Since the abolition of gift duty in 2011, the Ministry of Social
Development (Ministry) has significantly changed its policy
relating to residential care subsidy assessments. Long established
and previously accepted practices are no longer standing up to the
Ministry's scrutiny when a person applies for a residential
care subsidy. The unwavering and explicit message from the Ministry
is that people are required to look to their own resources first
before calling on the state to pay.
The social security system is a safety net to provide support
when there is a genuine need. It is not appropriate for individuals
to make provision for their adult children and grandchildren from
the resources available to them and then call on the State to
provide them with assistance for their own support.
 NZSSAA 74, para 31
Once a person is assessed as needing long-term residential care,
the Ministry carries out a financial means assessment. This
comprises an asset test and an income test.
If an applicant's assets are equal to or below the
applicable asset threshold (currently $218,423.00), the applicant
qualifies for Government funding. Assets tested include licences to
occupy (common with Retirement Villages), the value of gifts made,
and loans to individuals and entities (including family
The income test determines what the applicant must contribute to
the cost of their care. The definition of income in this context is
very wide and includes:
Any interest or dividends
Family trust income
Life interest income
50% of any private superannuation or life insurance annuities
received by the applicant or the applicant's spouse or
When the Ministry refers to income, it means income that is
received or receivable (meaning it has not been received but could
or should have been received). The Ministry can assess actual trust
income that is not paid out. It can also charge notional income
when the Ministry considers income returns from an asset are not
If an applicant's assets or income have been directly or
indirectly disposed of, the Ministry considers this deprivation.
This includes the gifting or selling income bearing assets and
re-arranging financial circumstances that have the result of
reducing income or assets. The Ministry is not concerned with the
purpose behind the restructuring; it is only concerned with the
The change in policy has seen the Ministry looking back to
ascertain what an applicant did with their assets well beyond the
time of the policy change in 2011.
What does this mean to you?
If you have any questions on how you have structured your
affairs including if you have made provision for a life interest in
your Will or if you have granted a similar right in a property, we
encourage you to contact us to review your structure.
Similarly, if you have any questions about the best structure
for you, we have many options available that may suit your
circumstances. Our specialist Estates Team will be more than happy
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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