This Factsheet explains what is considered real estate for pension assessment purposes, how it affects the pension, and what DVA needs to know if real estate is owned or acquired.
What is real estate for pension assessment purposes?
For pension purposes, real estate is any property that you own that is not your principal home. Some examples are:
- a house, unit, or flat (other than your home);
- vacant land;
- any part of your home that is used primarily for business purposes;
- a shop or factory
- a time share property;
- a farm or market garden;
- if your principal home is on a block of land that is more than 2 hectares (5 acres), the excess amount is regarded as real estate;
- self contained flats attached to your home; and
- your former home in certain circumstances if you have moved into residential aged care.
How does real estate affect my pension?
The market value of any real estate is counted as an asset for pension purposes under the assets test. The amount of any mortgage or loan secured on the property is deducted from the market value of the property. Unless your rate of pension is calculated under the assets test the value of any real estate will not affect your pension. Please refer to Factsheet IS88 Asset test overview.
Is my home an asset?
Your principal home will only be considered real estate for pension purposes and be an assessable asset in the following circumstances:
- you have been temporarily absent from your principal residence for a period exceeding 12 months;
- you were granted an extension to be temporarily absent from your lost or damaged principal place of residence as you were experiencing delays beyond your control, and your absence exceeds 24 months;
- you enter residential aged care and your home is not occupied by a partner. In this situation your former home will be assessed as an asset after two years;
- you entered residential care before 1 January 2017, are paying for your accommodation costs wholly, or partly, by periodic payment and renting out your home and you either stop paying a periodic accommodation payment and/or you cease renting out your home. In these situations your former home will be assessed as an asset after the two year standard exemption ceases; or
- you entered residential care on or after 1 January 2017, then your former home will be assessed as an asset after the two year standard exemption ceases.
For more information about how your home is assessed for aged care means testing purposes, please refer to Factsheet IS82 Aged Care and Your Finances.
What is market value?
‘Market value’ is the amount the property could be expected to sell for on the open market.
What if I am renting out my real estate?
If you receive rental income from a property or holiday home which you let for either the whole or part of the year, the amount received is counted as income for pension purposes after allowable deductions. An income tax return or proof of expenses must be produced for the deductions to be applied.
If a tax return is unavailable and there is no possibility of projecting expenses, DVA will work with you to undertake a reasonable assessment of expenses. Examples of reasonable expenses are rates and an agent’s commission. A further deduction is then made for any interest on a mortgage used to purchase the property. At the end of that financial year we will require a copy of the income tax return and actual expenses will be applied to the following year’s assessment.
Interim deduction calculation
- Take the amount received in rent per fortnight
- Deduct one third
- Deduct mortgage interest payments
- The result is assessable income.
Please refer to Factsheet IS87 Income Test Overview.
When is rental income exempt?
Rent received from your principal home is not included as income if you, or your partner, entered residential care before 1 January 2017 and are paying a daily accommodation payment, a daily accommodation contribution, an accommodation charge, or an accommodation bond wholly, or partly, by periodic payments. This exemption is not available if you entered residential care on or after 1 January 2017.
In addition, payments received for rooms rented to boarders or lodgers who are your father, mother, son, daughter, brother or sister are not treated as income for DVA purposes.
Do I have any obligations?
When you are granted an income support pension and periodically after that, you will be notified of your obligations. You will be required to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of changes to your circumstances that might affect the rate of income support pension you receive or your eligibility to receive that pension. These obligations apply equally to trustees.
In relation to real estate, there are a number of things you would need to tell us about within 14 days (28 days if you live overseas or receive remote area allowance).
If you acquire real estate the sorts of things you will need to tell us about within 14 days (28 days if applicable) are:
- the type of real estate (e.g. vacant land, time share etc.)
- the address of the real estate
- the purchase price of the real estate
- the amount of any mortgage or loan secured against that property
- any changes to your other income and assets as a result of the purchase; and
- if it is a farm, the market value of any livestock and/or plant and equipment.
You should also provide us with a copy of the latest rates notice for the new property.
If you already own property the sorts of things you will need to tell us about within 14 days (28 days if you live overseas or receive remote area allowance) are:
- if the property starts to be rented or leased
- if you sell all or part of the property
- if you give away or transfer title to someone else; and
- if you enter residential aged care.
If your gross rental income increases you only need to tell us about it within 14 days (28 days if you live overseas or receive remote area allowance) if:
- you are income tested; and
- you are receiving a reduced rate of pension and your total income from all sources, including rental and deemed income on financial assets changes by more than $2.00 (for singles) or $4.00 (for couples) per fortnight; or
- you are receiving a maximum rate of pension, and your total income from all sources, including rental and deemed income on financial assets exceeds the income free area by more than $2.00 (for singles) or $4.00 (for couples) per fortnight.
Usually an overpayment of pension will not occur when you have met your obligations. However, sometimes even if you have met your obligations, an overpayment can occur because we have not been able to process the change before the next payday. We do our best to avoid this occurring, but it is not always possible. To provide you with your exact entitlement we are obliged to recover overpayments of pension where they do occur.
DVA General Enquiries
Metro Phone: 133 254 *
Regional Phone: 1800 555 254 *
DVA Website: www.dva.gov.au
Factsheet Website: www.dva.gov.au/factsheets
* Calls from mobile phones and pay phones may incur additional charges.
- IS71 Home Owners
- IS82 Aged Care and Your Finances
- IS87 Income Test Overview
- IS88 Asset test overview
- IS104 Farms
The information contained in this Factsheet is general in nature and does not take into account individual circumstances. You should not make important decisions, such as those that affect your financial or lifestyle position on the basis of information contained in this Factsheet. Where you are required to lodge a written claim for a benefit, you must take full responsibility for your decisions prior to the written claim being determined. You should seek confirmation in writing of any oral advice you receive from DVA.