. In some areas, legislation governing Water Licences changed, allowing them in some circumstances, to be traded or leased. Water licences held on property a customer does not own is recorded as an 'other asset' on the Other Assets (OAS) screen.

Current Department of Social Services (DSS) policy is Water Allocations are assessed with land value, even if they have their own title and can be traded as personal property.

Water Licences and Water Allocations may be assessed as assets. Whether the Water Right is assessable depends if the land it relates to is exempt from the assets test. If 100% of the property is exempt from the assets test, the Water Right that relates to the property is also exempt. If the Water Right relates to a partially exempt property, the Water Right is also partially exempt. Asset value of the Water Right is shared between assessable and exempt portions of the property in accordance with their value. If the total property is assessable, 100% of the Water Right is assessable. The value of these assets varies depending on the size of the Allocation/Licence and market forces.

If a customer owns the land and Licence or Allocation, the value of the Licence or Allocation should be included in the total real estate value recorded on the Real Estate (RE) screen. All details of Water Rights should be included on the Real Estate Valuation Information (REVI) screen, so that it can be considered if a formal valuation is required. If the customer owns only the Allocation or Licence and no real estate, they are listed as separate assets on the Other Assets (OAS) screen.

If a customer is generating income from their Water Licence/Rights/Allocations (for example by leasing their Water Rights), this income will be assessable regardless of whether or not the Water Licence or Allocation is assessable as an asset. The Resources page contains examples of the assessment of Water Rights.

Farm Household Allowance customers

This treatment of water assets is not applicable for Farm Household Allowance customers. See Assessing assets for Farm Household Allowance (FHA) for the treatment of water under the FHA assets test.