3.1.2.30 Treatment of liquid assets
Summary
The amount of a recipient's liquid assets (1.1.L.50) determines the duration of the LAWP they will serve. This topic explains the treatment for the purposes of the liquid assets test of:
- amounts from former employers
- gifts and transfer of liquid assets
- proceeds from the sale of a home
- voluntary one-off payments of non-housing debts, and
- GST liabilities.
Amounts from former employers
Any amount due and able to be paid by a former employer of the person is considered to be a liquid asset.
Exception: Amounts owed to a recipient by a former employer whose assets are frozen because of bankruptcy or litigation would not be considered able to be paid.
Act reference: SSAct section 14A(1) Social security benefit liquid assets test definitions
Gifts & transfer of liquid assets
If a recipient or their partner makes a gift, or transfers their liquid assets to a natural or adopted child within 4 weeks prior to claiming, the assets are included in calculating the recipient's liquid asset level. While delegates have some discretion in the application of this provision, it would especially apply if:
- the recipient or their partner does not receive adequate consideration in money, or money's worth, for their transfer, OR
- the delegate is satisfied that the purpose or dominant purpose of the transfer was so the recipient could obtain JSP, YA or Austudy.
Act reference: SSAct section 14A(3) If: (a) during the 4 weeks …
When proceeds from sale of home are NOT liquid assets
A recipient or their partner can sell their home and have the proceeds disregarded as liquid assets for a period of 12 months from the date of sale if:
- the home that was sold was their residential home, and
- they are likely to use some or all of the proceeds of the sale to buy another home to live in, within 12 months from the date of sale.
Example: A person has $200,000 from the proceeds of the sale of their house and claims an allowance. If the person spends only $150,000 on their new home (including expenses), the remaining $50,000 will be assessed as a liquid asset.
Example: A recipient who has $200,000 from the proceeds of sale, claims an allowance and notifies that they have submitted an offer to buy a new home for $170,000. As contracts have not been exchanged, the recipient is within their rights to claim they will spend the entire $200,000 as associated expenses have not been incurred yet. However, where contracts have been exchanged, any monies left over after expenses (legal fees, stamp duty etc) have been settled would be included and assessed under the normal income and assets test.
Example: Where a recipient still has not purchased a home, 12 months after date of sale, and is unable to demonstrate that they are intending to purchase a new home (i.e. that they have submitted a deposit or signed a contract to purchase) the money should be assessed under the normal income and assets test. In order to demonstrate that they are intending to purchase or build a house, they must have either a contract to purchase a house or a contract to build a house that was signed prior to the 12 months ending. Intent can be demonstrated through the sighting of an original receipt for the deposit, and a copy of this paperwork must be filed. Only the purchase price of the new house would be an exempt liquid asset.
When voluntary one-off payments of non-housing debts are NOT liquid assets
A recipient or their partner can make one voluntary payment on a debt or on a number of debts after becoming unemployed or incapacitated, with the non-compulsory amount/s being disregarded in calculating the recipient's liquid asset level. This applies only if:
- the debt is not related to the principal home or any other residential property, and
- the payment is voluntary, (i.e., more than the minimum payment), and
- the payment is the first voluntary payment made on that debt since the recipient became unemployed or incapacitated.
Example: A person has an outstanding credit card balance of $2,000. The minimum payment is $25. Recipient pays balance in full. Liquid assets are reduced by $1,975.
The payment can still be disregarded if the recipient makes the payment while serving a LAWP - that is, AFTER the claim is processed. In this case, the claim may need reassessing to reduce the length of the LAWP.
A one-off debt payment CANNOT be disregarded if the payment is made after the LAWP has been served. In this case there is no need to reassess the claim.
Recalculating the LAWP
If the LAWP is recalculated following the voluntary payment on a debt, the calculation should be based solely on the liquid asset amount that was determined at the time of claim, less the payment. Any other expenditure since the date of claim that is not covered by the exempt assets provisions should not further reduce the liquid assets amount.
Example: A single recipient is assessed at the time of claim, as having $8,900 in liquid assets. A LAWP of 7 weeks is applied from the date of unemployment.
In week 5 of the LAWP, the recipient repays $3,200 of their outstanding car loan, and presents with funds of $1,500 having spent the rest of the money on general living expenses. As the $3,200 is a one-off voluntary payment, the LAWP is reassessed using the new liquid asset level of $5,700. That is, $8,900 minus $3,200.
This means the recipient has a LAWP of 1 week only. Their start date is reassessed and they are paid arrears.
Act reference: SSAct section 14A Social security benefit liquid assets test definitions, section 549A Liquid assets test waiting period (YA), section 575A Liquid assets test waiting period (Austudy), section 598 Liquid assets test waiting period (JSP)
GST liabilities
Where a recipient is holding net GST liabilities, these amounts will be exempt amounts for the purpose of calculating the LAWP.
Explanation: The net liability is the GST collected less the input tax credits which are deducted from the amount payable to the ATO.
The recipient MUST supply evidence of GST registration otherwise the amounts will be included in the calculation of the LAWP under SSAct section 14A Social Security benefit liquid assets test definitions.
The recipient MUST supply evidence at the end of the payment quarter that the amount was paid to the ATO otherwise an overpayment will be raised and debt recovery will commence.
Explanation: The onus is on the recipient to provide evidence of GST registration if they want their net GST liabilities to be exempt from the LAWP calculation.
Note: GST liabilities are payable to the ATO 4 times a year. However, the ATO has advised that businesses can submit their GST liabilities on a weekly, monthly or as a quarterly payment. The ATO provides personalised payment books to businesses if they feel that they would prefer to use the weekly or monthly payment options.