5.5.6.10 Single unemployed farmer, no dependants

Summary

This topic shows how the assets test hardship provisions apply to a single recipient who is an unemployed homeowner farmer with no dependants. General information on the method of calculating the rate of allowance paid under the hardship provisions, is contained the referenced section. All calculations are based on limits and rates applying at 20 September 2019. Asset amounts are in dollars. Income amounts are in dollars per fortnight (pf).

This topic contains the following:

  • Example 1: Recipient DOES NOT qualify under the hardship provisions, and
  • Example 2: Recipient DOES qualify because property value is disregarded.

Policy reference: SS Guide 4.6.7 Asset Hardship Rules

Example 1: Recipient DOES NOT qualify

In this example, the recipient's details are as follows:

Assets $

Value of farm excluding home and curtilage

Value of other assets personal and household effects

Car

Boat

Bank account

370,000

15,000

12,000

10,000

40,000

TOTAL VALUE OF ASSETS 447,000
Asset limit (single homeowner) 263,250
Income $
Deemed income from financial assets ($40,000 @ 1% p.a.)

$15.38 pf

($40,000 × 1% = $400 p.a.

$400 ÷ 26 = $15.38 pf)

Entitlement is precluded under the assets test.

Considerations

The farm is not on the market, so it is not clear whether the asset is unrealisable (4.6.7.50), the recipient may be able to sell part of their property or borrow against it. However, even though the recipient's income is strictly limited, they do not meet the test of severe financial hardship because their readily available funds are above the relevant limit ($14,762.80, see 4.6.7.60).

In these circumstances, the recipient would NOT qualify for consideration under the hardship provisions at this time.

Example 2: Recipient DOES qualify

In this example, the recipient's details are as follows:

Assets $

Value of farm excluding home and curtilage

Value of other assets personal and household effects

Car

Bank account

370,000

15,000

12,000

2,500

TOTAL VALUE OF ASSETS 399,500
Asset limit (single homeowner) 263,250
Income $
Deemed income ($2,500 @ 1% p.a.)

$0.96 pf

($2,500 × 1% = $25 p.a.

$25 ÷ 26 = $0.96 pf)

Entitlement is precluded under the assets test.

Inquiries have shown that the commercial lease value of the farm is $10,000. The recipient has NO actual income from the farm.

Considerations

The recipient has the farm on the market at a reasonable price. The recipient meets the test of severe financial hardship because their income is strictly limited and readily available funds are below the relevant limit ($14,762.80 for singles with no children, see 4.6.7.60).

The value of the property can be disregarded IF the recipient is unable to:

  • sell part of the property (e.g. it cannot be subdivided), OR
  • borrow against it.
  • Example: The recipient cannot meet the required repayments.

The value of personal and household effects, and car are also disregarded.

Notional ordinary income is assessed at 2.5% of the net market value of the property ($9,250 a year or $355.77 a fortnight), as this amount is less than the commercial lease value ($10,000).

Calculation of rate under the hardship provisions

The following table shows the recipient's rate calculation under the hardship provisions. Amounts are in dollars pf.

Step Action $
1

For unrealisable assets, calculate notional ordinary income:

  • 2.5% of asset value = 2.5% × $370,000 = $9,250
  • $9,250 ÷ 26

This is because the 2.5% asset value ($9,250) is lower than the commercial lease value ($10,000).

RESULT: NOTIONAL ORDINARY INCOME

 

 

355.77

2 Calculate any income received from exempt assets. 0.00
3

Calculate the deductions for assets that are NOT unrealisable or exempt ($1.00 pf for each $250 in assets):

  • Bank account balance ÷ $250 = $2,500 ÷ $250

RESULT: OTHER ASSET DEDUCTIONS

 

 

10.00

4

Determine the rate payable:

  • Maximum rate of benefit
  • Less notional ordinary income
  • Less other asset deductions

RESULT: RATE PAYABLE

567.80 (559.00 + 8.80 (ES))

355.77

10.00

202.03

Calculation check

The calculation can be checked, by adding the rate payable (from the calculation) to the actual income earned. The result MUST be LESS than the maximum rate payable, as follows:

  $
Rate payable 202.03
Actual income 0.96
RESULT 202.99

This amount is less than the maximum rate of $567.80 for a single JSP recipient over 21, therefore $202.03 pf is the amount payable under the assets test hardship provisions (4.6.7.130).

Act reference: SSAct section 1132(5) Notional fortnightly rate of ordinary income from unrealisable assets

Last reviewed: 20 March 2020