220.127.116.11 Unrealisable assets - unable or unreasonable to sell or borrow against
This topic explains when an asset (1.1.A.290) can be accepted as unrealisable and disregarded under the assets hardship rules. An unrealisable asset is an asset that cannot be sold or borrowed against, or which a pensioner cannot be reasonably expected to sell or borrow against.
Note: From 20 September 2001 if an asset is assessed as unrealisable for social security purposes it is automatically exempt from deeming.
This topic discusses:
- how to identify which assets an applicant wants disregarded
- when an asset is unable to be sold or borrowed against
- when a person in temporary hardship is expected to borrow, and
- when it is unreasonable to expect a pensioner to sell or borrow against an asset.
Act reference: SSAct section 11(1)-'unrealisable asset'
Identifying the assets
The applicant will nominate which asset/s they want disregarded (treated as unrealisable) on the Services Australia hardship claim form. A delegate will decide whether there are valid reasons why the asset/s cannot be sold or borrowed against. For pensioners, a delegate will also consider whether it would be unreasonable to expect the asset/s to be sold or borrowed against.
Unable to sell or borrow against an asset
Accept that a person is unable to sell or borrow against an asset if:
- the asset is on the market but cannot attract a buyer and the asking price is no higher than 10% above the assessed assets test value, or
- the person has been found eligible for Farm Household Allowance, or
- there is a legal restriction or court order which prevents the asset being sold or borrowed against, or the asset is subject to a pending property settlement, or
- the asset is a jointly owned home and the person has fled the home as a result of domestic violence, or
- the asset is owned jointly with another person and this person refuses to consent to the sale of the asset, or
- the asset is owned as a tenant in common and the practical effect of this form of ownership is that the asset would be unsaleable.
Person in temporary hardship expected to borrow
A person who is in temporary hardship (1.1.P.205) and who is not expected to sell an asset may be able to borrow against their assets to alleviate hardship.
Example: A person who owns substantial business assets and who is experiencing temporary hardship is expected to attempt to borrow by offering their business assets as security.
A person in temporary hardship:
- is only expected to attempt to borrow from banks, finance companies and similar institutions with whom they normally invest or with a government body set up specifically to assist certain businesses e.g. Rural Assistance Board, and
- is only expected to enter into a loan agreement if they would be able to meet repayments, and where the interest rate is no higher than prevailing secured loan rates.
If a person claims they have tried to borrow against an asset but have had their loan application rejected, evidence of their unsuccessful attempt to borrow is not usually required.
Unreasonable to sell or borrow against an asset
The assets hardship rules for pensioners include a test of whether it would be unreasonable to expect the pensioner to sell or borrow against an asset.
For pensioners accept that it would be unreasonable for them to sell or borrow against an asset if:
- the asset is a property and the pensioner has lived there for at least 20 years and the property cannot be subdivided to allow the pensioner to retain the portion their home is on, or
- the asset is a farm and the pensioner has been a farmer for at least 20 years (not necessarily on this farm) and the pensioner is working the farm and they could not sell some of the land without affecting the viability of the farm and/or significantly affecting their income from the farm (see exception), or
- the asset is a farm and a family member is working the farm to capacity and has been working the farm for at least 10 years (a slightly shorter period can be accepted if the family member has worked the property continuously since leaving school) and the farm is the main source of the family member's livelihood (see explanation and example), or
- the asset is a farm or some other business and there is a temporary but substantial reduction in income from the business due to factors outside the pensioner's control, or
- the asset is a house occupied by a near relative and the near relative has lived in the house for at least 10 years or the near relative has previously provided care for the pensioner in the house (which was formerly the pensioner's home) or the near relative is a handicapped child of the pensioner and the pensioner is providing the house to promote the child's independent living or the near relative has dependent children and the family income of the near relative does not exceed the FTB income ceiling, or
- the asset is the person's principal home, the person is temporarily overseas, and the person has been unable to return to Australia for reasons beyond their control.
Exception: In the first 2 situations above a period of less than 20 years is accepted if there are unforeseen circumstances, e.g. a couple purchased a farm and then one partner died. Accept that the surviving partner has a long-term attachment to the property even though they may not have lived there for 20 years.
Explanation: A family member's financial statements and income tax returns for the previous 2 years will usually show whether a farm is run efficiently or to full capacity. If necessary, a delegate can contact an agricultural expert from the state or territory Department of Agriculture or equivalent for advice.
Example: A farm is generally not run efficiently or to full capacity if financial statements show a substantial reduction in stock carried or land used for crops.
Example: A person is temporarily overseas and is unable to return to Australia as a result of COVID-19 travel restrictions. It is unreasonable to expect that person to sell or borrow against their principal home to which they are attempting to return, but they are prevented from doing so for reasons beyond their control.
Act reference: SSAct section 11 Assets test definitions, 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 23(14) For the purposes of this Act other than …