Notional Ordinary Income - Person's Farm Used by a Family Member

Notional ordinary income - person's farm used by family member

Notional ordinary income for a person's farm that is an unrealisable asset is the LOWER of:

  • 2.5% of its value, OR
  • the commercial lease value (1.1.C.207), OR
  • the rent that the family member can reasonably be expected to pay (reasonable rent) MINUS any rent actually received by the person from the family member.

'Reasonable rent' is:

  • income, MINUS MAXIMUM FTB free area for the family member and their partner (1.1.P.85),

Note: Reasonable Rent = (Income - FTB free area) ÷ 2

Examples: A person's son and his wife are sole occupants of the farm. The annual net farm income is $19,500. The wife's annual salary is $6,000. Therefore their total income is $25,500. The maximum family income free area is, for example, $23,400 for one child. Reasonable rent is calculated as ($25,500 - $23,400) ÷ 2 which gives a result of $1,050 in reasonable rent.

  • The farm is valued at $240,000. Therefore 2.5% of $240,000 = $6,000.
  • The commercial lease value of the farm is $8,000 per annum.
  • Reasonable rent is $1,050.
  • Therefore notional ordinary income for the property is $1,050.

Act reference: SSAct section 1129 Access to financial hardship rules - pensions, section 1130B Access to financial hardship rules - pension PP (single), section 1131 Access to financial hardship rules - benefits, section 11(1)-'unrealisable asset', section 23(14) For the purposes of this Act other than…, section 8(1)-'income'

Policy reference: SS Guide Notional Ordinary Income - Net Value of a Farm

Last reviewed: 15 August 2016