Part 3.12, Chapter 3 of the Act sets out the general provisions relating to the assets test.

Section 1118 of Part 3.12 of the Act provides that certain assets can be excluded for the purpose of calculating assets for the purpose of social security legislation.

What is an 'asset' for the purpose of Residential Aged Care Subsidy

Section 11(1) of the Act defines the word 'asset' to mean '...property or money (including property or money outside Australia).'

The Guide at Instruction 1.1.A.290 also provides guidance as to what an asset is, stating that the Act definition uses the descriptive term 'property', and that 'property' includes: financial investments including 'loans to family trusts, family members or organisations'.

Subsection 9(1) of the Act defines the term 'financial asset' as a 'financial investment or a derived asset'. In turn, a 'financial investment' is defined in subsection 9(1) of the Act to include a loan that has not been repaid in full.

(1) For the purposes of this Part, if a company is a controlled private company in relation to an individual:

(a) the individual is an attributable stakeholder of the company unless the Secretary otherwise determines; and

(b) if the individual is an attributable stakeholder of the company--the individual's asset attribution percentage in relation to the company is:

(ii) if the Secretary determines a lower percentage in relation to the individual and the company--that lower percentage; and

(c) if the individual is an attributable stakeholder of the company--the individual's income attribution percentage in relation to the company is:

(ii) if the Secretary determines a lower percentage in relation to the individual and the company--that lower percentage.

For deprivation provisions to apply it MUST be shown that a recipient has destroyed or diminished the value of an asset (1.1.A.290), income, or a source of income.

A recipient disposes of an asset or income when they:

• engage in a course of conduct that destroys, disposes of or diminishes the value of their assets or income, AND

• do not receive adequate financial consideration (1.1.A.55) in exchange for the asset or income.

Example: Signing a document transferring legal title to land and then giving it to another person to register the transfer is a course of conduct.

Allowable disposal free areas for assets disposed of on or after 1 July 2002

The allowable disposal free areas for assets are $10,000 per financial year (income year - see note), and $30,000 over any rolling 5 financial year period (4.1.10). These amounts apply to single recipients and couples (1.1.M.120).

Explanation: Only amounts disposed of in excess of the disposal free areas are assessable under the assets test. These amounts are called deprived assets.

Note: In the legislation the term 'income year' is defined as having the same meaning as in the Income Tax Assessment Act 1997. Accordingly, an income year aligns with the commonly understood financial year, i.e. from 1 July to 30 June.

Section 9(4) of the Act provides that for the purposes of the Act, an asset is a deprived asset if:

(b) the value of the asset is included in the value of the person's assets by section 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC or 1126AD or an amount is included in the value of the person's assets in respect of the disposal by section 1126E (so far as that section relates to section 1126AA, 1126AB, 1126AC or 1126AD).

Pursuant to sections 1124A and 1125 of the Act, if a person disposes of an asset under section 1123 of the Act, the amount of disposition exceeding the disposal limit, is to be included in the person's assets for a period of five years from the date of disposition.

For the purposes of this Act, a person disposes of assets of the person if

(a) the person engages in a course of conduct that directly or indirectly:

(i) destroys all of some of the person's assets; or

(ii) disposes of all or some of the persons assets; or

(iii) diminishes the value of all or some of the persons assets; and

(b) one of the following subparagraphs are satisfied:

(i) the person receives no consideration in money or money's worth for the destruction, disposal or diminution;

(ii) the person receives inadequate consideration in money or money's worth for the destruction, disposal or diminution;

(iii) The Secretary is satisfied that the person's purpose, or the dominant purpose, in engaging that course of conduct was to obtain a social security advantage.

Instruction 4.6.5.65 of the Guide states as follows:

When a loan no longer exists - loans made to a company, trust or individual

Legally, a loan ceases to exist at the time it is repaid, or when the debtor is formally released from the loan. A debtor is released from a loan contract under a bankruptcy or where the loan is forgiven.

A loan no longer exists for social security purposes when:

• the lender forgives the loan usually via a deed or gift of release (see explanation 1), OR

• the period specified in the relevant state Statute of Limitations has elapsed since the date of the first breach of the loan contract (see explanation 6), OR 6.96 Instruction 1.1.L66 of the Guide titled "Loans - statute of limitation period":

Explanation 1: Deprivation rules apply where a loan is forgiven, except where this occurs in the process of an irreversible wind up (that is, deregistration for a company) of a company or trust.

Explanation 6: The deprivation rules MAY apply if the lender could have taken action before the period specified in the Statute of Limitations but chose not to do so.

The statute of limitations period is the period of time after which legal action cannot be undertaken in respect of a particular matter. In relation to loans it is the period of time after which legal action cannot be undertaken to recover an un-repaid loan. This period is defined by the relevant state government legislation and may vary from state to state.

If the statute of limitations period has ended, a loan no longer exists for social security purposes.

[1] S8 p54. In this decision, a reference to 'S' is a reference to the documents filed by the respondent on 25 November 2024 and 28 February 2025 pursuant to section 25 of the Administrative Review Tribunal Act 2024 (Cth). 'SFIC' refers to a statement of facts and contentions. The applicant's SFIC was dated 18 December 2024 and the respondent's SFIC was dated 28 February 2025.

[3] Letter from Mr Jeff Hannaford to the tribunal dated 13 May 2025 p1

[4] Letter from Mr Jeff Hannaford to the tribunal dated 13 May 2025 p1

[5] S15 p130

[7] S28 p194

[8] S13 pp78-81. This document states the global assessment of the applicant's assets as $307, 930 but does not explicitly state the amount of the loan that was included in this global assessment.

[9] S14 p82. There are some discrepancies in the amounts stated for the loan in various documents lodged with the tribunal. For example, this letter refers to the loan component of the assets as $128456 whereas the amounts nominated in the company records show it to be $127417 but the Tribunal considers that these discrepancies are not material.

[10] S14 p82

[11] Respondent's SFIC [3.1]-[3.14]

[13] (1979) 2 ALD 634

[14] S14 p82

[18] Respondent's SFIC [5.21]-[5.23]

[19] [2016] AATA 235

[20] [2008] AATA 982

[21] S14 p104

[22] Respondent's SFIC [5.28]-[5.32], citing Secretary, Department of Social Services (Second services second review) and Bennett [2019] AATA 5828 and The Executor of the estate of the late Peter Sweeney; Secretary, Department of Social Services and (Social services second review) [2022] AATA 3152

[23] As discussed in Peter Sutherland and Allan Anforth, Social Security and Family Assistance Law (Federation Press, 4th edition, 2022) pp500-501

[24] Transcript 8 May 2025 pp23-24, citing Re Gordon Hughes and Secretary, Department of Social Security [1992] AATA 52, Foschi and Secretary, Department of Families, Community Services and Indigenous Affairs [2006] AATA 459 and O'Brien and Secretary, Department of Family and Community Services [2002] AATA 848

[25] (1997) 46 ALD 193

[26] (1997) 46 ALD 193, 201

[27] Letter from Mr Jeff Hannaford to the tribunal dated 13 May 2025 at p2

[28] Respondent's submissions 15 May 2025 [4.6]

[29] Respondent's submissions 15 May 2025 [4.7]

[30] [2007] AATA 1620

[31] [2007] AATA 1620 at [34]

[32] Respondent's submissions dated 15 May 2025 [6.5]-[6.7]

[34] Applicant's email to the tribunal on 29 May 2025 attaching the balance sheets of the company 1991-2007

[35] Respondent's submissions dated 13 June 2025 [3.3]-[3.4]

[36] Respondent's submissions dated 13 June 2025 [4.5]-[4.9]

[37] S14 p104

[38] S15 p129

[39] Respondent's SFIC [5.28]-[5.30]

[40] See generally Stephen Colbran and Peta Spender, Civil Procedure: Commentary and Materials (LexisNexis, 9th edition, 2025) [6.3.4]-[6.3.5]

[41] Respondent's submissions dated 13 June 2025

[42] Respondent's submissions dated 13 June 2025 [3.4], citing Instruction 4.6.5.60 of the Guide