Rural customers and primary producers

Rural residential properties and farms generally have a larger sized block under a single land title than city properties.

In recognition of this common occurrence, we can assess this type of land ownership in a concessional way.

Assets test for rural customers

Many older Australians living on farms and larger rural residential blocks may find that the standard value assessment of their property would affect their payment. This is even with limited or no income coming from the land. If you are in this situation, there are concessions which may help you receive a payment or may allow payment at a higher rate.

Property greater than 2 hectares

The land adjacent to your home is called curtilage. For social security purposes, curtilage in excess of 2 hectares on the same title as your home is assessed. For rural customers, the same title may be exempt from the assets test provided you or your partner:

  • are of age pension age and are receiving Age Pension, Carer Payment, Pension Bonus Bereavement payment or a Service Pension paid by the Department of Veterans’ Affairs
  • have continuously lived on the property for the past 20 years, and
  • satisfy the extended land use test by making effective use of productive land to generate an income, given your capacity to do so

Provided you or your partner satisfy all the conditions for the concession, the other person will also qualify regardless of their age or payment type. If you cease to be a couple, the concession will still apply to whoever continues to reside in the property and satisfy the extended land use test.

Extended land use test

This test ensures your land is being used productively to generate an income, if possible. Circumstances where the extended land use test can be satisfied include:

  • you or a family member are operating a farming business on the land
  • you are leasing the land to someone else for a commercial rate of return and
  • your land having limited or no potential for commercial use

We use the following factors to determine effective use of land:

  • the location of the land
  • your family situation
  • your health
  • whether other family members also have their own dwelling on the property
  • whether the land is being used to support you and your family, or a younger generation of your family
  • any current commercial land use
  • any potential commercial land use
  • whether you have caring responsibilities
  • environmental issues relating to the land, and
  • whether the block of land is an amalgamation of 2 or more blocks or titles

You may automatically meet the effective land use test if your property is affected by a natural disaster, such as drought, fire or flood, and meets the exceptional circumstance requirements. If your property is in an affected area, you will meet the test while the declaration is effective.

Read more about Disaster and Exceptional Circumstance declarations on the Department of Agriculture website.

Examples of effective land use

Example 1

Bob is single, 65 years old and owns a 30 hectare property where he has lived all his life. The property is on a single title and currently operates as a dairy farm. Provided Bob continues working the farm to its potential, all of Bob’s property is exempt from the assets test. The business assets of the farm such as structures, plant, stock machinery, equipment and sheds are not exempt from the assets test.

Example 2

Betty and Jim moved to their 5 hectare rural residential block 21 years ago. The block is on a single title and is scrubby, with no water and is not suitable for commercial use. The property cannot be subdivided. Given that Betty and Jim are unable to make effective use of the land, all of their property will be exempt from the assets test.

Example 3

Jenny is 85 years old and has lived on her 100 hectare single title farm for the past 40 years. She is frail and cannot operate the farm any longer on her own. Jenny’s son John and his family live in a house on the property and he earns his living from operating the farm to its potential. Jenny meets the extended land use test so all of her property is exempt from the asset test.

Exemption from the extended land use test

If the land surrounding your home cannot be exempt under the extended land use test, the private land use test will apply. This allows your home and up to 2 hectares of the title on which it sits, other than the land used for commercial purposes, to be exempt from the assets test. The value of any land in excess of this will be included in your total assets.

Primary production rules

If you are involved in a primary production business, all the assets and liabilities relating to primary production are taken into account and combined. The assets and liabilities are treated as if they are a single primary production asset and a single primary production liability.

Primary production results directly from:

  • cultivating land
  • maintaining animals or poultry to sell them or their produce
  • fishing and forestry operations, or
  • manufacturing dairy produce, including producing the raw materials

A primary production business asset is anything that is used to keep the business going, such as land, machinery, plant or equipment and stock. It excludes any non-assessable homes.

A primary production business liability is any liability the customer has obtained for the purposes of running the business.

Some assets and liabilities may be used for both primary production and non-primary production purposes. In these cases the main use of the asset will determine whether it is regarded as a primary production asset and the liability will be apportioned for the primary production usage.

Forgone wages policy

This policy recognises the past unpaid contributions to the farm made by close relatives aged 15 years or over. This means unpaid work or unpaid care for the farmer running the farming property. Farm work includes:

  • keeping farm records and accounts
  • working as a farm hand, and
  • doing other farm work where outside workers would otherwise have been employed

Unpaid care needs to involve a high level of assistance to the farmer in all aspects of personal care for a period of at least 12 months including:

  • food preparation and feeding
  • dressing and undressing, and
  • bathing, showering and toileting

General housekeeping and helping with the chores are not seen as a contribution to running the farming property. Work for which outside labour would have been employed is considered a contribution.

Other contributions

Capital improvements made to the farm can be considered as contributions as part of the assets test. Capital improvements include:

  • building of new fences
  • construction of dams
  • construction of sheds or other farm buildings
  • planting of vines or trees that produce a crop, and
  • purchasing livestock and equipment

Contributions to the farm that are not considered include:

  • increased market value over time
  • repairs carried out on the farm
  • planting of trees which do not produce a crop, such as trees planted for soil reclamation purposes, and
  • proposed capital expenditure

Any time spent share farming or in a partnership cannot be included as a period during which a contribution was made.

Transferring ownership

When a retiring farmer legally transfers ownership of the property, including plant, stock and equipment to another person, including a close relative, this will be considered a gift. The value of the transferred property may affect your payment. The amount of the gift can be reduced if the person receiving the gift has made contributions to the farm in the past without receiving any, or reduced, remuneration. This is referred to as forgone wages.

Under the forgone wages policy the property transferred may include farming land, plant stock and equipment. Where any other asset is given to a family member and full valuable consideration has not been received, gifting rules will apply.

If a farm is owned by a private company or private trust, forgone wages may be applied where:

  • the farm is transferred from an individual to a trust
  • the farm is transferred between trusts, or companies
  • the farm is transferred from a trust or company to a near relative, or
  • control of the trust or company that holds the farm is passed to a near relative

In all situations, we must be satisfied that ownership or effective control of the farm has been transferred to the close relative and the close relative worked for little or no wages. We must also be satisfied that the benefit of the labour was for the past attributable stakeholder of the private trust or private company.

When a farm is transferred for past contributions, you need to provide the following to help us assess your claim:

  • details of all the periods that the family member worked, provided care or made any other contributions
  • documents you have to support these claims such as tax returns, receipts for capital expenditure or workers’ compensation claims, and
  • details of how the property has been run over the years

We may get a statement from your relative, the beneficiary of the farm transfer, showing the periods that they worked on the farm or provided care to you.

Calculating forgone wages

Forgone wages are calculated using the average weekly ordinary times earnings from the Australian Bureau of Statistics minus an amount for notional tax liability that the employee would have incurred and a notional incidental liability. The notional tax liability is calculated as 20% of forgone wages over $10,000. The incidental liability is 10% of the annual amount of forgone wages.

If a person was working for less than a normal wage, the forgone wage would be allowable if it could be shown that this was the case. For example, if the person received 75% of the wage otherwise to be paid under the applicable award, then 25% of the forgone wage would be allowed as a deduction of the gifted value.

Weekend and after school work can be taken into account if the farmer would have had to hire someone to do that work. The same hourly rate that is used for full time employees is used to calculate any forgone wages.

Value of unpaid care

The value of unpaid care is based on the cost of paying for equivalent assistance that is available through local community support agencies. Equivalent assistance would include home help, care at home and the cost of food provision such as Meals on Wheels.

Page last updated: 15 April 2016