Loans 108-04090070

A loan is something lent or furnished on condition of it being returned, often with an amount of interest.

Examples of loans for deeming include:

• Bonds
• Bank bills
• Commercial bills and promissory notes
• Loans to family members (but not from one member of a couple to the other)
• Loans to trusts and private companies
• Loans to any other individual, group or corporation

All money loaned by a customer is an assessable asset, regardless of when the loan was made.

The value of the loan is the amount still owed to the customer. Loans are assessed as a financial investment so they are subject to the deeming provisions.

Forgiveness of a loan is a disposal of an asset and may be assessed as deprivation.

If there is a small change to asset values, check if the customer needs to notify.

A referral to a Complex Assessment Officer (CAO) is required when the customer advises a loan is:

• to a private trust or company
• a failed financial investment, or
• irrecoverable

There are several situations where a loan is considered a failed financial investment.

The Minister for the Department of Social Services (DSS) can exempt investments and loans from the deeming provisions. Applications are processed by the Exemptions Officer in DSS.

Investments exempt from the deeming provisions are assessed for Income Test purposes using the actual rate of return.

From 20 September 2001, Centrelink has the authority to exempt a loan from the deeming provisions only if the loan is considered unrealisable and therefore 'disregarded' under the asset hardship rules. Requests for exemptions of loans from the deeming provisions must be referred to the CAO.

Where a loan has been forgiven, a Deed of Debt Forgiveness may be required to confirm the agreement made between the lender and borrower. A deed is a formal document and should meet certain legal requirements. See Australian Government Solicitor Fact Sheet No. 37.

The deed should normally include the following requirements, but some of the requirements can vary state by state:

• the terms of the agreement
• the date the agreement was made
• It was signed by the lender in the presence of an independent witness
• it was signed by the borrower in the presence an independent witness
• it was signed by the witness

If the provided deed does not meet the above requirements, forward the case to the Income Support Means Test Team who will advise if the deed can be accepted.

From 1 January 2002, new rules were implemented for the way private trust and private companies are treated under the Assets Tests. Where a customer has made a loan to a private trust or private company, an assessment must be made by a CAO.

See Loans and liabilities against assets for information about margin loans.