4.10.1.10 Historical policy on calculation of pension under the means test - March 1951 to November 1976

Summary

Between 9 March 1951 and 25 November 1976, the rate of pension payable to a person was calculated under a means test rather than the income test that is presently used. This topic is intended to provide a general guide only and is likely to be of use where a case raises a question of an underpayment or overpayment occurring in part before 25 November 1976.

This topic covers following matters:

• property
• separate valuations
• capital value of an annuity
• discretionary exemptions
• property included in an assessment
• superannuation
• property deprivation, and
• income.

Property exempt from assessment

The property taken into account in the assessment of pension between 9 March 1951 and 25 November 1976 did NOT include:

• the value of a person's home, including the land on which it stood, unless the land or buildings included
  • dwellings detached or semi-detached from the dwelling occupied by the person as their home
  • a shop not used by the person as part of their home
  • rooms occupied by more than 5 tenants (cases usually decided in National Administration)
  • land separated from the home by roads or intervening properties
  • land used for farming or grazing or leased to another person for share farming or other purposes, and
  • land not relevant to the person's use of their house as a permanent dwelling
• the value of a person's furniture and personal effects, including a motor vehicle not primarily used for business purposes
• the first $1,500 of the surrender value of life assurance policies (including policies held over the life of another person)
• the capital value of an annuity, life estate, contingent interest or reversionary interest
• the value of an interest in a deceased estate which had not been received by the person, and
• a war gratuity.

Separate valuations

Where a piece of real estate included both a component that was a person's home (including the curtilage or surrounding area) and a component that was not, separate valuations for each were obtained and only that part which was occupied by the person was excluded from the value of his or her property.

Capital value of an annuity

The capital value of an annuity, if less than the purchase price, indicated that it was possible that deprivation of property occurred. The capital value was considered to be the price for an annuity under similar conditions granted on the notional market to a normal buyer of similar age and health.

Discretionary exemptions

A discretionary power was provided to enable the value of the property of a person to be disregarded in special circumstances. The discretion was generally exercised for a limited period only and was used, for example, where the person:

• was holding money to be used for the purchase or erection of a home
• let the property during a temporary vacation
• did not hold an equitable (beneficial) interest in property of which he or she was the legal owner
• owned tools of trade valued at less than $200.00, and
• had made an advance purchase of a cemetery plot.

Property included in assessment

Property included:

• the value of real property, including a leasehold, owned by the person and not considered to be his or her home. This amount was reduced by any outstanding encumbrance such as a mortgage
• the balance owing to the person following the sale of a property
• the market value of bonds, shares and securities
• compensation (1.1.C.240) received in a lump sum, superannuation and other lump sum amounts paid as lump sums (i.e. not a periodical payment reduced to a lump sum)
• the person's interest in a deceased estate distributed to the person
• recoverable debts due to the person or their partner
• 95% of the person's credit in a Starr-Bowkett subscription account
• the goodwill of a profitable business with a clientele personal to the person (see example), and
• the value of land, stock and plant used for farming.

Superannuation

From 1972, superannuation received by the person as periodical payments, including overseas payments to which the person had contributed if this was to the person's advantage, was capitalised into a lump sum for the purposes of calculating pension. The lump sum to be included as property was the product of the annual rate of the superannuation and a conversion factor in the attached table. The person's age at his or her next birthday was used.

Deprivation of property

Deprivation of property may have occurred if, for example:

• items of property which were included in the assessment of pension were converted into items which were not so included and reasonable value was not received
• items of property were transferred to another person without valuable consideration being obtained. In these cases, the amount deprived was maintained in the assessment of pension for 12 months after the date of transfer, or
• sums of money were disposed of for no reasonable purpose in the 12 months preceding the claim for pension.

If a person had deprived themselves of an amount of property in order to qualify for or obtain a pension, the amount maintained in the person's assessment as deprived property was reduced by depletion, recognising that such a depletion of assets (1.1.A.290) would have occurred in the passage of time.

Income

The assessment of personal income was conducted under a similar income test as is presently used with some exceptions:

• income from property which did not involve exertion on the part of the person was not taken into account, but the value of the property itself was included (see example), and
• periodical superannuation was capitalised and treated as property.