Assets

Contributed by Danny Shaw and Dianne Anagnos and current to 1 September 2005

EXCLUDED ASSETS

The Social Security Act defines assets very broadly, but specifically excludes the value of certain assets, including (s.1118(1)):

• a person’s principal home if they are living in it, including up to two hectares around it;
• granny flats (if certain criteria are met);
• special aids for people with disabilities;
• pre-paid funeral expenses and cemetery plots;
• investments in a superannuation or approved deposit fund, deferred annuity or Australian Taxation Office small superannuation account, until the person turns age pension age or makes an early withdrawal; and
• native title rights and interests, of either the person or their community.

ASSETS TESTS

Different assets tests apply for pension, allowance and family tax benefit entitlements.

Factors affecting assets test thresholds

For pensions and allowances, the threshold at which each assets test applies depends on:

• the person’s marital status; and
• whether the person owns their home.

In applying assets tests, Centrelink adds up the estimated value of all assessable assets.

The assets of a couple are the combined total value of all assets owned by each member of the couple.

When the threshold is exceeded

For allowances and for the parenting payment (both single and partnered), if the total value of assets exceeds the relevant threshold amounts, no payment can be made.

For pensions (except the single parenting payment), every $1,000 over the threshold reduces the person’s pension by $3 per fortnight until the rate payable is nil.

HARDSHIP RULES

The assets tests are designed to encourage people to see that their assets produce income, reducing their reliance on government support. There are hardship rules (ss.1129-1131 for pensions, s.1132 for allowances) under which certain assets can be disregarded where it is accepted that the application of the test would leave the person in severe financial hardship.

The rate of payment under the hardship rules is also determined according to special rules.

DISPOSAL OF ASSETS

Under the Act, a person who claims, or receives, a social security payment is regarded as having ‘disposed of’ an asset if they have given it away, destroyed or otherwise disposed of it, or reduced its value, without an adequate financial return.

The value of assets that a person may dispose of each financial year without affecting their entitlement is $10,000 for either a single person or a couple, up to a maximum of $30,000 over any five-year rolling period.

The value of any disposal over this limit is assessed as an asset for the purposes of the relevant assets test for a period of five years, commencing on the day of the disposal (ss.1123-1127).