Vacation of principal home due to illness 102-03010050

Question

Description

1

Question: What if the home will be rented out during the 2 year exemption period?

Answer: Notification must be within 14 days (normal notification provision) if the home will be rented. Rent from former principal home will not be assessed as income if the customer:

• entered aged care prior to 1 January 2017
• is paying or liable to pay an accommodation charge, or
• is paying an accommodation bond by instalments or a combination of a lump sum and instalments

In all other circumstances it is assessable.

2

Question: What if the home is sold within the 2 year exemption period?

Answer: Notification must be within 14 days if the home is sold within the 2 year period, as the proceeds will be assessed under extended deeming. Customer is entitled to have their former principal home exempt from the income and assets test for up to 2 years if it was vacated due to customer’s care needs. If the home is sold during the 2 year exemption period, the proceeds of sale are immediately assessed as an asset and are subject to deeming.

The customer is assessed as a non-homeowner and the non-homeowner income and assets test will apply.

3

Question: What happens after the 2 year exemption period?

Answer: The home will become an asset. A Module R - Real estate details (MOD R) will need to be completed.

The assessment should be based on the customer’s estimate of the value of the former home (and any other real estate item) until a valuation is obtained. Unless the delegate considers it warranted a valuation should only be obtained where total assets (including the customer’s estimate of real estate value) are within $20,000 of the allowable assets limit.

Note: overpayments should only be raised if a customer has deliberately misrepresented the details of the asset.

For more information about assessment of customers who vacated their home due to illness, see Vacation of home to enter care situation (INH) reviews.

4

Question: How does the accommodation charge exemption affect rental income?

Answer: The rental income from the former home that would usually be assessed under Services Australia’s rules is exempt from the pension and benefit income tests and the means tested or income tested daily fee while the resident has a liability to pay an accommodation charge and entered aged care prior to 1 January 2017.

Customers do not need to establish that the rental income is used to pay the accommodation charge for the exemption to apply.

For the purpose of assessing a customer’s eligibility for the exemption of rental income, a home is the former home, if the resident left that home to enter a care situation.

This exemption also applies to the resident’s partner.

5

Question: Why exempt the home under the accommodation charge exemption rule when my partner is still in the home?

Answer: If the partner is still living in the principal home the customer is assessed as a homeowner and the home is exempt. The accommodation charge exemption rule benefits the couple if the partner decides to rent out a room. Note: rental income does not have to be used to help pay the accommodation charge.

This rental income is exempt from the income test if the customer entered aged care prior to 1 January 2017, for both partners until the customer no longer meets the criteria for the exemption (for example, they no longer have to pay the accommodation charge).

6

Question: How does the accommodation bond periodic instalments or the Refundable Accommodation Deposit (RAD) in periodic instalments exemption affect rental income?

Answer: The rental income from the former home that would usually be assessed under Services Australia’s rules is exempt from the pension and benefit income tests if the customer entered aged care prior to 1 January 2017, while the resident qualifies for an accommodation bond periodic instalments exemption.

Where a customer who entered aged care prior to 1 January 2017 is eligible for the accommodation bond periodic instalments exemption, the former home will also be eligible for the exemption of the rental income received from that home. Customers do not need to establish that the rental income is used to pay the accommodation bond periodic instalments for the exemption to apply.

For the purpose of assessing a customer’s eligibility for the exemption of rental income, a home is the former home, if the resident left that home to enter a care situation prior to 1 January 2017.

This exemption also applies to the resident’s partner.

7

Question: How does the rental income exemption apply to care recipients who entered permanent Residential Aged Care prior to 1 January 2016?

Answer: Rental income from the former principal home is excluded from the Aged Care Means Test Assessment for care recipients who entered permanent Residential Aged Care prior to 1 January 2016 and meet the following conditions:

• are renting their former principal home, and
• paying their accommodation costs by either periodic payment or a combination of periodic and lump sum payment

Note: the periodic payment includes the daily accommodation payment (DAP), daily accommodation contribution (DAC), or a periodic payment of a bond for residents who entered care before 1 July 2014.

Item

Description

1

If the partner is living in the principal home

While the partner remains in the home, the principal home is an exempt asset under the income and assets test.

2

Partner vacates the home to enter a care situation

The 2 year exemption applies to both partners from the date of the later entry to a care situation.

3

Partner vacates the home temporarily for a reason that is not care or illness related

The 2 year exemption applies from the date of the first partner’s entry to the care situation. The remaining partner’s 12-month home exemption for the temporary vacation applies concurrently. The date from which the exemption ceases to apply is the later of:

• the 2 years from the first partner’s date of entry to the care situation, or
• 12 months from the remaining partner’s date of temporary vacation

4

Partner sells the home with the intention of purchasing another within 24 months

The homeowner status continues.

Proceeds of sale are exempt from the income and assets test but subject to deeming for up to 24 months until the purchase of the new home.

5

Partner sells the home and does not intend to purchase another

The couple are treated as non-homeowners. Proceeds of sale are immediately assessable under the income and assets tests, and the increased non-homeowner assets threshold will apply.

6

Partner dies

If the partner lived in the home, a 2 year exemption commences from the date of the partners death.

Item

Description

1

Single customer enters age care prior to 1 January 2017 however claim is not processed until after this date

Betty lodges a claim for Age Pension on 29 December 2016 and is qualified and payable from that date, however the application is not processed until 10 January 2017. Betty resides in residential aged care facility. Betty is paying the accommodation fees by periodic payments and is renting her former home.

Will Betty’s former home be grandfathered or will the rental income be assessed?

As Betty was in permanent aged care as of 1 January 2017, even if there is a processing delay, the former home will be grandfathered.

2

Single customer transferring to another payment

George is in receipt of Disability Support Pension on 31 December 2016 and will be transferring to Age Pension when George turns 65 on 22 February 2017. George resides in an aged care facility and has a former home, which is grandfathered.

Will George’s former home continue to be grandfathered when George transfers to Age Pension from 22 February 2017?

Yes. Grandfathering status will be retained when a person moves from one type of income support payment to another provided:

• the person is in aged care on 1 January 2017
• the former home is rented out, and
• the customer is paying their accommodation fees periodically

3

Partnered customers where both entered aged care

Andrew and Bernadette are partners and in receipt of Age Pension. On 5 December 2016, Andrew entered permanent aged care. Andrew is paying the accommodation fees periodically. Bernadette continues to reside in their home. Bernadette enters permanent aged care on 21 January 2017 and the former home commences to be rented.

Will the former home be grandfathered for both Andrew and Bernadette?

Yes. The former home is exempt for both members of a couple in determining their rates of Age Pension.

4

Partnered customers where one partner dies

Charles and Peter are partners and are in receipt of Age Pension. On 5 December 2016, Charles entered permanent aged care. Charles is paying the accommodation fees by periodic payments. Peter continues to reside in their jointly owned home. Peter passes away on 25 February 2017. Charles begins to rent the former home.

Will the former home be grandfathered for Charles?

Yes. The former home is exempt as Charles entered permanent aged care prior to 1 January 2017.

5

Partnered customers where ‘grandfathered’ customer dies

Mary and Paul are partners and are in receipt of Age Pension. On 5 December 2016, Mary entered permanent aged care. Mary is paying the accommodation fees by periodic payments. Paul continues to reside in their jointly owned home. Paul enters permanent aged care on 1 April 2017 and the former home commences to be rented. The former home is grandfathered. Mary passes away on 15 May 2019.

Is the former home still exempt for Paul from 15 May 2019?

No. The former home will no longer be grandfathered, as Paul unfortunately does not meet all of the conditions to have the former home exempted.

6

Partnered customers and determining rental income exemption

Zane and Joy are partners and in receipt of Age Pension. On 5 December 2016, Zane entered permanent aged care. Zane is paying the accommodation fees periodically. Joy continues to reside in their home. Joy enters permanent aged care on 21 January 2017 and the former home commences to be rented. The rental income is net $26,000 pa.

Is Zane’s share of the rent exempt and Joy’s ($13,000) assessable?

Is Joy’s share of the income split and $6,500 affects Zane and $6,500 affects Joy?

Or is the $26,000 exempt income for both?

Exempt for both because Zane entered permanent aged care accommodation prior to 1 January 2017. This is because section 8(8) (zn) of the SSA 1991 states while a person is accruing a liability to pay an accommodation charge -any rent from the person’s principal home that the person, or the person’s partner, earns, derives or receives from another person.

The rental income and the asset value of the home will be exempt for both until Zane dies or loses his grandfathered status.