Assessing deprivation/gifting 108-06010010

Some older Australians may be at risk of abuse. Abuse of older Australians is a form of family and domestic violence. It includes any form of violence or mistreatment that causes harm or distress to an older person. This includes physical, sexual, psychological, financial, and social abuse and neglect. It can be unintentional or deliberate and occurs within a relationship of trust. It is also known as elder abuse.

Older Australians may be subjected to financial abuse. This can include:

• theft of an older person's money or assets
• the use of physical or psychological abuse to force an older person to give away their money or assets
• using or controlling an older person's money or assets improperly, coercively or illegally
• For assessment of stolen assets, see Assessment of assets (CLK).

Note: deprivation should not be assessed if the customer has not willingly deprived themselves of assets.

The Resources page has an intranet link for more information about family and domestic violence.

Disposal of an asset (including the forgiving of a loan) and/or income is a notifiable event, where adequate financial consideration is not received deprivation has occurred. This includes attributed trust or company assets distributed to non-controllers, or when the ratio of distributed assets given to a part-controller is greater than their attributed share. See Gifting rules for trusts and companies. Making donations or tithing to a religious or other organisation is also considered disposing of an asset.

Note: different rules apply to an approved Special Disability Trust (SDT). Gifts to a SDT may be exempt from the deprivation provisions if the contributor is an immediate family member, of Age Pension age and the SDT concessional gifting cap is not used. See Gifting concessions to a Special Disability Trust (SDT).

Disposal of income is maintained indefinitely.

A person or a couple can dispose of assets of up to $10,000 during an income year. This $10,000 limit applies to a single person or to the combined amounts gifted by a couple. The term income year has the same meaning as a financial year in the Income Tax Assessment Act 1997 and is from 1 July to 30 June. This is the same for all customers regardless of their payment types, start dates and relationship status.

Additionally there is a disposal limit of $30,000 over a 5 year rolling period. This limit applies to the gifting free area; that is, although customers can continue to dispose of (gift) assets of up to $10,000 in an income year without penalty, they must take care not to exceed the gifting free limit of $30,000 in a rolling 5 year period.

Note: the 5 year rolling period is actually 5 consecutive financial income years starting on 1 July. It is possible to make gifts within 5 years of each other that are not in the same 5 year rolling period, for example, 20 June 2012 and 15 July 2016.

Although individual cases of deprivation may be less than the allowable yearly amount, when totalled they may exceed the gifting free areas. All assessable cases of gifting must be recorded. Assessable cases are all gifts made:

• while the customer and/or their partner are receiving an income support payment or Low Income Health Care Card (LIC) and
• in the 5 years immediately before claiming or becoming qualified (whichever is later).

Do not record gifts outside of this 5 year period as they will incorrectly be included in the calculation of the gifting free areas.

A partnered couple are considered one unit. If assets are transferred between the members of a couple, the gifting rules do not apply. There is a similar relationship where a customer is attributed with 100% of the net assets of a private trust or company; any gift (or loan forgiven) between themselves or their partner and the entity is not deprivation. See Gifting rules for trusts and companies.

For Norfolk Island residents it has been determined the gifting rules will not apply to gifts made before the announcement by the Australian Government on 19 March 2015 that it would integrate Norfolk Island with the mainland tax and social security systems.

The system will automatically calculate the amount to be included in a customer's assets for any one event or if the $30,000 limit is exceeded in a 5 year period. For each gift, the amount to be included in a customer's assets under the 5 year rule from 1 July 2002 is worked out as follows:

• Add the value of all gifts made by the customer in the 5 year rolling period (that is, counting back 5 years and including the most recent gift)
• Add all of the deprived assets values included in the customer's assets under both the $10,000 1 year rule and the $30,000 5 year rule during the rolling period, including the assessable amount under the 1 year rule resulting from the current assessment of the latest gift
• Subtract the total from Step 2, from the total of Step 1. If this amount exceeds the gifting free limit $30,000 then, whichever is the lesser of the excess and the amount of the actual disposal is to be included in the value of the customer's assets for 5 years from the date of the disposal

However, there will be occasions when customers may request an explanation of how the rule is applied as opposed to the calculation:

• Check how much of the $30,000 free area has been 'used up' in the current and preceding 4 income years immediately before the latest gift. This is the total amount of gifts made in that period less the amount being maintained as a gift (gifts made minus the disposal limits accessed; this can be viewed on the GIFTS screen)
• If the difference is $30,000 or more, all of the 5 year free period has been used up and the entire amount of the latest gift is maintained
• If the difference is less than $30,000, the amount to be maintained is the greater of:
• The amount by which the latest gift exceeds the $10,000 annual free area that has not been used, and
• The amount by which the whole amount of the latest gift when added to the previously calculated 'used up' portion of the $30,000 now exceeds $30,000

Amounts in excess of either the $10,000 1 year limit or the gifting free $30,000 5 year limit are included in the value of the customer's assets for a period of 5 years from the date of disposal. This excess amount is defined as a financial asset and is subject to the deeming rules.

Any amounts gifted in the 5 years before grant of payment are assessed under the deprivation (disposal) rules. Deprivation provisions do not apply when the customer has disposed of an asset within the 5 years before grant but could not reasonably have expected to become qualified for payment. For example, a customer makes a gift and then qualifies for a payment due to unexpectedly losing their job or becoming incapacitated.

Gifts made in the 4 weeks before claim may impact customers subject to the Liquid Assets Waiting period (LAWP). For more information, see Liquid Assets Waiting Period (LAWP).

If a customer disposes of income without disposing of assets, the actual amount of the income disposed of is assessed indefinitely. For example, income from a superannuation pension with a fixed term would be assessed until the term expires. Note: additional specific procedures exist if the income is a foreign pension.

For Norfolk Island residents it has been determined the gifting rules will not apply to gifts made before the announcement by the Australian Government on 19 March 2015 that it would integrate Norfolk Island with the mainland tax and social security systems.

Customers who are claiming a Low Income Health Care Card (LIC) are not able to give away income or assets so they can receive social security entitlements including concession cards. Even though the LIC is not asset tested, deemed income from the disposal of an asset can be included in the claimant's assessable ordinary income.

Before 18 October 2007, where a disposed of asset was returned to a customer, the amount of the gift could not be disregarded. However, from 18 October 2007, policy was amended (and supporting legislation was drafted) to allow a gift to be disregarded from the date of return.

For the period between the gift and its return, assess it under the gifting rules, that is, for its value less the allowable threshold, and deemed. For more information, see Assessing returned gifts.