This Factsheet explains what the financial hardship rules are, how you can qualify for income support pension on the grounds of financial hardship and how you can apply.
What are the hardship rules?
The hardship rules can assist people who are in severe financial hardship to receive a pension or increase their rate of pension. The hardship rules apply only to people whose pension is assessed under the assets test.
If your pension is assessed under the assets test and you have substantial assets, you may receive only a small amount of pension or if your assets are high enough, no pension at all. The hardship rules provide for the value of certain assets to be disregarded, thus allowing a higher rate of pension to be paid.
Why do we have the hardship rules?
Normally, if a person has substantial assets, those assets are used to produce income for their own support. However, there are cases where a person has substantial assets which produce little or no income and the person is unable, or cannot reasonably be expected, to sell or re-arrange their assets to produce income.
The financial hardship rules exist so that people are not placed in severe financial hardship where there is no reasonable action they could be expected to take to alleviate the hardship.
Who is Eligible?
To be considered under the hardship rules you must first meet the basic eligibility criteria for a service pension or the income support supplement. DVA can give you more information about this. Refer to Factsheet IS44 Age / Invalidity Service Pension and Factsheet IS46 Income Support Supplement.
What are the criteria?
For the hardship rules to apply to you, you need to meet all of the following criteria:
- your pension is assessed under the assets test
- you have not given away income or assets
- you or your partner have an asset or assets which you cannot sell or could not reasonably be expected to sell
- you are, or could be in, severe financial hardship if the hardship rules are not applied.
In certain circumstances the hardship rules may apply to you even if you have given away income or assets. This includes situations where the financial hardship currently suffered by you is not a direct result of the disposal of the income or asset or where you would have met the hardship criteria even if you had not disposed of the income or asset.
What is severe financial hardship?
To be assessed as being in severe financial hardship, you need to meet all of the following criteria:
- the total annual rate of pension which would be paid to you under the assets test plus all income you receive, is less than the maximum annual rate of pension
- your readily available funds do not exceed the maximum annual rate of service pension (for single pensioners), currently $23,095.80, or the maximum combined annual rate of service pension (for partnered pensioners), currently $34,819.20. The above rates will increase in line with the statutory increases in pension rates in March and September each year
- there is no other course of action which you could reasonably be expected to take to improve your financial position.
Readily available funds are assets which can be readily accessed as cash and include cash on hand, money in bank, credit union or building society accounts, fixed term deposits, bonds and shares. Where the hardship situation is long term or permanent, the surrender value of a life insurance policy and the value of a caravan or second car may also be included.
The term ‘income’ has a special meaning under the hardship rules. As well as ordinary income it includes:
- disability and war widows pension under the Veterans’ Entitlements Act 1986 (VEA);
- allowances paid by DVA such as clothing allowance and recreation transport allowance;
- income which is deemed to be produced by your assets;
- weekly permanent impairment payments under the Military Rehabilitation Compensation Act 2004 (MRCA);
- weekly wholly dependent partner payments under the MRCA; and
- the Prisoner of War Recognition Supplement under the VEA.
It is not possible to access income support under the financial hardship provisions if a household's income from all sources, including disability pension, exceeds the maximum annual rate of service pension. As the Special Rate of Disability Pension (currently $35,471.80 pa) exceeds the maximum annual rates of service pension (both single and combined), Special Rate pensioners are not eligible to access income support under the financial hardship rules.
Certain assets which are disregarded under the hardship rules are deemed to produce income at the lesser of 2.5% of their value or the commercial lease value. This does not apply to a farm which is being worked to its full capacity by you or your partner. Special provisions may apply when the farm is being worked by a family member.
For more information about what constitutes ‘income’ under the hardship rules, contact DVA.
When may an asset be disregarded?
An asset may be disregarded under the hardship rules if you are unable to sell an asset or it is unreasonable to expect that you would sell an asset.
The hardship rules may also be used to disregard the value of an unrealisable asset, such as a loan to a failed company or institution.
In certain circumstances, before an asset is disregarded under the hardship rules, you may be expected to try to borrow money using your assets as security.
Examples where you may be unable to sell an asset:
- you have tried to sell the asset at a reasonable price and have been unable to attract a buyer
- your property is occupied by an estranged or former spouse and their right of occupancy is provided by a court order or legal agreement
- your property is subject to a pending property settlement
- you own the property as a joint tenant or tenant in common with another person who is not claiming consideration under the hardship rules and that person refuses to give consent to the sale of the property
- your home property is attached to a property occupied by a relative or long term tenant and you could not sell the second property without also having to sell the home property.
Examples where it may be unreasonable to expect an asset to be sold:
Example 1: You have a long term attachment to a property:
If you have a long term attachment to property on which you live, you would not be expected to sell the property unless it is capable of being subdivided and sold piecemeal. This is because sale of the property could result in you being required to sell your home. Generally, you are considered to have a long term attachment to a property if you have lived there for 20 years.
If you have been a farmer for the past 20 years you would not be expected to subdivide and sell part of your property if this would affect its viability. This rule can apply regardless of whether you have been farming the particular property for the whole 20 years.
Example 2: Your property is occupied by a family member:
It may be considered unreasonable to expect you to sell a farm where a family member is working the property efficiently or to its full capacity, is dependent on it for his or her livelihood and has been working the property for the past ten years.
It may be considered unreasonable for you to sell a house which is not your principal home and in which an adult child, parent, brother or sister lives. This may apply when:
- the near relative has lived in the house for at least 10 years
- the near relative has previously provided care for you in the house if the house was your former home
- you are providing accommodation for a handicapped son or daughter to promote your child’s independent living
- your near relative has dependent children and their income is lower than the income level for family allowance supplement.
The financial situation of your near relative will also be considered when determining whether or not it is reasonable for you to sell the home.
Example 3: You are in temporary financial hardship:
If you are a farmer or self employed person suffering a temporary but substantial reduction in income because of bushfire, drought, illness or a downturn in the industry, you may not be expected to sell your property or business.
How do I apply to be considered under the hardship rules?
To be considered under the hardship rules you need to make a request in writing to DVA.
Your request should state that you are suffering severe financial hardship, give details of the asset or assets you wish to have disregarded and explain why you believe these assets should be disregarded. If the assets are in joint names, both parties should sign the request. If both you and your partner are applying to be considered under the hardship rules, you should both sign the request.
What if I am not happy with the decision?
If your request to receive pension on the grounds of hardship is refused, or you are not happy with some part of the decision, you have the right to ask that we review the decision. You may apply to have the decision reviewed by a Review Officer. If you decide to apply for a review, you must do so within 3 months of receiving the letter notifying you of our decision. Your request for a review must be in writing and explain your reasons for seeking the review.
If you are dissatisfied with any aspect of the Review Officer’s decision, you may apply in writing to the Administrative Appeals Tribunal for a review of that decision. Your application should set out the reasons for your appeal and should be lodged with the Tribunal within 3 months of the date you receive the Review Officer’s decision.
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.
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.