Understanding Assets Test Rules for Rural Customers and Primary Producers in Australia

Australia’s diverse landscape includes vast rural areas, farms, and primary production businesses, which require unique considerations when it comes to pension entitlements.

Today, we will explore the assets test rules specifically tailored to those defined by Services Australia as rural customers and primary producers. Understanding these rules is essential for those living on larger properties or engaged in agricultural activities, as they can significantly impact pension eligibility and payment rates.

Assets test for rural customers and primary producers

Rural homes and farms often encompass more land on a single title compared to city properties. To ensure fairness in assessing pension entitlements, distinct assets test rules apply to rural customers and primary producers.

1. Blocks over 2 hectares: In general, only 2 hectares of land on the same title as your primary residence are exempt from the assets test. However, if you are a rural customer meeting specific criteria, all the land on this title may be exempt. To qualify, you or your partner must:

• Have reached Age Pension age.
• Be receiving Age Pension, Carer Payment, Pension Bonus Bereavement Payment from the government, or a service pension from the Department of Veterans’ Affairs.
• Have continuously lived on the property for the past 20 years.
• Pass the land use test.

This exemption applies to both members of a couple if one person meets the criteria. If a couple separates, the exemption applies to whoever resides on the property.

2. Extended Land Use Test. To meet the extended land use test, you need to demonstrate that you are using the land to generate income, if feasible. This may involve:

• Running a farming business on the land.
• Leasing the land to someone else for a commercial rate of return.
• Having limited or no potential to earn income from the land.

The application of the extended land use test takes into account various factors, including the land’s location, your family situation, health, the presence of other houses on the land, commercial land use, environmental issues, and the combination of multiple blocks or titles.

Not Passing the Test

If you do not meet the extended land use test criteria, the standard rules for private land use apply. This means your assets test will not include your primary residence or up to 2 hectares of land on the same title that is not used for business purposes. The remaining land will be considered in the assets test.

Examples (Source: Services Australia)

Example 1: Bob’s Dairy Farm

Bob is a single 67-year-old farmer who owns a 30-hectare property on a single title. Bob has spent his life running it as a dairy farm. The good news for Bob is that provided he continues to work the farm to its full potential, the entire property is exempt from the assets test. However, it’s important to note that any other business assets Bob may have, such as livestock and sheds, aren’t exempt and will be considered in his assets test.

Example 2: Betty and Jim’s Rural Residential Block

Betty and Jim moved to their 5-hectare rural residential block on a single title more than two decades ago. Their property is covered in scrub, lacks a water source, and has limited income-generating potential. Additionally, local council regulations prevent them from subdividing the land. Fortunately for Betty and Jim, these circumstances mean that their entire property is exempt from the assets test, recognizing the challenges of earning income from the land.

Example 3: Jenny’s Family Farm

Jenny, aged 85, has called her 100-hectare single-title farm home for the past 40 years. While she can no longer manage the farm independently, her son John and his family reside in another house on the land. John has taken on the role of running the farm, generating income from its operations. In Jenny’s case, the entire property is exempt from her assets test, given that her son’s efforts ensure the farm remains productive and financially viable.

Conclusion

The assets test rules for rural customers and primary producers in Australia are designed to account for the unique nature of rural properties and agricultural businesses. Understanding these rules and meeting the eligibility criteria can impact your Age Pension entitlement and payment rates. It is advisable to seek personalised advice from Centrelink or a financial advisor to navigate these rules effectively and ensure you are receiving the pension benefits you are entitled to, based on your specific circumstances.