Deprivation of assets and income

Deprivation is a deliberate act or inaction resulting in assets or income not being available to the client. It may be direct or indirect. Deprivation is generally when a client or their partner (living or deceased) gives away more than the allowable limits or sells financial resources (assets) for less than fair value.

Deprivation can only be of a client's own assets, income or entitlements. Once an asset has been gifted (for example, to a trust or family member), what is done with the asset and any income it generates cannot be attributed to the client.

The act or inaction does not need to have been done for the purpose of getting Residential Care Subsidy. Each act of deprivation factually established might be counted back into the financial means assessment.

A client and/or their partner (living or deceased) can deprive themselves of assets or income individually or as a couple.

For more information see:

• Examples of deprivation
• Gifting

Deprivation is a factual determination and includes transactions where one person benefits at the expense of the other (for example an interest free loan). This is different to a bad investment decision where a transaction took place for fair value or in good faith, but the client had a loss or did not get a return. Poor investment decisions are not considered to be deprivation.

For example, if the client invested in a family members company by purchasing shares at a fair value there has been no deprivation even if the company fails. However, if the client purchased shares in a family members company for significantly more than market value this could be considered deprivation because the intent of the transaction was to benefit family at the expense of the client.

When a client enters care, they are expected to generate income from their investments (where possible) to pay for their care. This means past investments that would not be considered deprivation might be assessed as deprivation going forward if the client does not make any changes to start earning income.

For example, historic investments in bonus bonds would not be considered deprivation of income because the client had a chance of increasing their capital. However, once the client enters care they are expected to rearrange this so that the funds can earn an income. Failure to do so would be deprivation of income. The deprivation could be calculated based on the interest that would be received if the funds were in an interest earning account.