4.6.3.60 Exempting the principal home - temporary vacation of property

Summary

An income support recipient's principal home MAY continue to be an exempt asset (1.1.E.170) when they are NOT living in it.

This topic discusses:

• when an absence from the principal home is temporary
• the exemption period for temporary vacation, under different circumstances, including
  • to care for another person
  • because the income support recipient enters a care situation
  • due to the loss or damage of the income support recipient's principal home, and the requirement to rebuild or repair within a reasonable period
  • temporary absences for other reasons, including being overseas and unable to return
• the effect of selling the principal home during a temporary absence
• the effect of an income support recipient temporarily reoccupying the principal home.

Definition of temporary vacation

Unless an income support recipient states a definite intention NOT to return to their principal home, an absence should generally be regarded as temporary. The income support recipient remains a homeowner and is only eligible for RA in limited circumstances.

If an income support recipient does NOT intend to return to the principal home, the home is an assessable asset (1.1.A.290), and the higher non-homeowner allowable assets threshold applies.

This does not apply if an income support recipient vacates the principal home to provide or receive a substantial level of care (1.1.C.15). In these cases, care situation (1.1.C.25) provisions apply, and the income support recipient's intention to return home is irrelevant.

If an income support recipient was subjected to domestic violence and this is the reason for vacating the principal home and the income support recipient is facing uncertainty in their long term living arrangements, this absence is regarded as temporary.

Temporary vacation exemption period

In the following circumstances a person can temporarily vacate their principal home, and the home can continue to be considered an exempt asset (time limits may apply):

• to care for another person in a private residence (up to 24 months)
• the income support recipient enters a care situation (up to 24 months)
• for reasons related to loss or damage to their principal home (up to 12 months, or extension up to 24 months if certain circumstances apply), or
• for any other reason not covered above (up to 12 months, or longer in limited circumstances - see below).

Care for another person

Where an income support recipient is absent from their principal home to care for another person in a private residence, their principal home can be treated as an exempt asset for that person for up to 24 months.

Income support recipient enters a care situation

When a person enters a care situation (for example, aged care), their principal home is treated as an exempt asset for up to 24 months. However if the person's partner continues to live in the home, the home remains exempt while the partner continues to live in it.

Extended exemption period for temporary vacation - home is lost or damaged (from 1/07/2007)

If an income support recipient's principal home is lost or damaged the home can continue to be the income support recipient's principal home for a period of up to 24 months if:

• the loss or damage was not wilfully caused by the income support recipient, and
• the income support recipient has made reasonable attempts to
  • rebuild, repair or sell the principal home, or
  • purchase or build another principal home, and
• the income support recipient has been making those attempts within a reasonable period after the loss or damage, and
• the income support recipient has experienced delays beyond their control in purchasing, building, repairing, or renovating another principal home.

All of the above criteria MUST be met. If one of the above criteria is not met then the income support recipient CANNOT gain an extension of the temporary absence from the principal home provisions to up to 24 months.

Making reasonable attempts

An income support recipient would be considered to be making reasonable attempts (to rebuild, repair or sell the home, or purchase or build a new home) IF they entered into some form of agreement including:

• signing a contract to sell the home
• signing a contract of sale to purchase a house
• purchasing or signing a contract to purchase a block of land to construct a house on
• signing a contract with a builder to construct or rebuild a house, or house and land package, or
• contracting or accepting a quotation from a tradesman to undertake repairs or renovations.

The income support recipient will be required to provide some documentary evidence (when the extended exemption period is being requested) to satisfy they have been making reasonable attempts.

Exception: In special circumstances an income support recipient may be considered to be making reasonable attempts if they have been unable to enter some form of an agreement. These circumstances include where the income support recipient has:

• experienced delays relating to the rebuilding, repair or sale of the home, or purchase or construction of a new principal home

  Example: Gaining building approval from the local shire council which is required prior to entering into a contract with a builder.

• been absent from the place they intend to rebuild, repair or sell the home, or purchase or construct a new principal home due to reasons beyond their control

  Example: Caring for a close family member in a separate location to the place where they were to rebuild their new principal home.

• had changes in health that have had a major bearing on the individual's circumstances

  Example: Being hospitalised for an extended period.

• been unable to gain a commitment/enter into an agreement with a builder because demands in the building industry are stretched in a particular area.

  Example: After a natural disaster.

The income support recipient will be required to provide some documentary evidence for special circumstances to apply.

Making those attempts within a reasonable period

An income support recipient must have made these attempts within a reasonable period after receiving insurance or compensation payments.

Taking action could include: plans being developed by an architect or draftsman, gaining quotes from builders, attending open houses, contacting real estate agents on house and land packages available.

The income support recipient may be required to provide some documentary evidence (when the extended exemption is being requested) to satisfy they have been making attempts within a reasonable time period.

If an income support recipient has NOT made attempts within a reasonable period, i.e. 6 months from receiving insurance or compensation payments, the extended exemption CANNOT apply.

Experienced delays beyond their control

An income support recipient would be considered to have experienced delays beyond their control IF they have been unable to commence or complete the purchase, construction, repair, or renovation of their home due to delays in the building industry.

Determining a time period for the extended exemption

A time period for the temporary vacation (home lost or damaged) exemption should be determined. This time period should be in line with when the income support recipient anticipates, or the contract stipulates, the purchase, construction, rebuilding, repair or renovation of the building (including the principal home) or plant will be complete.

If the income support recipient's building (including the principal home) or plant is still not complete the time period for the temporary vacation can be further extended provided the criteria continues to be met and the overall timeframe does not exceed the total allowable 24 month exemption period.

The extended temporary vacation (home lost or damaged) exemption period should end when either of:

• when a new principal home is purchased, or the building, rebuilding, repair or renovation of the new principal home is complete, or

  Example: The final progress payment has been made and the certificate of occupancy has been issued.
• the determined extended time period expires

whichever comes first.

Temporary absence for other reasons

If an income support recipient temporarily vacates the principal home for any reason other than those described elsewhere in this topic, the home continues to be the principal home and the income support recipient continues to be defined as a homeowner, for up to 12 months. The exemption applies even when the income support recipient expects to be absent for more than 12 months.

After a 12 month temporary absence the home is no longer the income support recipient's principal home.

Exception: Where a person is absent overseas and is unable to return because of circumstances beyond their control, this period may be extended.

Temporary absence overseas - unable to return

Where a person is temporarily absent from Australia and the Secretary is satisfied that they are unable to return because of circumstances beyond their control, the Secretary may determine an additional period during which the principal home will remain exempt.

Principal home sold during the temporary absence

From 1 January 2023, if the income support recipient, or their partner, sells the principal home during the temporary absence exemption period and intends to apply the proceeds to purchase, build, rebuild, repair or renovate a new principal home, as much of the proceeds that will be used for the new home is not counted as an asset for 24 months from the date of sale. The income support recipient remains a homeowner throughout the principal home sale proceeds exemption period.

If the income support recipient has not been able to purchase, build, rebuild, repair, or renovate a new principal home within 24 months, the principal home sale proceeds CAN be exempt from the assets test for up to a maximum of 36 months, subject to the person meeting certain criteria. The income support recipient remains a homeowner throughout the exemption period.

SS Guide 4.6.3.80 discusses the criteria.