Notional income on unrealisable assets 108-04120070

All property disregarded under the hardship provisions (except household contents, personal effects and motor vehicles) is deemed to produce income which is the lesser of:

• 2.5% of the value of the property
• the amount that could reasonably be obtained by commercial application of the property (the commercial lease value, which will generally be the market rental value)

When determining notional income, the commercial lease value advised by an approved valuer must be reduced by any interest expense relevant to the disregarded assets.

The 2.5% value of the property and the commercial lease value is compared separately for each item of property being disregarded. Note: any income actually received by the customer from the property is deducted from this deemed amount.

The overall financial situation of the family member will be taken into account in determining what rent, if any, that family member could reasonably be expected to pay if:

• residential premises are disregarded when occupied by a near relative or long term tenant with low income, or
• a farm is being operated by a family member, and
• it is not reasonable to expect the property to be used for any other purpose

If real estate other than a farm is occupied by a family member or a long term tenant with low income, then for the purposes of calculating the notional income, 20% of total income of the occupant (and partner) of the property, is to be assessed. This would include all income and allowance sources, for example, basic rate of pension, Energy Supplement, Pension Supplement, Rent Assistance, Mobility Allowance and Pharmaceutical Allowance etc.

The rationale for these provisions is that customers should take all reasonable steps to fully utilise their resources before looking for support under the hardship provisions.

If the property is being worked to its full capacity by the customer, partner, or family member, no notional income may be assessed. See the Resources page which contains more information.

The Department of Veterans' Affairs (DVA) uses a similar rule for notional income. If the partner of a social security customer is a DVA customer affected by the notional income rule, it will be necessary to liaise with DVA to ensure that the rule is applied the same way by both Departments.

The notional income rule also applies to assets disposed of on or after 1 June 1984 where a delegate has disregarded the application of the disposition provisions of subparagraphs 1129(1)(b)(ii) (pensions) and 1131(1)(d)(ii) (benefits) of the Social Security Act 1991. In these cases, notional income is assessed as if the asset were still in the customer's possession (subsections 1130(9) (pensions) and 1132(7) (benefits) of the Social Security Act 1991).