Life Interests

Bill Savellis
Aug 15
4 min read

Like granny flat rights, life interests are usually family arrangements which usually arise when a person:

Receives the right to use assets or the income produced by those assets but ownership is given to another person(s), or
Transfers an assessable asset to another person, but retains an interest in the asset, or
Receives life interest in an asset through the will of another person.

Subject to the contractual arrangements that established the life interest, it remains in place until the person:

Dies
Sells the asset, or
Formally surrenders the asset.

Generally, the person with the life interest has a right to income from, or use of, an asset for their life or until a specified event, such as leaving a house. Once this right ceases, the owners of the asset are able to take possession. But it is important to check the documents that established the life interest to determine what rights the person has.

If a person transfers assets or money for a right to reside in a property owned by another person this transaction may be assessed under the granny flat rules rather than life interest rules.

How will a life interest affect a person’s Centrelink/DVA entitlements?

The assessment of a life interest depends on how the life interest was created and the terms and conditions of the life interest (if a life interest agreement has been entered into). It also depends on who created it as different rules apply if it was created through the spouse’s will.

An actuarial valuation is required to determine the value of the life interest if the life interest was created by:

A person, or
The person’s partner, or by
The death of the person’s partner.

This actuarial valuation is then included as an assessable asset in the person’s assets test. However, if the life interest is in the person’s principal home (usually acquired from a deceased estate), the person is considered to be a homeowner and the value is an exempt asset while the person continues to use it as their home.

Any earnings derived from the life interest will be included as assessable income in the income test.

What happens if a person moves out of the life interest arrangement and into aged care?

For residents who enter aged care from 1 July 2014, the assessment of a life interest for aged care purposes is fully aligned with the assessment of a life interest for social security purposes.

Where a person with a life interest moves into aged care, the assessment of the life interest will depend on how it was set up and by who, whether there is a formal agreement and the terms of the agreement.

The actuarial value of your life interest is an assessable asset if the life interest was created by you or your partner or by the death of your partner. However, if there is a protected person continuing to live in the home the principal residence exemption will apply. No asset value is assessable where the life interest was not created by you, your partner, or by the death of your partner.

A life interest will generally be assessed as shown in the table below but it is always important to have a formal assessment conducted by Centrelink/DVA to determine the assessment and impacts.

If a life interest (is created by someone other than spouse) …	Then for Centrelink/DVA and aged care fee purposes, the person …
Only provides a right to live there, and Terminates upon moving out	Becomes a non-homeowner and is an exempt asset (no deprivation applies). No asset value included in the means-test assessment (MTA)
Only provides a right to live there, but Does not terminate upon moving out, and Provides no other entitlements to property or use of property or any profit from use of property after moving	Remains homeowner for two years and is an exempt asset (no deprivation applies) for first two years. After two years, person becomes non-homeowner and no ongoing value or deprivation applies for Centrelink/DVA The actuarial value, up to the capped value, is included in the MTA
Provides a right to live there, but Does not terminate upon moving out, and Allows use of property or profit from any use of the property for lifetime	Remains homeowner for two years and is an exempt asset (no deprivation applies) for first two years. After two years, person becomes non-homeowner and an actuarial valuation of the life interest would become an assessable asset. The actuarial value, up to the capped value, is included in the MTA Deprivation would apply if a person formally relinquishes a life interest (at any stage) without receiving adequate consideration, using an actuarial valuation to calculate the asset value
If a life interest (is created by the spouse) …	Then for Centrelink/DVA purposes, the person …
In all situations	Remains homeowner for two years and is an exempt asset (no deprivation applies) for first two years. After two years, person becomes non-homeowner and an actuarial valuation of the life interest would become an assessable asset Capped value included in MTA although if protected person still living there it will be exempt Deprivation would apply if a person formally relinquishes a life interest (at any stage) without receiving adequate consideration, using an actuarial valuation to calculate the asset value

Book a chat with Bill to make confident, informed decisions about your future.

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.

Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 8 July 2025. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.