Income and asset testing

Yes, they must have a financial means assessment from Work and Income. However a person who is needs assessed as requiring dementia or hospital care does not have to apply for a financial means assessment in order to receive the ‘top-up subsidy’ (where under section 56 of the Act the DHB funds the difference between the maximum contribution and contract price for dementia or hospital care).

A person must have a needs assessment before applying for a financial means assessment.

For more information, go to Residential care questions and answers.

The Needs Assessment Service Coordination agency (NASC) will supply a person with an application form for a financial means assessment when they have a needs assessment.

If you think that you may need help in filling out the application form you can call the Residential Subsidy Unit at Work and Income for assistance on 0800 999 727.

It is important that you send in your application form as soon as possible, even if you cannot complete it in full or do not yet have all the necessary documents. Your eligibility for Government funding can only be backdated up to 90 days before the date your application is received by Work and Income.

Under the Residential Care and Disability Support Services Act 2018 a ‘resident’ who is needs assessed as requiring residential care indefinitely is liable for contracted care costs provided to them up to the maximum contribution amount. The care costs are capped at the amount of the maximum contribution unless the resident has agreed to pay for additional services that are not contracted care services. Where this is so, the resident remains liable to pay for these additional services.

If the person has been means assessed as having assets above the applicable asset threshold in the Act, and the cost of contracted care services they need is above the maximum contribution amount, under section 56 of the Act the DHB must pay the difference above the maximum contribution. This applies from the date the person is assessed as requiring that type or level of residential care or the date they begin receiving contracted care services.

If the person has been means assessed as having assets equal to or below the threshold, under section 56 of the Act the DHB is liable to pay for the difference between the cost of contracted care services needed and the contribution the resident makes (as determined in the means assessment).

The DHB is liable to pay from the date the resident is assessed as having assets equal to or below the applicable asset threshold or up to 90 days preceding the date of the means assessment that determined their eligibility.

The person must be in a facility that has an Age-Related Residential Care Contract with a DHB.

If a person enters residential care and is waiting for a needs assessment or a financial means assessment to be processed, they are liable to personally pay fully for the cost of their care.

If the needs assessment determines that the person requires long-term residential care indefinitely and the financial means assessment determines that the person qualifies for Government funding (the residential-care subsidy), then the DHB will pay the rest home or hospital for the cost of contracted care services that the person received for up to 90 days preceding the date of the financial means assessment that determined their eligibility. The rest home or hospital will then refund the person for the cost of care for this period only.

If a resident received care for a longer period than 90 days before the application for a financial means assessment was received, then they are liable to fully pay for the cost of care received before the 90 days.

If a resident has been needs assessed and is paying the maximum contribution for contracted care services provided, and a review of their means assessment determines that they should contribute a lesser amount, than the DHB is liable to pay for the difference up to 90 days before the date of the financial means assessment that determined their contribution.

For the purposes of a financial means assessment, the Act defines ‘assets’ as realisable assets of the person and his or her spouse. There is an inclusive definition of ‘assets’ in Part 2 of Schedule 2 of the Act.

Examples of assets that may be considered in the asset test include:

• the value of property
• cash or savings
• investments or shares
• leisure boats
• caravans and campervans
• investment properties
• licence to occupy contracts
• the value of assets gifted (gifts given away)
• loans made to other people (including family trusts).

A person’s home (principal residence) is generally included in the asset test if they do not have a partner (spouse); or both the person and their partner (spouse) are in long-term residential care; or a person’s partner is in long-term residential care, but has chosen to have their assets assessed against the higher asset threshold (Asset Threshold A).

Part 2 of Schedule 2 of the Act defines assets that are exempt from a person’s financial means assessment (‘exempt assets’).

Exempt Assets that are excluded from the financial means assessment include:

• The home (the principal residence) of the person’s partner (spouse) or a dependent child of the person, if that person has chosen to be assessed against the lower asset threshold (Asset Threshold B)
• A car or similar vehicle that is for the personal use of the person’s partner (spouse), if that person has chosen to be assessed against the lower asset threshold (Asset Threshold B)
• The value of any ex-gratia payment by the Government of New Zealand or the Government of any other country, because the person or their spouse was a prisoner of war or civilian internee during the Second World War
• The value of any pre-paid funeral of the person or their spouse, up to a maximum value of $10,000
• A lump sum paid to the person under Schedule 1 of the Accident Compensation Act 2001, or a lump sum payment of an independence allowance under Part 13 of the Accident Insurance Act 1998 or Part 4 of Schedule 1 of that Act; but this exemption applies only in the first 12 months after the payment is made.

The following assets are also exempt from the financial means assessment as specified by the Residential Care and Disability Support Services Regulations 2018:

• personal belongings such as clothing, jewellery, personal collectables, objects or family treasures/taonga such as art, books, stamps and antiques;
• household contents/chattels such as appliances and furniture; and
• any increase in the value of a person’s assets included in the initial financial means assessment (that determined the person had assets equal to or below the asset threshold) will be excluded from any subsequent review of a person’s means assessment.

For the purposes of a financial means assessment, Part 3 of Schedule 27 of the Act defines income (after deduction of income tax).

Examples of income that may be considered in the income test include

• New Zealand Superannuation or any other benefit
• 50 percent of private superannuation payments received by the person and their spouse (partner)
• 50 percent of life insurance annuities received by the person and their spouse (partner)
• Overseas Government pensions (excluding a War Disablement Pension)
• Contributions from relatives
• Accident insurance payments
• Earning from investments or business or employment
• Redundancy or termination payments
• Income from a family trust
• Income that the person or their spouse has directly or indirectly deprived themselves of.

Part 3 of Schedule 2 in the Amendment Act defines income that is exempt from a person’s financial means assessment.

As of 1 July 2020 income from any assets is included in the income test except for:

• the first $1,027 for a single person
• the first $2,054 for a couple with both are in care
• the first $3,081 for a couple with one partner in the community
• for a couple with one partner in care, any income from paid employment of the partner living in the community is also excluded.

The amounts are reviewed each year, but not always increased. The latest amounts, and further detail on financial means assessment, can be found on the Work and Income website.

Income are also exempt from the financial means assessment as specified by the Residential Care and Disability Support Services Regulations 2018. These include:

• any ex-gratia payments or interest from such a payment for prisoners of war and civilian detainees; and
• any interest generated from the pre-paid funeral amount of the person or of the person’s spouse, as defined in Part 2, Schedule 2 of the Act.

The amount of exempt income from assets increases on 1 July each year. This started from 1 July 2006. The adjustment is based on changes to the consumers’ price index for the year ending on the previous 1 March, and is rounded to the nearest dollar.

Deprivation generally occurs where a person (or their partner) gives away or sells financial resources (assets) for less than their value. Deprivation of income may include the gifting or selling of income bearing assets.

Deprivation may also have occurred when:

• the person (or their partner) re-arranges their financial circumstances, so as to reduce their income or assets after having received written advice of the income contribution they are required to make
• the person (or their partner) loans significant amounts of cash interest free
• gifts are made over the allowable gifting limit (eg, gifting outside the five-year gifting period) may be considered deprivation and depending on the circumstances, may be counted back in to the financial means assessment.
• changes have been made to the ownership of land or the home was registered as a joint tenancy
• a person has transferred or gifted a property to a trust or family member
• their financial resources have been structured and managed in a way that does not generate an income stream, for example, the conversion of income earning assets (such as dividend producing shares) to a non-income earning form such as Bonus Bonds, or where the transfer of income earning assets to a trust has the effect that the person receives less income.

The most recent government valuation of a property is taken into account for the purposes of a financial means assessment. Valuation updates vary nationally depending on the Territorial Local Authority, but are generally every few years.

If a person qualifies for government funding (the residential care subsidy) then their house, along with their other assets, will not be asset tested again, unless their circumstances change.

The Social Security (Long-Term Residential Care) Regulations 2005 prescribe the allowable gifting and the gifting period for the purposes of financial means assessments.

Currently the maximum amount that a person or their spouse can gift over the period of five years prior to the date of the person’s financial means assessment, without it affecting the income and asset test is up to $6500 per year. This amount will be reviewed on 1 April each year taking into account Consumers’ Price Index adjustments for the previous calendar year. The gifting adjustments will occur in $500 increments.

Gifting is assessed by looking at the date of the financial means assessment and looking at the amount gifted in each of the previous five years.

If the person has not gifted the maximum allowable (allowable gifting) at the time of application for a financial means assessment, they may make a further gift up to the amount of the five-year limit, to a person who has provided a high level of care prior to the person applying for a means assessment.

You may be aware that gift duty was recently abolished for dispositions of property under the Estate and Gift Duties Act 1968.  It is important to note that the rules for gifting under the Social Security (Long-Term Residential Care) Regulations are separate from those under the Estate and Gift Duties Act 1968 and you must consider your obligations under each piece of legislation separately.

Gifts made outside the current and to be prescribed five-year gifting period are generally not included in the financial means assessment unless the gifting is considered extraordinary (ie, it is an asset for the purposes of the financial means assessment as there has been deprivation of property).

Extraordinary gifting is gifting of a nature beyond what would be considered ordinary or normal.

Criteria for determining extraordinary gifting includes:

• the period over which the gifting occurred – when it started and the frequency;
• the value of the gifting and whether it was made in a lump sum or by periodical payments;
• the nature of the income or asset gifted; and
• to whom the gift was made, and the relationship of the recipient to the resident.