Assessing a life interest in a home 108-04070070

A customer may have a right to the use of a home for life. Where a customer has such a life interest in the accommodation in which they reside, the value of that interest is exempted as the principal home and the customer is considered a homeowner. If a customer has created a life interest or a right of occupancy in a private home for their own benefit, the granny flat provisions apply.

Take care to ensure that a person who states that they have a life Interest is not in fact the controller of a discretionary trust. If a person who has a life Interest has the ability (under the trust deed of a will) to use trust capital, the person does not have only a life interest. A discretionary trust exists which is subject to trusts and companies legislation.

If the customer only has a right to accommodation for life, the customer is not entitled to rent out the house. No further asset exemption would apply.

If the customer has a life interest in the income of the home, the customer would be able to rent out the home and receive the asset exemptions.

If the customer only has the right to accommodation but the home is still rented out, the customer can qualify for the asset exemption if it is proven the rent goes directly to them. However, if the home is being rented by someone else (for example, a deceased estate) and the estate is passing the rent to the customer, then the asset exemption would not apply. A determination must be made about how to treat this income.

Note: normal vacation of principal home due to illness provisions apply first. Once the exemption period ends, an actuarial valuation from the Australian Government Actuary (AGA) would be required.