Assessing Adjacent Land

Assessing Adjacent Land to the Principal Home

Contrary to popular understanding of the term ‘Adjacent Land’, under social security law ‘Adjacent Land’ is defined as the land surrounding the principal home that is held under the same title.

Under the ‘Private Land Use Test’ only the principle home and adjacent land up to 2 hectares (4.94211 acres) used primarily for private or domestic purposes can be exempted for assets test purposes. Adjacent land in excess of 2 hectares and land used for commercial purposes is otherwise assessed.

From 1 January 2007, however, the ‘Extended Land Use Test’ was brought in exclusively for age pensioners (and some carers). The extended land use test means that age pensioners who have lived in their principal home for 20 years or more continuously, will not be assessed on adjacent land, regardless of the size, provided they make ‘Effective Use’ of the land.

Effective use of the land is a broad brush with many complexities but generally is satisfied where the land is being used to its potential to generate income or where the land is not being used because it has no, or limited potential to generate income.

If it is the age pensioner that is working the land to generate income, any income generated is then assessed against the income test. It is worth noting that the guidelines take into consideration the capacity of the pensioner when assessing effective use.

Interestingly however, when a family member is working the land to its potential, and the income generated is used to support that family rather then passed on to the pensioner, than the income generated from the land is not assessed against the income test of the pensioner.

This is just a snapshot of the information available on this subject and you should not make any decisions based on this article without seeking further advice about your individual circumstances.