Exempt Assets 108-04080020

Example

Description

1

First Home Saver Accounts (FHSAs)

FHSAs are savings accounts which provided a simple, tax effective way for Australians to save for their first home through a combination of Government contributions and low taxes. FHSAs were exempt from the Income Test and Assets Test for Social Security Payments until 1 July 2015.

These savings accounts were available from 1 October 2008 and were not coded on the customer's or their partner's record. The details were not requested from the customer. Any withdrawals or actual returns paid on an FHSA will not be assessed under the Income Test before 1 July 2015. If the customer declares they have an FHSA they must be coded on the customer record as a financial asset. No overpayment should be raised if the customer declares they have had an FHSA before 1 July 2015.

2

Principal home

• The principal home is generally the home in which the customer lives for the greatest amount of time each year
• The principal home a customer owns and lives in, is exempt under the Assets Test, no matter what its value is
• Assess the customer as a homeowner and tell the customer their principal home and curtilage is an exempt asset unless a business is being operated from home. For more detail on house and curtilage assessments, see Assessing house and curtilage
• Even when a person leaves their principal home, it may still be exempt for a limited period depending on their circumstances. See Vacating principal home
• Part of the principal home may be assessed as an asset if a person uses their home to produce income, for example by conducting a business on the premises, or if the home includes a self-contained living area that is let out to a person other than a near relative
• See Determining homeowners and non-homeowners for more information

3

Selling principal home

If a customer sells their principal home, the portion of the proceeds that will be used to acquire another home. For sales:

• before 1 January 2023, within 12 months, are exempt from the Assets Test for up to 12 months from the date of sale. This exemption can be extended for up to a further 12 months (up to a total of 24 months) if the customer meets certain criteria
• from 1 January 2023 onwards, within 24 months, are exempt from the Assets Test for up to 24 months from the date of sale. This exemption can be extended for up to a further 12 months (up to a total of 36 months) if the customer meets certain criteria

Note: payments to customers for homes purchased under the ACT Government Loose-fill Asbestos Insulation Eradication Scheme or the NSW Voluntary Purchase and Demolition Program are to be considered compensatory. Tell the customer, the sum received, less the amount they are intending to spend on a replacement, will not be assessed as an asset or deemed to be earning income. This applies until they have replaced the property, subject to a 12 month limit (unless there is a valid reason for taking longer).

For sales before 1 January 2023 to gain an extended exemption of up to 24 months for the principal home sale proceeds the customer must have 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. (This could be to purchase, build, rebuild, repair or renovate their new principal home), and
• Been making those attempts within a reasonable period after selling the principal home, that is, within 6 months, and
• Experienced delays beyond their control in obtaining a new principal home

For sales from 1 January 2023 onwards to gain an extended exemption of up to 36 months for the principal home sale proceeds the customer must have 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. (This could be to purchase, build, rebuild, repair or renovate their new principal home), and
• Been making those attempts within a reasonable period after selling the principal home, that is, within 18 months, and
• Experienced delays beyond their control in obtaining a new principal home

The customer must meet all of the above criteria to be considered to have made a reasonable attempt to obtain a new principal home. If one criteria is not met the customer cannot gain an extended principal home sale proceeds exemption.

Note: the proceeds are a financial investment and as such subject to deeming whether or not a customer intends to use them to purchase another home if sold before 1 January 2023. For home sales from 1 January 2023 onward, the proceeds are deemed at the lower deeming rate only.

See Sale of principal home.

4

Temporary vacation of the principal home

The principal home is exempt for up to 12 months for a temporary vacation of the home from the date of vacation. An additional 12 months exemption may apply if the home was lost or damaged and the customer meets the required criteria. An exemption does not apply if the customer has no intention to return to the principal home.

The extended exemption applies if the property was lost or damaged either before or after 1 July 2007 and is applies to all income support payments. To gain an extended exemption of up to 24 months the customer must have a continuing intention to purchase, build, rebuild, repair or renovate a new principal home, and have:

• Made reasonable attempts to obtain a new principal home, (this could be to purchase, build, rebuild, repair or renovate their new principal home), and
• Been making those attempts within a reasonable period after selling the principal home, that is, within 6 months, and
• Experienced delays beyond their control in obtaining a new principal home

If one of the above criteria is not met the customer cannot gain an extended exemption for up to 24 months.

If the customer's absence from the principal home is permanent, the current accommodation will be treated as the principal residence and the former principal home (if still owned by the customer) will be assessed as an asset immediately.

Rent Assistance is generally not payable, with a few exceptions.

See:

Permanent vacation of principal home, or

Temporary vacation of principal home

5

Vacation on principal home to enter care

If customer vacates principal home to enter a care situation the home is generally exempt as an asset for a 2 year period.

• Complete the Accommodation (AC) screen, ensuring the Reason Home Vacated: field is coded as 'INH' for a 2 year exemption
• Complete the Real Estate (RE) screen, ensuring the following are coded:
• 'EXE' in the Type: field, and
• Any rental income in the Gross Income: field as this is assessable

This exemption may be extended for up to 5 years or indefinitely depending on when the customer entered care and the circumstances of the care.

For more information and coding, see Vacation of principal home due to illness.

• Record details on a DOC and tell the customer of the outcome

Example

Description

1

Commonwealth gifted cars

If the customer is provided with a motor vehicle under the scheme administered by the Commonwealth known as the gift car scheme, then that motor vehicle is an exempt asset.

Record details on a DOC and tell the customer of the outcome.

2

Medals and decorations awarded for valour

The value of any medal or decoration awarded for valour that is owned by the person but not part of an investment or hobby.

Record details on a DOC and tell the customer of the outcome.

3

Prisoner of War payments

These one-off payments are ex-gratia payments made by the Department of Veterans' Affairs (DVA) of $25,000 for former POWs and civil internees of the Japanese, or Europeans during World War 2, or of the North Koreans during the Korean War. They are non-taxable.

The lump sum is exempt from the Assets Test and receiving the lump sum will not count as income. However, if the lump sum becomes a financial investment, it will be subject to deeming.

A $25,000 exemption from the Assets Test will be maintained for life even if the customer uses the $25,000 to purchase something that is not an asset (for example home extension or holiday).

For assessment and coding information, see Exempt lump sums.

4

Aids for disabled

If a customer, their partner or dependent child is disabled and there is an increase in value of assets as a result of purchases or modifications (for example to car or home) to accommodate disabilities. These assets are disregarded when assessing the total value of the asset.

Record details on a DOC and tell the customer of the outcome.

5

Special Disability Trust

An SDT is a trust established for a sole beneficiary, who has a severe disability, by the parent/s or a close relative for the future care and accommodation needs of the beneficiary. An SDT may be exempt from the Income and Assets Tests if it meets all the requirements.

SDT assessments are processed by the SDT Processing Team in Perth, Western Australia.

For more information, see Special Disability Trust (SDT) - initial contact.

Example

Description

1

Compensation and insurance payments

If the customer receives money to compensate for the loss of or damage to their buildings or personal effects, or to repay debt (for example consumer credit insurance), the payment is not treated as income and is an exempt asset for social security purposes.

If the payment is invested, money earned on the investment is not deemed under the Income Test for up to 12 months after the person receives the payment. The exemption from the Assets Test and the Income Test deeming rules may be extended past 12 months if the customer can show they meant to spend the compensation or insurance payment on repairs within 12 months, but they were not able to do so for reasons beyond their control.

The payment is not an assessable asset. Assessment details can be found in Exempt lump sums.

Note: a lump sum compensation payment paid to a customer for personal injury is not exempt from the Assets Test. For more information, see Compensation as Income.

Compensation received as a restitution payment for prisoners of war may be exempt for more information, see Japanese World War 2 Prisoners of War (POW) payment

2

Cemetery plots

A cemetery plot acquired by a customer for themselves or their partner is an exempt asset. For couples, each member of the couple can have the value of a plot exempt as an asset. This means a cemetery plot acquired for a family mausoleum can be an exempt asset.

• Documents verifying the purchase of a cemetery plot must be requested, sighted and checked for compliance with Centrelink's policy for exemption. Record details of the exempt cemetery plot on a DOC and tell the customer of the outcome

Pre-paid funeral expenses and funeral bonds

See Exempt Funeral Investments (Funeral Bonds) for assessment of pre-paid funeral expenses and Funeral Bonds.

3

Life, reversionary, remainder or contingent interests

If a customer surrenders the value of a life interest the delegate must refer the case to the Complex Assessment Officer (CAO), who will obtain a valuation from the Australian Government Actuary (AGA).

See Assessing deprivation/gifting for details

Note: any income produced by these products continues to be included in the Income Test.

4

Native title rights and interests

• Native title rights and interests within the meaning of section 223 of the Native Title Act 1993 are exempt assets
• any rights and interests of a similar nature under any law of a State, a Territory or a foreign country (whether or not the rights and interests relate to land or waters outside Australia)
• but does not include any right or interest in a lease or licence, or in a freehold estate
• The value of any native title right and interest of the person, or of a community or group of which the person is a member is an exempt asset
• it is likely any right or interest resulting from successful native title claims will be made to communities rather than individuals
• individual customers may then receive rights or interest from the community
• Record details on a DOC and tell the customer of the outcome

5

Superannuation and/or rollover investments before reaching Age Pension age

Superannuation and/or rollover investments in the name of a customer or non-customer partner are disregarded until the person turns Age Pension age. These investments do not need to be coded on the customer's or their partner's record and details should not be requested from the customer. Note: if a customer makes an early withdrawal from their superannuation and/or rollover investment see, Assessing withdrawals from superannuation.

Customer and/or partner turns Age Pension age

From the date the customer or their partner turns Age Pension age, all superannuation and/or rollover investments are assessable. These are recorded on the Managed Investment (MI) screen. See Managed investments - adding a new investment.

Note: if customer is receiving regular superannuation payments due to retirement or has an income stream, see Income streams.