Mackenzie Elvin

Residential Care Subsidy Considerations

Although gift duty has been repealed, there has been no change to the Social Security (Long Term Residential Care) Regulations 2005 which sets out the means testing of income and assets for the purposes of the Residential Care Subsidy.

Under those regulations, gifts in excess of $6,000.00 per annum in any of the five year period before applying for a subsidy or in excess of $27,000.00 in any year before that period can be treated as a “deprivation of assets”.

What this means is that, anyone who is concerned about their eligibility for residential care subsidies should continue a gifting programme at $27,000.00 per year until the allowable asset threshold is reached. This is currently $210,000.00 as at 1 July 2011 and increases by $10,000.00 pa on 1 July each year.

WINZ have clarified their position regarding gifting since the repeal of gift duty and have stated that they will interpret the regulations as meaning gifting in excess of $27,000.00 per annum for an individual or for couples. This is contrary to previous understandings that it was $27,000.00 each or $54,000.00 for a couple. It may take a legal challenge to clarify this and our advice until such time as there is clarification is that if eligibility for a subsidy is a concern gifting should be $27,000.00 per couple not $54,000.00 per couple.

Transferring the family home to a Trust to avoid the Residential Care Subsidy has always had its risks. Changes to the subsidy rules mean considerable care should be taken before contemplating the sale of a residential home to a Trust.

For further advice contact:

November 2011