Chapter 4 - Your Income and Assets
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First you need to know
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The difference between income and assets
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What is income?
Income that counts in the income test
Income that does not count in the income test for service pension
Income that counts in the income test for income support supplement
What are financial assets?
What are non-financial assets?
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What is deeming?
An example of a deeming calculation for a couple
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How the income test works for service pensioners and social security age pensioners (paid by DVA)
The income free area
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How the income test works for war widows and widowers receiving the income support supplement
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What are assets?
What is counted as an asset?
What is not counted as an asset?
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How the assets test works
What if you deprive yourself of income?
What if you give away assets?
Gifts
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How we assess the value of your income and assets
Superannuation pensions paid from defined benefit schemes
Other income streams (purchased superannuation pensions, market linked pensions, allocated pensions, immediate annuities and allocated annuities)
British and other foreign pensions
Public company shares, managed investments and superannuation fund investments
Income from estates
Real estate and rental income
Businesses partnerships, sole trader enterprises and farms
Boarders and lodgers
Compensation
Other income
Cars, boats, caravans, household contents and personal effects
- Return to contents
This chapter explains what income and assets are, how the income and assets tests work, and the changes to your income and assets that you are obliged to tell us about.
First you need to know
You need to know the answers to the following two questions.
Do you receive a maximum rate pension or a reduced rate pension?
You will receive the maximum rate of service pension or social security age pension (paid by DVA) if your income and
assets do not exceed set limits. If your income or assets are above these
limits, you will receive your pension at a reduced rate.
Many war widows receive the income support supplement. The amount of this payment does not usually exceed $163.20 per fortnight.
| Fact Sheet: IS30 |
|---|
| Pension Rates, Limits and Allowances Summary (PDF version) |
| Pension Rates, Limits and Allowances Summary (HTML version) |
Is your pension paid under the income or the assets test?
Your pension is assessed using both the income and the assets tests and
whichever test results in the lower rate of pension is the test which
applies to you. For most people this will be the income test unless they
have assets of $161,500 or more excluding the value of the home they live
in. The letters we send to you periodically will tell you which test applies
to you.
The difference between income and assets
The difference between income and assets is explained by the following examples.
- Your money in the bank is an asset and the interest it is deemed to earn is income.
- Your holiday home is an asset and any rent it generates is income.
- If you own a business, the property, plant and equipment are assets and the net profit is income.
What is income?
Income is any amount that:
- is earned, derived or received by you for your use or benefit; or
- is a periodical benefit or payment (including a gift or an allowance).
It includes amounts received as personal earnings, money, profits (whether of a capital nature or not) and other forms of remuneration whether received from an Australian source or from another country.
It is important to note that what is considered income for the purposes of service pension, social security age pension (paid by DVA) or income support supplement assessment is not necessarily the same as income for the purpose of income tax assessment by the Australian Taxation Office.
Income that counts in the income test
Examples
- Deemed income from financial assets.
- Income from non-financial assets such as rental properties.
- Gross income from earnings.
- Real estate and business income including income from farms.
- Income from boarders and lodgers who are not immediate family members.
- Income from income streams such as superannuation pensions, overseas pensions, immediate annuities (lifetime or fixed), allocated annuities and allocated pensions.
- Profit component upon withdrawal from a conventional life insurance policy (which accrues bonuses).
Note: If you are receiving a social security age pension (paid by DVA), any disability pension or permanent impairment payment and Special Rate Disability Pension paid under the Military Rehabilitation and Compensation Act 2004 (MRCA) is counted as income under the income test. If your social security age pension is reduced or not payable because of these payments, the Defence Force Income Support Allowance (DFISA) may be payable. See Chapter 2 - Which Pension Do You Get?
Income that does not count in the income test for service pension
Examples
- Allowances for out of pocket expenses incurred when carrying out the duties of a job.
- Board and lodging received from members of your immediate family.
- Any child related payments made by Centrelink.
- *Disability pension and allowances, except loss of earnings.
- *Permanent impairment payment and special rate disability pension paid under the MRCA.
- The amount of superannuation that has been applied to reduce a Special Rate Disability Pension under the MRCA.
- War widow's pension.
- Restitution payments made to Holocaust victims of National Socialist (Nazi) persecution.
- Carer Allowance (previously known as Domiciliary Nursing Care benefits).
- Rental income from your former home while you are in residential aged care and paying an accommodation charge.
- From 1 July 2005, rental income from your former home while you are in residential aged care and paying an accommodation bond by periodic payments.
Note: *These payments are included in the assessment of rent assistance - See Chapter 6 Benefits and Services.
Note: Carer allowance is not income and assets tested and is not taxable. It is an allowance paid because you are caring for someone and is paid by Centrelink. It should not be confused with 'Carer Pension' which is an income and assets tested income support payment also paid by Centrelink.
Income that counts in the income test for income support supplement
Income that is not included in the assessment of income support supplement (ISS) is the same as for service pensions, except that the following payments are included for ISS:
- Disability pension paid by another government;
- War widow's pension;
- Pensions paid by foreign governments that are similar in nature to war widow's pension.
For further information and
other examples of exempt income, contact your nearest DVA office.
| Fact Sheet: IS87 |
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| Income Test Overview (PDF version) |
| Income Test Overview (HTML version) |
What are financial assets?
Financial assets are financial investments you make. The income from financial assets is calculated using an assumed (deemed) rate of income. Refer to the heading in this chapter What is deeming. For pension purposes, financial assets include:
- Accounts with banks or other financial institutions (including savings accounts, cheque accounts and term deposits);
- Cash in excess of $500;
- Gold or other bullion;
- Managed investments such as public unit trusts (including cash, mortgage, property and equity trusts), insurance bonds and friendly society bonds;
- Loans you make to other people including family and friends;
- Loans you make to organisations, such as businesses, private trusts or private companies;
- Bonds and debentures;
- Shares in public companies listed on any stock exchange either in Australia or overseas;
- Shares in unlisted public companies;
- Asset-tested short term income streams;
- Superannuation fund investments (including public superannuation funds, approved deposit funds, deferred annuities, retirement savings accounts and self managed superannuation funds) for pensioners who are of pension age.
Note: Current pension ages are:
- 60 years for a male veteran or male income support supplement recipient.
- 65 years for the male partner of a female veteran.
- 58.5 years for a female veteran or female income support supplement recipient.
- 63.5 years for the female partner of a male veteran.
Female pension ages will increase in 6 monthly increments every 2 years so that by January 2014 they will be equal to male pension ages.
For information regarding the effects of superannuation fund investments on your pension, refer to Other income streams and Superannuation fund investments later in this chapter or contact your nearest DVA office.
Note: See Chapter 5 - Obligations for information on how much money you can have in bank accounts, based on September 2007 deeming rates, before it would affect your income support pension.
What are non-financial assets?
- Household contents and personal effects.
- Cars, boats and caravans.
- Antiques or collections.
- Standard life insurance policies.
- Private company shares.
- Asset-tested long term income stream.
What is deeming?
We count your income from financial assets by ‘deeming’ them. This means that instead of using the actual return or income you are receiving from your assets, we assume they are earning a rate of interest known as the ‘deeming rate’. Income from some financial assets can be difficult to calculate and deeming is a simple and fair way of assessing the amount of income from these assets.
How does deeming work?
The deeming rates are monitored to ensure that they reflect appropriate
rates of return. Any changes to the deeming rates are made in March and
September when pensions are indexed. The deeming thresholds (refer to
the following table) are indexed in July each year in line with movements
in the Consumer Price Index (CPI). If there is a negative CPI, no change
is made.
The deeming thresholds are (as at March 2008)
- For singles - $39,400 which is deemed to earn the lower deeming rate of 4%.
- For couples - $65,400 (combined) which is deemed to earn the lower deeming rate of 4%
Amounts over these thresholds are deemed to earn the higher rate of 6%. If your interest rate is higher than the deeming rate, we will still only deem to a maximum of 4% and 6%.
Deeming works as follows:
Step 1 : The values of your financial assets are added together.
Step 2 : The first $39,400 ($65,400 for couples) is deemed to earn the lower deeming rate of 4%.
Step 3 : Amounts over $39,400 ($65,400 for couples) are deemed to earn the higher deeming rate of 6%.
An example of a deeming calculation for a couple
The following is an example of a deeming calculation for a couple who have total combined financial assets of $151,588.
| Step 1 | Total financial assets | $151,588 |
| Step 2 | First $65,40 of total at 4% interest | $65,400 x 0.040 = $2,616.00 |
| Step 3 | Remaining balance of total | $151,588 - $65,400 = $86,188 |
| Step 4 | Balance of total at 6% interest | $86,188 x 0.060 = $5171.28 |
| Step 5 | Add answer at step 2 and step 4 | $2,616.00 + $5171.28 = $7,787.28 |
| Step 6 | Divide your answer from step 5 by 26 to convert annual income to fortnightly income | $7,787.28 ÷ 26 = $299.51 |
| Fortnightly deemed income (Combined) | $299.51 |
Exemptions from deeming
We do not deem income from:
- Investments which are in liquidation or financial difficulty;
- Investments associated with certain church and charitable institutions (however, it is important to note that if you earn interest on the investment, the actual interest earned will be counted as income).
For
information about exempt church and charitable investments, contact your nearest
DVA office.
| Fact Sheet: IS89 |
|---|
| Deeming and Financial Assets (PDF version) |
| Deeming and Financial Assets (HTML version) |
How the income test works for service pensioners & social security age pensioners (paid by DVA)
The Income Free Area
The amount of income that you may earn and still receive the maximum pension is called the Income Free Area.
Income free areas are different for singles and couples:
- For singles - $132 per fortnight.
- For couples - $232 combined per fortnight.
- For couples who are separated by illness - $232 combined per fortnight.
The income free area is also increased by $24.60 per fortnight for each dependent child you have.
The rate of reduction from the maximum rate once income exceeds these income free areas is:
- For singles - 40 cents for every $1 over.
- For couples - 20 cents each for every $1 over.
- For couples who are separated by illness - 20 cents each for every $1 over (a reduction from the maximum singles rate).
See Chapter 5 - Changes to your financial circumstances - Your Obligations for more information about how much money you have in bank accounts before your income support pension may be affected.
Note: The minimum variation to service pension is $1.00 per fortnight.
How the Income Test works for war widows and widowers receiving the Income Support Supplement
The income support supplement that some war widows and widowers receive is also income tested. The rate of income support supplement does not usually exceed $163.20 per fortnight. The amount of income that you may have and still receive this rate for singles and couples is:
- For singles - $508.60 per fortnight (excluding your war widow's pension or equivalent MRCA benefit)
- For couples - $1,117.60 per fortnight (excluding your war widow's pension or equivalent MRCA benefit)
Once your income exceeds the amount stated above, the supplement is reduced.
- For singles, your supplement is reduced by 40 cents for every $1 of income you have above this amount.
- For couples, your supplement and your partner's pension are reduced by 20 cents for every $1 of income you and your partner have above this amount.
Note: The maximum supplement is adjusted twice yearly in line with movements in the cost of living and/or average wages. The minimum variation to the income support supplement is $1.00 per fortnight.
See Chapter 5 - Changes to your financial circumstances - Your Obligations for more information about how much money you can have in bank accounts before your income support pension may be affected.
If
you need information about your rate of pension, please contact your nearest
DVA office.
Obligations |
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| Your obligations if you are assessed under the income test |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - you need tell us within 14 days (28 days if you live overseas) of the event if:
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What are Assets?
An asset is any property or possession you partly or wholly own, including outside Australia, and debts owing to you. The value of your assets is what you would get if you sold them on the open market (less any debts or encumbrances).
What is counted as an asset?
- Financial assets (refer to the list).
- Any money or property owed to you.
- Gifts (totalling more than $10,000 in a financial year or totalling more than $30,000 in a rolling 5 year period)
- Other non-financial assets (refer to the list).
What is not counted as an asset?
- The home you live in.
- Aids and appliances for the disabled.
- The amount of the asset that is exempt for an asset tested exempt income stream.
- Superannuation fund investments (including public superannuation funds, approved deposit funds, deferred annuities, retirement savings accounts and self managed superannuation funds) for pensioners who are under pension age.
- Exempt funeral bonds, pre paid funeral plans or cemetery plots.
Note: The home you live in may also include the land surrounding it on the same title. Refer to 'Farms and large resedential blocks' later in this chapter.
Note: Refer to 'What are financial assets?' earlier in this chapter for information on pension age.
Note: If you enter residential aged care your former home may continue to be exempt from the assets test under certain circumstances. When the exemption period ends, the home will be counted as an asset. See Chapter 3 - Living Arrangements, Changing Situations which could affect your pension for more information or contact your nearest DVA office.
How the Assets Test works
The value of assets you can have and still receive the maximum rate pension is called the assets value limit.
There are different assets value limits for singles and couples and according to whether you own your home. A lower assets value limit is applied if you own your home and a higher assets value limit is applied if you do not own your home.
Once the value of your assets exceeds the assets value limit, the pension is reduced below the maximum rate. The rate of reduction from the maximum rate pension is 75 cents a fortnight for every $500 above the assets value limit.
Obligations |
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| Your obligations if you are assessed under the assets test |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. Note: If you are assessed under the assets test and you think that your total income may have increased to the point where your income limit is exceeded, let us know and we will conduct a review of your circumstances to ensure that your pension is paid at the correct rate. |
| Fact Sheet: IS88 |
|---|
| Assets Test Overview (PDF version) |
| Assets Test Overview (HTML version) |
What if you deprive yourself of income?
If you choose not to receive income or to deprive yourself of income for the purpose of receiving an income support pension or obtaining more pension, the foregone income is counted as income for pension purposes for as long as you deprive yourself of the income.
| Obligations |
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| Your obligations in relation to deprived income |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
What if you give away assets?
If you give away assets above the gift limits and your pension is assessed under the assets test, the amount exceeding the gift limits is counted as an asset for pension purposes. Refer to 'Gifts' later in this chapter for more information on the gift rules.
Note: You should contact DVA before you deprive yourself of income or give away assets to ensure that you understand the effect it will have on your pension.
| Obligations |
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| Your obligations in relation to giving away assets |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of giving away an asset and provide the following information:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
Gifts
A gift is an asset which is given away without receiving the market value of that asset in return.
How much money can you give away?
You can give away assets up to the value of $10,000 in each financial year or $30,000 over a 5 year rolling period without affecting your pension. These limits apply to both single pensioners and couples.
If you give away more than either limit, the amount above the relevant limit will be counted as if it were still your asset under the assets test for 5 years. Income will be deemed on the extra amount as well.
If you are the controller of a private trust or private company any amount that the trust or company gives away, including by way of distribution, may also count as deprived income. Relinquishing control of a private trust or private company is regarded as disposal or giving away an asset. (Refer to 'What if you deprive yourself of income' and 'What if you give away assets' earlier in this chapter).
The family of a severely disabled person can give up to $500,000 to a trust created solely for the care and accommodation of that person. Gifts of up to a total of $500,000 per trust by an income support recipient/s who has reached the relevant pension age will be exempt from the deprived assets rules. If more than one person applies for the gifting concession, it will be applied to the gifts of parents and immediate family members in the order of who first receives income support at or after pension age. (Refer to 'special disability trusts' later in this chapter). You should contact your nearest DVA office for information about who would meet the criteria to be assessed as a severely disabled person for the purpose of a special disability trust.
Obligations |
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| Your obligations in relation to gifts |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if you give away amounts totalling more than:
(If you give away $50 here and $100 there or you give away an asset such as your car and other money and over the course of a financial year you have given away more than $10,000, you will need to keep track of what you have given away so that you can let us know). This obligation also applies to amounts given away or distributed by a private company or private trust that you control. Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
Note: If you are not sure whether the amount you want to give away will affect your pension, contact your nearest DVA office before you make a decision.
If you receive a reduced rate pension and it is asset tested, and you give away assets equal to or less than either limit, your pension may increase. It is in your interest to advise us of any gifts in excess of $500.
| Fact Sheet: IS92 |
|---|
| Giving Away Income or Assets (PDF version) |
| Giving Away Income or Assets (HTML version) |
How we assess the value of your income and assets
The next section explains income and asset items individually, including your obligations in relation to each.
Superannuation pensions paid from defined benefit schemes (eg ComSuper, Defence Forces Retirement and Death Benefits, Military super pension, State super pension, bank super, railway super etc)
Gross superannuation paid from a defined benefit scheme is counted as income for pension purposes and is converted to a fortnightly amount. For example, an annual superannuation of $5000 is divided by 26 fortnights:
$5000 ÷ 26 = $192.31 per fortnight
Your defined benefit superannuation pension may have a tax free component calculated under the tax law by your defined benefit pension provider. Whether you have a tax free component, and the value of the tax free component, will depend on your individual circumstances.
If you have a tax free component, this is regarded as a deductible amount for income support pension purposes, and the amount of your assessable income is reduced by the value of the deductible amount. For example, an annual superannuation of $5000 less an annual deductible amount (tax free component) of $100 is divided by 26 fortnights..
$5000 - $100 ÷ 26 = $188.46 per fortnight
Obligations |
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| Your obligations in relation to superannuation pensions paid from defined benefit schemes |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
If you are currently receiving Australian Government (ComSuper) or State Government superannuation (except QSuper) or the Defence Forces Retirement and Death Benefit (DFRDB) and you have told us that you are receiving it and it is included as income in the assessment of your pension, you do not need to tell us about changes to your benefit related to indexation.
Other income streams (purchased superannuation pensions, market linked pensions, allocated pensions, immediate annuities and allocated annuities)
Income stream products include purchased superannuation pensions, market linked pensions, allocated pensions, immediate annuities and allocated annuities. These are all financial arrangements where you give an investment company a sum of money and they pay you a regular income. The money used to purchase an income stream can come from your savings or directly from accumulated superannuation contributions. Generally only the portion of the payments you receive that is profit or interest is counted as income. That is, the portion that represents your own money is not counted as income. The balance of the income stream is counted as an asset unless it is classified as an assets test-exempt income stream. For some income streams purchased between 20 September 2004 and 19 September 2007, only 50% of the balance is classified as an assets test-exempt income stream. Income streams purchased from 20 September 2007 are fully assessable under the assets test, although limited exceptions apply.
Note: Annuities and pensions are complex investments. You need to provide a copy of any relevant schedules. For more information about the effect on your pension, contact your nearest DVA office.
| Fact Sheet: IS96 |
|---|
| Income Streams (PDF version) |
| Income Streams (HTML version) |
Obligations |
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| Your obligations in relation to purchased superannuation pensions, market linked pensions, allocated pensions, immediate annuities and allocated annuities |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
|
Wages and earnings
Gross wages and salary are converted to fortnightly amounts and counted
as income.
- If you are employed seasonally or on a casual basis or your wages vary from week to week, we average your gross wages over the period that best represents your earnings situation. In these circumstances where your earnings are not earned at a constant or clearly recognisable rate it will be necessary to regularly review your earnings, over a defined period to better determine your average fortnightly amount of earnings. Your rate of pension will be adjusted according to your average fortnightly earnings.
- If you are working either full time or part time and you are receiving a regular and consistent income your gross wage will be counted as income.
- If you 'sacrifice' salary or wage payments in favour of other benefits, such as additional superannuation, vehicles, accommodation or other benefits, the amount of salary or wages you sacrifice is counted as income at the time the salary or wages are earned.
- If you are self employed, we use your tax return which is supplied by you (or your profit and loss statement if you do not lodge a return) to work out your income, allowing for reasonable expenses. For self employed people, the deductions allowed by DVA are not necessarily the same as the deductions allowed by the Australian Taxation Office (ATO).
Certified copies of pay slips may be required to verify gross income from wages and earnings.
If you are working and not sure how your employment situation will affect your rate of pension you should contact your nearest DVA office.
Obligations |
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| Your obligations in relation to earnings and wages |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
It is in your own interest to let us know if you stop work or if your income from employment reduces so that we can increase your pension without delay.
British and other foreign pensions
British pensions
These pensions are counted as income and assessed in a special way. We monitor the daily market exchange rates. The exchange rate used during the monitoring period is the ‘On Demand Air Mail Buying Rate’ as supplied by the Commonwealth Bank. This is the closest to the rate used to convert British pension to Australian dollars prior to payment in Australia. If the base rate varies by plus or minus 2.5%, that new rate is applied to the assessment of your DVA pension from the first day of the next pension period. For information on British social security pension you can contact 'The International Pension Centre', Tyneview Park, Newcastle Upon Tyne NE98 1BA, United Kingdom or phone +44 (0) 191 218 7777. For information on the Armed Forces Pension Scheme (Service Personnel and Veterans Agency) you can write to Pensions Division, Mailpoint 480, Kentigern House, 65 Brown Street, Glasgow G2 8EX or phone 0800 085 3600. For information on war pensions, including war disablement and British war widow's/widower's pension, call +44 1253 866043 or write to Service Personnel and Veterans Agency, Norcross, Thornton Cleveleys, Lancashire, FY5 3WP.
Other foreign (overseas) pensions
If Australia is not your country of origin and if you have lived and worked in another country, you are required to test your eligibility with that country for a pension. There are countries that pay pensions because you have lived and worked in that country. You are required to test your eligibility and notify DVA if you are eligible for any payments. The gross amount of foreign pension you are eligible for is counted as income for pension purposes except where paid in respect of incapacity or death resulting from employment in connection with a war or war-like operation in which the crown has been engaged. In March and September each year we will update the exchange rate used to convert the amount of your non British foreign pension to Australian dollars. This means that you do not need to tell us of changes in the exchange rate, although you can request the exchange rate be updated at any time. If you receive an indexed foreign pension you will need to advise us if your rate of pension changes for any reason other than a change in the exchange rate.
Note: If you intend to travel or reside in a country where you may have an entitlement to a foreign pension you are required to make a claim for that pension while in that country. This includes making a claim in that country, even if you have previously applied and been rejected because of where you were living at the time you applied.
Note: If you are receiving a social security age pension (paid by DVA), rent assistance or income support supplement, foreign disability pension paid because of war-related disabilities is counted as income for pension purposes.
Obligations |
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| Your obligations in relation to all foreign pensions |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
|
You do not need to tell us of exchange rate changes.
| Fact Sheet: IS97 |
|---|
| Foreign Pensions (PDF version) |
| Foreign Pensions (HTML version) |
| Fact Sheet: IS98 |
|---|
| Foreign Pensions - Social Security Age Pension (PDF version) |
| Foreign Pensions - Social Security Age Pension (HTML version |
Public company shares, managed investments and superannuation fund investments
Public company shares
Public company shares represent the portion of a public company owned by a person and can be in:
- A public company which is listed on any stock exchange (either in Australia or overseas);
- An unlisted public company; or
- Derivatives, such as options, rights, warrants and futures.
How are public company shares valued?
We value all of your shares which are listed on the Australian Stock Exchange
by multiplying the number of shares you own by the last sale price of
the share. We use the last sale price on our database, which is updated
fortnightly.
| Example 1 |
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| If you own 1,000 AAA ordinary shares and the last sale price was $17.00 a share, the total value of these shares would be $17,000. Unlisted public company shares, overseas shares, options, rights, warrants and futures are valued by multiplying the number of shares you own by the last sale price of the share. We use the latest available information in the financial press or information provided by the company. |
Your income from shares
Income is deemed on the value of your public company shares. We do not
assess your actual share dividends or your capital gains. The value of
your shares is added to the value of your other financial assets. Your
total financial assets are then deemed.
Note: Private company shares are not deemed or added to your other financial assets (see Private companies and private trusts).
| Example 2 |
|---|
| If you own 1,000 AAA Ordinary shares and the last sale price was $17.00, the total value of these shares is $17,000. If this $17,000 was your only financial asset, we would deem it to earn income at the current deeming rate of 4% ($17,000 x 4% ÷ 26 = $26.15 deemed income per fortnight). |
Your public company shares as assets
The current value of all shares is counted as an asset for pension
purposes.
Re-valuing public company shares
In March and September of each year we will update the value of all
your public company shares which are listed on the Australian Stock Exchange
with the most recent share prices available to us. The value of all of
your listed shares will also be updated when we review your public company
shares or managed investments specifically at your request.
Unlisted public company shares, overseas shares, options, rights, warrants and futures will only be updated when you tell us of a change in their value or if we notice that a re-valuation may be required.
Obligations |
|---|
| Your obligations in relation to public company shares |
You will need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
You do not have to tell us if
- the prices of your listed shares change;
- the number of your listed shares changes due to a company restructure which affects all share holders (for example, a share split, consolidation, or bonus issue); or
- the name of your listed company changes due to a company name change, merger or takeover.
However you may tell us about significant changes in the value of your shares if you consider your pension may be affected.
Note: We monitor public company share name changes, mergers, takeovers, restructures and terminations for all listed shares and will update your share record in response to these events. By keeping the name and number of shares you hold up to date, we can ensure that your listed shares will be revalued correctly in March and September each year.
| Fact Sheet: IS90 |
|---|
| Public Company Shares (PDF version) |
| Public Company Shares (HTML version) |
Managed Investments
For pension purposes, managed investments include:
- Public unit trusts (including property, equity, bond, cash management and mortgage trusts and common funds) offered by unit trust managers;
- Insurance bonds (including investment bonds, savings plans, insurance certificates and single premium insurance policies) offered by insurance companies;.
- Friendly society bonds offered by Friendly Societies;
- Superannuation fund investments (including public superannuation funds, approved deposit funds, deferred annuities, retirement savings accounts and self managed superannuation funds) offered by a range of institutions;
- Non–exempt funeral bonds.
Managed investments can be
- Unit based - these investments issue units which represent your portion of the investment.
- Account based - the value of these is a cash amount which includes the amount originally invested, plus any additions and the capital growth accumulated to date.
How are Managed Investments Valued?
We value all of your unit based investments by multiplying the number
of units you own by the unit buy back price. We use the unit buy back
price on our database, which is updated monthly.
| Example 3 |
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| If you own 1,000 ZZZ Trust ordinary units and the last unit buy back price was $1.90, the total value of these units would be $1,900. |
Account based investments are valued using the current total buy back value provided by you or the fund manager.
| Example 4 |
|---|
If you have an investment in the YYY Capital Guaranteed Fund, the last known value of your investment will appear on the last statement you received from the fund manager. A more current value is available if you ask the fund manager to provide you with the current total buy back value. |
Your income from managed investments
Income is deemed on the value of your managed investments. We do not assess
your actual investment dividends or your capital gains. The value of your
managed investments is added to the value of your other financial assets.
Your total financial assets are then deemed.
| Example 5 |
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| If you own 1,000 ZZZ Trust ordinary units and the last unit buy back price was $1.90, the total value of these units would be $1,900. If this $1,900 was your only financial asset, we would deem it to earn income at the current deeming rate of 4% ($1,900 x 4% ÷ 26 = $2.92 deemed income per fortnight.) |
Your managed investments as assets
The value of all managed investments is counted as an asset for pension
purposes.
Revaluing managed investments
In March and September of each year we will update the value of all your
unit based investments with the most recent unit buy back prices available
to us. The value of all of your unit based investments will also be updated
when we review your managed investments or shares specifically at your
request.
Account based investments will only be updated when you tell us of a change in their value or if we notice that a revaluation may be required.
Superannuation fund investments
Superannuation fund investments include money invested in superannuation funds,
approved deposit funds, deferred annuities, retirement savings accounts and self managed superannuation funds. They are
not counted for pension purposes until you reach pension age (See Chapter
2 - Which Pension do you get?) or commence to receive
a pension or annuity out of the fund. Once you reach pension age, superannuation fund investments are treated as managed investments. If you convert the investment
to an income stream, the income stream rules apply.
Obligations |
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| Your obligations in relation to managed investments |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
You do not have to tell us if
- The unit buy back prices of your unit based investments change.
- The number of units you hold in your unit based investments changes due to an investment restructure which affects all unit holders (for example, a unit split, consolidation or bonus issue).
- The name of your fund manager or investment changes due to a company or product name change, merger or takeover.
However you may tell us about significant changes in the value of your managed investments if you consider your pension may be affected.
Note: We monitor investment name changes, mergers, takeovers, restructures and terminations for all managed investments and will update your records in response to these events. By keeping the name and the number of units you hold up to date, we can ensure that your unit based investments will be re-valued correctly in March and September each year.
Obligations |
|---|
| Your obligations in relation to funeral bonds |
You will need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
| Fact Sheet: IS91 |
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| Managed Investments (PDF version) |
| Managed Investments (HTML version) |
| Fact Sheet: IS95 |
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| Funeral Bonds and Prepaid Funeral Plans (PDF version) |
| Funeral Bonds and Prepaid Funeral Plans(HTML version) |
Income from estates
Income paid to you from an estate is counted as income for pension purposes. We convert the total amount received to a fortnightly amount, for example, $3000 per year converts as follows: $3,000 ÷ 26 = $115.38 per fortnight.
Note: Refer also to 'Private Companies and Private Trusts' later in this chapter
| Obligations |
|---|
| Your obligations in relation to income from an estate |
You need to tell us within 14 days (28 days if you live overseas
or receive remote area allowance) of the event if:
|
Real estate and rental income
If you receive rental income from a second property or holiday home we will assess as your income the net income after deductions for reasonable expenses incurred in renting the property.
- If you lodge a tax return we will use this to calculate the amount of your income and expenses.
- If you do not have to lodge a tax return, you should keep a list of the income and expenses associated with the rental property.
- If the property is recently rented and records of expenses are not available, we will allow one third of the gross rent as a deduction for expenses. A further deduction can be made to cover interest on a mortgage used to purchase the property.
Under the assets test, the market value of any real estate other than your home is counted as an asset. Any mortgage secured on the property is deducted from the value of the property, provided the mortgage is not security for another person or institution.
Obligations |
|---|
| Your obligations in relation to real estate and rental income |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
If you are paid under the income test, you need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Note: If this applies to you, let us know and we will conduct a review of your circumstances to ensure that your pension is paid at the correct rate. Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
Business partnerships, sole trader enterprises and farms
Partnerships and sole trader enterprises
The income you receive from your partnership or sole trader enterprise
is counted as income. We usually exclude reasonable expenses associated
with the running of the partnership or sole trader enterprise and refer
to the information contained in your tax return and attached schedules. The deductions allowed by DVA are not necessarily the same as the deductions allowed by the Australian Taxation Office (ATO)..
The net value of the enterprise is the amount which is counted as an asset. This means the current market value of property owned by the business or partnership, less any debts owing. If it is a partnership, only the portion owned exclusively by you is counted. Any amounts distributed to you personally are counted as income.
Obligations |
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| Your obligations in relation to partnerships or sole trader enterprises |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
|
Farms and large residential blocks
Income you receive from your property is counted as income for pension purposes. We use the information on your tax return and generally exclude reasonable expenses associated with the daily operation of the farm or property. The deductions allowed by DVA are not necessarily the same as the deductions allowed by the Australian Taxation Office (ATO).
If your home is a farm or on a block of land that is 2 hectares (5 acres) or more, the home and curtilage (ie the house and up to 2 hectares immediately surrounding the house that is on the same title) are not counted as an asset, provided the 2 hectares of land is used for private and domestic purposes.
Land in excess of 2 hectares that is adjacent to your principal home and on the same title may be exempt from the assets test. To be eligible for this exemption you must have reached pension age and the property must have been your principal home for at least 20 years, or your partner must meet these requirements. A land use test must also be satisfied, which means that if the land is viable it must be used to generate an income, or you must have a valid reason for not doing so.
If you are not eligible for this exemption, the land surrounding your principal home and on the same title, used primarily for domestic purposes, up to a maximum of 2 hectares only, is exempt from the assets test. Any loans secured on the property are taken into account when determining the market value of the property. The value of all plant and equipment and livestock are included as assets.
Obligations |
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| Your obligations in relation to your farm or property |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
If you are paid under the income test, you need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Note: If this applies to you, let us know and we will conduct a review of your circumstances to ensure that your pension is paid at the correct rate. Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
| Fact Sheet: IS105 |
|---|
| Business Structures - Partnerships and Sole Traders (PDF version) |
| Business Structures - Partnerships and Sole Traders (HTML version) |
Private companies and private
trusts
The income and assets held in a private trust or private company may be
attributed to a person if they satisfy one of the following:
- The control test - 'control' includes control via an associate; or
- The source test - where a person transfers assets or services to a private trust or private company after 7:30 pm Australian Eastern Standard Time (AEST) on 9 May 2000.
This attribution means that the assessable income and/or assets held in a private company or private trust may be counted in your pension assessment. Reasonable expenses associated with the running of the private trust or private company are usually excluded. The deductions allowed by DVA are not necessarily the same as the deductions allowed by the Australian Taxation Office (ATO).
Even if you are not the attributable stakeholder, any income you receive from a private company or a private trust may be counted for pension purposes and includes:
- Wages and directors' fees;
- Share dividends;
- Distributions (including other forms of remuneration);
- Excessive interest on loans; and
- Estate payments.
Note: Any gifts/transfers over $10,000 in a financial year (or $30,000 over a five year rolling period) and any loans to companies or trusts are considered to be financial assets and are deemed to be earning income. Gifts made by a private trust or private company may be counted as deprivation of your asset if you are the attributable stakeholder.
The net assets of private trusts and private companies is the current market value of assets less any allowable business liabilities.
Special disability trusts
The purpose of special disability trusts (SDT) is to assist families who have the financial means to make private financial provisions for the future care and accommodation of family members with severe disabilities. To qualify as a SDT, the trust must meet specific criteria.
The trust can be established by parents and immediate family members for the current and future care of a severely disabled family member.
The pension of the person with a disability who is the beneficiary of the trust will not be affected until the assets exceed the limit of $500,000. This limit will increase annually on 1 July in line with the CPI. (Refer to ‘Gifts’ earlier in this chapter for details on gifting concessions.)
For further information on private companies, private trusts and special disability trusts contact your nearest DVA office.
Obligations |
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| Your obligations in relation to companies and trusts |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Income support pensions paid to people who have an assessable involvement in a private trust or private company will be reviewed annually. When you have finalised your financial statements for the year you should forward a copy within 14 days (28 days if you live overseas or receive remote area allowance) to DVA. The financial statements include the trust and company tax returns, balance sheet, profit & loss statement, depreciation schedule and your personal income tax return. Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
Obligations |
|---|
| Your obligations in relation to special disability trusts |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
When you have finalised your financial statements for the year you should forward a copy within 14 days (28 days if you live overseas or receive remote area allowance) to DVA. Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
| Fact Sheet: IS155 |
|---|
| Business Structures - Private Trusts (PDF version) |
| Business Structures - Private Trusts (HTML version) |
| Fact Sheet: IS156 |
|---|
| Business Structures - Private Companies (PDF version) |
| Business Structures - Private Companies (HTML version) |
| Fact Sheet: IS163 |
|---|
| Special Disability Trust (PDF version) |
| Special Disability Trust (HTML version) |
Boarders and lodgers
The following table shows what percentage of gross income is counted as income if you have people living in your house:
- Lodgers (accommodation only) - 70%
- Lodgers (bed and breakfast) - 50%
- Boarders (bed and full meals) - 20%
Note: Board and lodgings received from members of your immediate family does not count as income for income support pension purposes.
| Example 6 |
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| If you have one lodger who receives bed and breakfast, and pays you $100 per fortnight, 50% (ie. $50) is counted as income. |
| Example 7 |
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| If you have two boarders who each pay $200 per fortnight, 20% (ie. $40 per boarder or $80 in total) is counted as income. |
Obligations |
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| Your obligations in relation to boarders and lodgers |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. |
Compensation
There
are special rules relating to the effect on pension of compensation for
insurance, worker's compensation, or court judgments or settlements of
legal actions for damages or other compensation. There are also some differences
in how the rules affect service pension and income support supplement
and how they affect social security age pension (paid by DVA). If you are entitled to compensation or think you may be entitled to compensation, you must take reasonable action to claim it. If you intend to claim, or lodge a claim or commence receiving compensation or your compensation details vary you must notify your nearest DVA office. For more
information about the effect on your pension, contact your nearest
DVA office before you make any decisions.
| Fact Sheet: IS101 |
|---|
| Compensation (PDF version) |
| Compensation (HTML version) |
| Fact Sheet: IS102 |
|---|
| Compensation and your Social Security Age Pension (PDF version) |
| Compensation and your Social Security Age Pension (HTML version) |
Obligations |
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| Your obligations in relation to compensation depend on your circumstances at the time. |
If you are receiving a pension you need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of:
whichever is earlier. If you are already receiving periodic compensation payments which affect your pension, you need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) if:
whichever is earlier . Social security age pensioners (paid by DVA) - note that your obligations are the same except that if you receive remote area allowance you need to tell us within 14 days not 28 days of the above events. You also need to tell us within 7 days if you anticipate receiving or you receive a compensation payment. |
Other income
If you receive income from any other source like gratuities or directors’ fees, the gross amount received is counted as income.
When a conventional life insurance policy is withdrawn, there may be a profit component that is counted as income for a period of 12 months from redemption.
Obligations |
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| Your obligations in relation to other income |
You need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of the event if:
|
Cars, boats, caravans, household contents and personal effects
Cars, boats and caravans
Unless these are your principal residence, their current market value
is counted as an asset. Any income they generate (for example, from hiring
out) less reasonable expenses, is counted as income.
Household contents and personal effects
The value of these is assumed to be $10,000 and is counted as an asset.
If you think they are worth more or less than $10,000, you may nominate
another amount. The value of your household contents and personal effects
is only a pension issue when you are assessed under the assets test and
your assets are either above the assets value limit or close to it.