4.6.5.30 Assessing Property, Real Estate & Unit Trusts

Summary

This topic discusses:

  • the general provisions for assessing property and real estate,
  • the assessibility of a leasehold,
  • when property is considered to be LEGALLY sold,
  • sales between family members,
  • assessing sale proceeds, and
  • assessing unit trusts.

Act reference: SSAct section 23(14) Participation in pension loans scheme

General provisions

The value of a person's interest (1.1.I.185) in any property or real estate is assessable. Residential property is assessable even when the person, or their partner (1.1.P.85), is NOT living in it.

Exception: An interest NOT created by the person OR their partner in an exempt asset (1.1.E.170).

Policy reference: SS Guide 4.6.2.10 General provisions for exempt assets

Assessing a leasehold

If a person holds a leasehold over a property, the unexpired period of the leasehold MAY have a market value (1.1.M.40). A leasehold with a market value is an assessable asset (1.1.A.290).

IF it appears that payability or rate MAY be affected, a valuation will be required from a professionally qualified valuer appointed by Centrelink.

Sold property or real estate

When a person enters into a valid and legally binding contract for the sale of their property or real estate, the property or real estate is no longer the person's assessable asset.

Explanation: A person usually enters into a valid and legally binding contract when they 'exchange' contracts with the purchaser, and any 'cooling off' period prescribed by relevant legislation has expired. If the agreement is subject to preconditions, these preconditions have been met.

While the property or real estate is no longer the person's assessable asset, subject to the terms of the contract, the vendor may now have assessable assets as follows:

  • money paid by the purchaser to the vendor ('the deposit'), and
  • a debt owed by the purchaser to the vendor to the value of the unpaid interest in the property.

Where the vendor retains an interest in a property to the extent of the debt owed by the purchaser, and the property is the vendor's principal home, subject to the terms of the contract, the value of that interest may be exempted under SSAct paragraph 1118(1)(a) or (b) if the person's right to remain in the home until the debt has been paid gives them reasonable security of tenure in the home.

When the full purchase price has been paid by the purchaser, and all the other requirements of the contract have been completed (e.g. legal title has been transferred to the purchaser) the vendor will cease to have an assessable interest in the property.

Subject to the terms of a valid and legally binding contract, a purchaser's assessable assets may include an assessable interest in the property to the value of the amount paid on exchange of the contract, such as a deposit paid on the exchange of the contract.

Where the contract allows for repayment by instalments, the terms of the contract may influence whether the property is an assessable asset. In these circumstances, each case should be determined on its merits.

Sales between family members

Sales between family members need to be examined in more detail to determine the assessment of the vendor's interest in the property. IF the contract is NOT legally binding, the property or real estate is still the person's asset.

Explanation: To no longer be a property of the person, ownership must be LEGALLY transferred to the purchaser. Family transactions may lack the usual checks and balances afforded to commercial arrangements and it may be that the contract is not legally binding, has unmet preconditions or contains loopholes or ambiguities.

For assistance in determining the legality of an agreement or with the interpretation of the terms of a contract, delegates should contact the CAO.

Proceeds of sale

The value of any cash (1.1.C.63) proceeds received by a person from the sale of the property or real estate is assessed as a cash asset. The value of any monies or debt owing to the person is assessable. If the sale price of the property or real estate is below market value, deprivation provisions may apply.

Policy reference: SS Guide 4.1 Deprivation of Income & Assets

Unit trusts

The assessable value of unit trusts is the current market value.

Act reference: SSAct section 1064-G1 Assets Test

Policy reference: SS Guide 2.2.3 Verifying Financial Information, 4.6.2.10 General provisions for exempt assets

Last reviewed: 11 August 2014