Real estate assets

Real estate assets can include a house, unit, vacant land, holiday home or shack, regardless of whether you rent it out or not.

About real estate assets

The value of any real estate apart from your own principal home is considered an asset under the assets test. To be exempt from the assets test, your principal home and adjacent land, up to 2 hectares, must be on a single title block and the land must not be used primarily for commercial purposes. Any additional property or part of your own principal home, over 2 hectares will be assessed as part of the assets test. In some circumstances all of the land on the same title as the principal home may be exempt from the assets test.

If you use any portion of your home buildings exclusively for business purposes the portion used will be counted as part of your assets under the assets test.

If you leave your principal home and enter a care situation, your home may be exempt from the assets test for up to 2 years.

If you enter a care situation and your home is rented, your home and any rental income you may get for the home will be exempt from assessment. It will be exempt for the duration you are in care if you pay an accommodation charge or accommodation bond by periodic payment.

Aged care means testing arrangements

Your former principal home will be counted as an asset for aged care means test assessment unless it is occupied at the relevant time by:

  • your partner
  • a dependent child younger than 16 years of age
  • a dependent student younger than 25 years of age who is in full time studies and not receiving an income support payment
  • your carer who has lived in the home for the past 2 years and is eligible to receive an income support payment, or
  • a close relative either your parent, sister, brother, child or grandchild who has lived in the home for the past 5 years and is eligible to receive an income support payment

If the person who is occupying your home moves out, your home may no longer be exempt from your aged care means test. If your home is included as an asset, its value will be capped. If you entered care prior to 1 July 2014, the value of your home will not be capped, and the full value of your home will be an assessable asset.

New entrants to permanent Residential Care on or after 1 January 2016 will have any rental income from their former principal home included in their aged care means test assessment.

Any rental income you may get from the home will be exempt from the aged care means test assessment if you:

  • entered Residential Care before 1 January 2016, and
  • are paying your accommodation costs by periodic payments, or a combination of periodic and lump sum payment

If you are formally discharged from permanent Residential Care for more than 28 days on or after 1 January 2016, rental income from your former principal home will be included in the aged care means test assessment if you re-enter care.

These rules only apply to aged care means test assessments and not the assessment of rental income for social security purposes.

Real estate values

The value of real estate fluctuates over time and it is important to keep us up to date with the current value of your real estate to ensure you get the right payment. You should tell us of any changes to your real estate including the:

  • amount of any mortgage on the property
  • percentage of the property that you own, including if you have sold it, and
  • value of the property

We may arrange a valuation of your real estate at no cost to you. This can be different to the valuations used by state and local governments, which do not generally reflect the current market value of the property and buildings. We make an allowance for any loan amount you have owing on that property and we only take into account your ownership percentage. We will apply an indexation amount annually to the value of your real estate to keep the value current, and to ensure you are receiving the correct entitlement.

If the assessment of your real estate puts you in severe financial hardship, you can make a claim for consideration under our Asset Hardship provisions. If you are of age pension age, you can also apply for a loan under the Pension Loans Scheme.

If we value your property and your payment is affected, we will notify you. You will not have to pay back any money because of a change in the valuation, unless you have done something to improve the value, for example added a pool and not told us. If you do not agree with the value we put on your real estate asset, you can ask for a review of the decision.

We verify property ownership against land title information from state and territory governments. We will contact you if our records do not match. If you own more property than what our records show, this may result in you or your partner’s payment being completely or significantly reduced. You or your partner may have to pay back money. If you do not agree with the ownership finding, you can ask for a review of the decision.

We will not disclose your information to state and territory governments.

Life interest

If you transfer an asset to another person but retain an interest in the asset, a life interest is created. A life interest can also be created by the will of a deceased individual.

The person with the life interest has a right to income from, or use of, an asset for their life or until a specified event, such as leaving a house. The person who has the remainder interest only has use and benefit of an asset when the life interest ceases. A person may have legal ownership of an asset, but if another person has a life interest, then only a remainder interest is assessed.

Life interest in your home

You may have a right to the use of a home for life, usually acquired from a deceased estate. Where you have a life interest in the accommodation in which you reside, the value of that interest is exempted as the principal home and you are considered to be a homeowner.

If you transfer assets or money for a right to reside in a property owned by another person you may be assessed under the granny flat rules.

Assessing life interests

We assess a life interest based on how the life interest was created.

The actuarial value of your life interest is an assessable asset if the life interest was created by you or your partner or by the death of your partner. No asset value is assessable where the life interest was not created by you, your partner, or by the death of your partner.

Disposing of a life interest

If you surrender your life interest, this may be assessed as a gift. We will obtain an actuarial valuation to determine the value of the life interest that you are giving up. The actuarial value will be the value of the gift that is assessed as a deprived asset, which will then be added to your other financial assets and be subject to the deeming provisions.

Retirement villages

Retirement villages are purpose built units that generally accommodate you if you are aged over 55 and offer support through self care units. Some villages offer serviced units which means that you can have meals, house cleaning, laundry and some personal care provided.

Some complexes have both a retirement village section and an aged care facility section.

Self care unit

Self care units are usually 1 or 2 bedroom units and have fully self-contained facilities, including a kitchen to prepare meals. In villages that also contain serviced units or residential aged cared accommodation some offer meals and personal care at an extra cost.

Serviced units

Serviced units generally do not contain the facilities to prepare full meals. Residents generally eat meals in communal dining rooms or have their meals delivered to their room. Residents in serviced units may receive help with the cleaning and maintenance of the unit. Serviced units are not considered to be low level aged care facilities unless the facility receives government funding. In that case the residents need to have an Aged Care Assessment Team assessment done that produces a finding that the resident needs low level care.

Entry contributions and ongoing service fees and charges

Before you move into a retirement village, you will generally have to pay an entry fee or entry contribution. The amount you have to pay may vary according to the village you choose and the kind of accommodation you require. In some cases the amount may be the equivalent to the actual purchase price or market value of a unit.

You may also need to pay ongoing fees and charges for services and facilities. If you are living in a self care unit or serviced unit these fees are set by the retirement village.

Some retirement villages also offer rental places to people who do not own a home, only have a few assets and are not able to pay an entry contribution. The rental costs are set by the retirement village.

The fees are not set by government legislation, so it is important you understand what you are getting in return for the amount you have to pay.

Entry contribution assessment

The amount of entry contribution you pay affects whether you are considered to be a homeowner and if you are eligible to receive Rent Assistance. We do not include any ongoing fees and charges as part of your entry contribution amount.

We compare the amount of the entry contribution you pay against a figure called the extra allowable amount. This figure is the difference between the non-home owner and the home owner asset test thresholds at the time the entry contribution is paid. The current extra allowable amount is $151,500. If you pay an entry contribution of more than the extra allowable amount, you are considered to be a homeowner and your entry contribution is not included under the assets test.

If you pay an entry contribution that is less than the extra allowable amount, you are considered to be a non-home owner and your entry contribution is included under the assets test.

Tenure in retirement villages

The common types of tenure at retirement villages are loans, licences and leaseholds. Other types include strata title and company share. All of the different types of tenure protect tenants’ rights, however only some of them confirm ownership rights. You should seek legal advice before buying into a retirement village.

If you still own your former home

If you are not considered to be in a care situation and you have not sold your former home, it is treated as an asset unless your partner is still living there. If you rent out your former home the rent you receive will be considered income.

Lifestyle resorts, caravan or mobile parks and over 55 villages

Lifestyle resorts, caravan or mobile parks and over 55 villages covered by the relevant state or territory retirement village legislations are considered retirement villages. If you reside in one of these places, and you have paid the site fees, you may be eligible for Rent Assistance.

A caravan or mobile home park, such as a transportable home park, may call itself a retirement park or village and restrict occupancy to residents over a specified age. Although these parks may appear to satisfy the basic criteria for determining that they are a retirement village, they may not have this classification. Only facilities covered by state retirement village legislation are allowable retirement villages.

Page last updated: 1 July 2016