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This topic provides information on the following subjects:
Note: Deeming exemptions for superannuation investments are covered in 4.4.2 Deeming of Financial Investments.
The Minister for Families, Housing, Community Services and Indigenous Affairs, and the Minister for Tertiary Education, Skills, Jobs and Workplace Relations have the legislative power to exempt a financial investment or class of financial investment (1.1.F.135) from the deeming rules for their portfolio payments.
The Ministers have approved guidelines for exemption from the deeming rules. Guidelines vary for different types of investments. The guidelines are set out under separate headings later in this topic.
A deeming exemption removes the particular financial investment from the calculation of the recipient's deemed income, however, it does not alter the value of the investment under the assets test rules. A deeming exemption only removes a financial investment from the deeming provisions, and actual income, if any, is assessed.
Exemptions are granted only in special circumstances to preserve the fairness of deeming. Exemptions are not granted because of poor investment performance, such as shares producing negative returns, or because a low return investment was made in order to assist another person.
Policy reference: SS Guide 4.4.1.30 Scope of Deeming, 4.4.1.20 Operation of Deeming, 4.6.7.50 Unrealisable Assets - Unable or Unreasonable to Sell or Borrow Against
The Minister determines the date of effect for deeming exemptions as part of the decision to grant a deeming exemption.
Act reference: SSAct section 1084(1) Certain money and financial investments not taken into account, section 1082(2) For the purposes of this Division, the above threshold rate..., section 9(1)-'financial investment'
From 20 September 2001, any financial investment that is regarded as unrealisable for the purposes of the assets test hardship provisions is exempted from the deeming rules when calculating the rate of payment under the hardship provisions. This only applies while the income support recipient is being paid under the assets test hardship provisions.
Act reference: SSAct section 1084(2) If a financial investment is an unrealisable asset for the purposes of section 1129, 1130B or 1131...
Policy reference: SS Guide 4.4.1.30 Scope of Deeming, 4.4.1.20 Operation of Deeming, 4.6.7.50 Unrealisable Assets - Unable or Unreasonable to Sell or Borrow Against
In some instances compensation and insurance payments can be held as financial investments.
Example: A person receives an insurance payment following the loss of their home in a natural disaster such as a bushfire, and then holds the payment in their bank account until their home can be rebuilt.
In such cases, the financial investment and any interest earned are exempt from the deeming rules for 12 months or in some cases longer.
Explanation: The exemption from the income test deeming rules may be extended past 12 months if the recipient can show that they meant to spend the compensation or insurance payment on repairs within 12 months, but they were not able to do so for reasons beyond their control.
Act reference: SSAct section 1084(1) Certain money and financial investments not taken into account, section 8(8)(m) Money from an investment that is...
Policy reference: SS Guide 4.3.2.30 Income Exempt from Assessment - Legislated
Until 31 December 2009, the Minister for Families, Housing, Community Services and Indigenous Affairs provided deeming exemptions for all investments in certain church and charitable development funds. After 31 December 2009, only those individual investments in development funds exempt prior to 1 January 2010 continue to be exempt from the deeming rules until the particular investment ceases to exist.
The deeming rules will apply to all new investments and any additional monies provided by income support recipients for investment in development funds on or after 1 January 2010.
If church or charitable organisations (including nursing homes) require more information they can contact the FaHCSIA Deeming Exemptions Officer, at helpdesk.financial.markets@fahcsia.gov.au.
Exemptions are only granted where the outcome is consistent with the principles of deeming. These principles mean that recipients with the same amount in financial assets should receive similar treatment no matter how they choose to invest those assets, unless there are extremely special grounds for a deeming exemption.
Deeming exemptions are not required when a financial investment ceases to exist.
Explanation: Deeming can only apply to financial investments. Deeming cannot be applied to a financial investment if it does not exist. Therefore a deeming exemption cannot be applied when the financial investment ceases to exist.
Some investments may experience short term difficulties such as delays in payment or renegotiation of contracts. Deeming exemptions are provided for financial investments that have failed fundamentally, not for those in short term difficulties.
Failed financial investments are considered for deeming exemption against the following guidelines:
Policy reference: SS Guide 4.6.5.110 Failed Financial Investments
The following 2 forms of investment, which were exempt from deeming before the July 1996 deeming changes, are included as financial investments when calculating deemed income unless a recipient can establish certain conditions exist.
For these types of investment exemptions have been provided where the recipient holding the investment:
Explanation: For the purposes of exemptions of the above forms of investment, financial hardship was when a recipient's total income, as a result of deeming, was lower than the maximum rate of pension or allowance, including RA where applicable, that could be paid to the recipient under the income test.
In this instance, total income was the sum of the following:
Act reference: SSAct section 23(14) For the purposes of this Act other than Part 2.11 and the YA Rate Calculator...
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Last reviewed: 8 November 2011
