Deprivation related to the transfer of a farm to a close relative 108-06010030

If a customer has legally transferred ownership of a farm, farm assets (or an interest in a farm) to a close relative as a gift, or sold for less than its market value to a near relative, the value of any past contributions to the farm made by the close relative may be taken into account when assessing deprivation.

Past contributions are often referred to as forgone wages, but may also include contributions made to improve the farm, the purchase of livestock and equipment, or unpaid care of the customer.

A person's past contribution is calculated to be the value of unpaid work that they performed, or contributions made, and it is to be deducted from the deprivation assessment value of the property. Any duties performed would have to be the type of work that another person would have been hired to complete, such as a farm hand, or general labourer. Future proposed contributions will not be taken into consideration, neither will any increase in the value of capital accrual as a result of the relative's contributions (for example, improvements made by the relative have increased the value of the farm). Forgone wages are not calculated for any period that the close relative was under the legal age for leaving school (generally 15 years, or younger). When calculating a person's forgone wages, weekend and after-school work may be taken into account at the equivalent hourly rate, where the work performed was in the nature of normal employment.

A relative may have performed unpaid care of the customer, and this may be taken into account as past contributions. A close relative's unpaid care of a customer is accepted as financial consideration if both the following conditions are met:

• a substantial level of care was provided, as defined in Chapter 3.6.4 of the Social Security Guide, Qualification for Carer Payment
• care was provided for a minimum of 12 months

The care value is the amount that would have had to be paid to purchase equivalent assistance from community support agencies. It includes home help, care at home, and the cost of providing food.

In order to calculate the value of someone's forgone wage, the Average Weekly Ordinary Time Earnings (AWOTE) of Australian employees (full-time) figure is used regardless of whether the family member would have been paid a junior rate or adult rate at the time. Where the person's close relative worked for less than normal wages, it is necessary to establish the percentage of normal wages received. Similarly, where the close relative did not work a full week or worked part-time, it is necessary to establish the number of hours worked and convert the AWOTE figure.

The period during which a relative's efforts were financially unrewarded should be identified by reference to all the relevant evidence, for example, taxation returns, books of accounts, receipts for capital expenditure, workers compensation records etc. It is permissible to accept the evidence of the client and the close relative if there is no reason to doubt their statement(s). Where there is good reason as to why this evidence is not acceptable, without support from another source, it may be necessary to obtain statutory declarations from the parties.

Where the close relative may have been entitled to a share of the profits (for example, Share farming or in a partnership) or was the proprietor of the business (for example, a farmer, grazier etc.), forgone wages do not come into account. This is because, under these arrangements the relative was not an employee but was party to an agreement whereby normal market forces determined the income earned. If, in an exceptional case, it can be clearly established that the relative had contributed to the farm contrary to a normal share farming or partnership arrangement, the value of the extra contribution may be taken into account.

Where the customer's principal home is the farm house, and the home is included with the transfer of the farm, the asset value of the home and curtilage is not taken into account for the forgone wages calculation (that is, the value of the home and curtilage is not included in the value of the property transferred). However, if an extended land use exemption applies to the adjacent land, the extended land use exemption is disregarded in the foregone wages calculation (that is, the home and curtilage is limited to the land used for private use on the same title document up to a maximum of 2 hectares). Where the customer retains a life interest in the principal home this is to be assessed under the granny flat provisions. If the customer has transferred all their farming assets but continues to do some work on the farm, they would be considered an employee as they have legally transferred the ownership of farm, stock and equipment to the new farmer.

Primary producers who meet certain income and asset requirements, and wish to retire from farming and hand control over to the next generation, may be allowed to retain limited appointorship of the primary production private trust, and not have farm assets or income attributed to them. This document does not cover limited appointorship.