Media Release by The Hon Mal Brough MP

2006-07 Budget – $173 million pension assets test improvement for pensioners on the land

Almost 10 000 Age Pensioners living on farms and rural residential properties will reap the benefits from a landmark $173.3 million 2006-07 Budget initiative to improve the treatment of rural land under the pension assets test.

Family and Community Services Minister Mal Brough, today said that from January 2007, people of Age Pension age living on rural property, who have at least a 20 year attachment to the land, may have all land on the same title as the family home excluded from the assets test applied to Age Pensions and Carer payments.

“The Howard Government will replace the current two-hectares exemption of home property land, sometimes referred to as “curtilage”, with new rules for those on certain farms and large rural residential blocks,” Mr Brough said.

“Affected pensioners are often precluded from all or part of their pension because they hold assets in excess of the assets test even when they might have a very good reason for not being able to better use the excess land to derive an income.

“The Government believes a fairer exemption should apply to people who have a long term attachment to the land, of at least 20 years, and where the land is primarily used for domestic purposes and on the same title as the family home.

“The exemption will allow eligible pensioners to receive a higher rate of pension and improve their living standards while remaining in their family home – which has always been the intent of the assets test exemption.

“For example, it will help retired farmers, who are no longer able to work their properties, to receive more pension or receive the pension for the first time without giving up land that has often been in the family for generations.

Mr Brough said that the current rules will continue to apply to land that can reasonably produce an income to ensure quality farm land is not locked up from production. However, for non productive land it is a much fairer deal.

“This landmark announcement is in response to community concerns over the equity of treatment between older Australians living in rural areas and those residing in city areas whose properties have increased substantially in value but remained exempt.

“This landmark improvement to curtilage rules, first brought in 21 years ago, will mean a better deal for many older Australians living in rural areas, by more fairly applying the family home exemption,” Mr Brough said.

Pension asset test – changed treatment

Why is this important?

This measure addresses community concerns over the equity of treatment of a pensioner’s principal home between city and rural areas and ensures that people who cannot reasonably liquidate excessive land are not denied the pension.

The Australian Government is responding to these concerns and maintaining the fairness of the assets test by ensuring that pensioners in similar situations are treated the same.

Who will benefit?

From 1 January 2007, subject to certain criteria, the maximum amount of private land adjacent to a person’s principal home that can be exempt from the assets test will be increased from two hectares to encompass all land on the same title as the person’s principal home.

To qualify, a person must be:

  • an Age Pensioner; or
  • a Carer Payment recipient of age pension age; or
  • a qualified person of age service pension age; or
  • for a service pensioner couple, one member of a couple has reached the relevant pension age paid under the Veterans’ Entitlements Act 1986.

The person must have a long-term (20 year) attachment to the land. The area of land to be disregarded is limited to that on the same title as the person’s principal home. The exemption is limited to land primarily used for domestic purposes. The person must show that it is not reasonable for them to take alternative action that will enable them to use the land to support themselves.

Older Australians living on farms and larger rural residential blocks, and who have little income, may be able to be paid a higher rate of pension, thereby improving their living standards while remaining in the home they have lived in for many years.

It is estimated that, from implementation on 1 January 2007, 8,400 current Age Pensioners will receive more income support and 1,500 new applicants will receive income support.

What funding is the Government committing to the initiative?

The Government will provide $173.3 million over four years.

What have we done in the past?

Currently a person’s entitlement to pension may be reduced as a result of the asset value of excess land on their home block/property.

Since the assets test’s introduction in 1985 a person’s principal home has been exempt from the assets test, as has up to two hectares of the land immediately adjacent to the home, if used for private purposes.

When will the initiative conclude?

This measure is ongoing.