Retirement villages versus lifestyle villages
Retirement villages are residential premises that provide accommodation primarily for persons aged 55 and over who have ceased full-time employment.
The type of accommodation offered by retirement villages varies considerably, and may include self-care and/or serviced units with communal facilities.
Retirement villages are regulated by state based legislation. Therefore the legislative definition of a retirement village may vary from state to state.
An alternative accommodation option to retirement villages are lifestyle villages. Other names for lifestyle villages include park homes, mobile home parks or over[1]55 villages. This type of accommodation originated from caravan parks and mobile home villages.
Lifestyle villages are regulated under different legislation to retirement villages and have different ownership and fee structures. As a result, the social security assessment of these two accommodation types differs.
Is it a retirement village?
The predominant way of determining whether a client resides in a retirement village is to clarify whether the accommodation is subject to the Retirement Villages Act in the relevant state or territory.
Whether a facility is a retirement village can be confirmed by contacting the facility or referring to the accommodation contract between the facility and the resident.
New South Wales, Victoria, Queensland and South Australia have a retirement villages register available online that lists all retirement villages in that state. Refer to the appendix for further information.
However even where a facility appears on the retirement villages register, it may still be prudent to confirm with the facility or the accommodation contract as some facilities may offer various types of accommodation
Social security assessment of retirement villages
When a client takes up residence in a retirement village, their entry contribution determines:
· home ownership status,
· assets test assessment, and
· eligibility for rent assistance.
The entry contribution is the amount the resident paid (or has agreed to pay) to secure accommodation in the retirement village.
This payment can be structured in many different ways such as a payment, loan or donation but it is essentially the amount that must be paid as a condition of entry to the retirement village.
The entry contribution does not include ongoing costs such as general service or maintenance fees which are payable on a regular basis. The amount of entry contribution is then compared to the Extra Allowable Amount (EAA).
The EAA is the difference between the lower assets test threshold for homeowners and non-homeowners at the date of entry to the retirement village (i.e. the date the resident becomes entitled to take up residence in the retirement village). Refer to the appendix for a list of historical extra allowable amounts.
For example, the lower assets test threshold for a single person for 2021/22 is $270,500 for a homeowner and $487,000 for a non-homeowner. Therefore, an individual entering into a retirement village during the 2021/22 has an EAA of $216,500 (i.e. $487,000 – $270,500 = $216,500).
If the entry contribution is greater than the EAA, the resident will be assessed as a homeowner and the entry contribution will be exempt from the assets test. In addition, the individual will not be eligible for rent assistance as they will be classed as an ineligible homeowner.
If the entry contribution is equal to or less than the EAA, the resident will be assessed as a non-homeowner and the entry contribution will be an assessable asset. The individual may be eligible for rent assistance based on the ongoing service and maintenance fees payable in the village. Other fees such as entry contributions or deferred management fees are not eligible for rent assistance.
The following table summarises the home ownership status, asset test assessment and eligibility for rent assistance for people living in retirement villages:
| Entry contribution Greater than EAA |
Entry contributions equal to or less than EAA | |
| Home ownership status | Homeowner | Non-homeowner |
| Entry contribution assessed as an asset | No | Yes |
| Rent assistance | No | Yes |
Example 1 – entry contribution greater than EAA
Joel receives age pension and entered a retirement village on 5 July 2021. Joel agreed to pay $400,000 as a lump sum for accommodation and an ongoing maintenance fee of $2,000 p.a.
Joel’s entry contribution amount of $400,000 exceeds the EAA of $216,500 for 2021/22. Therefore, Joel is considered a homeowner and the $400,000 paid for the retirement village unit is exempt from the age pension assets test. He is not eligible for any rent assistance because he is an ineligible homeowner.
Example 2 – entry contribution less than EAA
Venus agreed to pay a lump sum of $100,000 for her retirement village unit and $300pf in service and maintenance fees. According to her contract, her entry date into the facility is 20 July 2021. Given her entry contribution of $100,000 was less than the EAA of $216,500 for 2021/22, Venus will be assessed as a non-homeowner.
In this case her entry contribution amount will be assessed as an asset. Note, entry contributions are not considered financial assets and therefore they are not subject to deeming for the income test. Venus is eligible for rent assistance in respect of the service and maintenance fees of $300pf.
Example 3 – entry date prior to 1 July 2021
Walter entered a retirement village on 1 October 2014 and paid an entry contribution of $150,000.
He has now reached age pension age and would like to know how his circumstances are assessed for social security purposes.
As the entry contribution of $150,000 was greater than the EAA in 2014/15 of $146,500 , Walter is considered a homeowner and is not eligible for rent assistance. His retirement village unit would be exempt from the assets test.
Is it a lifestyle village?
Lifestyle villages (also known as residential land lease communities, manufactured home parks or over 55’s villages) originated from caravan parks and mobile home villages.
Generally, this type of accommodation option involves the resident owning the home they live in but not the land underneath the home.
Fees include ongoing maintenance, service or site fees for the right to occupy the site. The home is usually a manufactured home or a moveable dwelling, however there are lifestyle villages with immoveable homes.
Lifestyle villages operate under state-based legislation that covers manufactured homes or residential parks, which is different from the state-based legislation that covers retirement villages.
Whether a facility is a lifestyle village can be confirmed by contacting the facility or referring to the accommodation contract between the facility and the resident.
Social security assessment of a lifestyle village
The social security assessment of lifestyle villages is more in line with caravan parks, which is distinct from the assessment of retirement villages.
An individual living in a lifestyle village will be assessed as a homeowner provided they own or partly own the dwelling in which they live (regardless of the amount paid for the home). The amount used to purchase the home is not measured against the EAA (as is the case for retirement villages) to determine homeownership status.
Likewise, the home will be exempt from the assets test regardless of the amount paid.
This is the same assessment as for individuals living in caravans or mobile homes. If they own or partly own the caravan or mobile home, it will be exempt from the assets test and they are considered a homeowner regardless of the amount paid.
Rent assistance and lifestyle villages
Usually an individual who is considered a homeowner for social security purposes is ineligible for rent assistance (i.e. an ineligible homeowner). However, there are exceptions to this general rule . One of these exceptions relates to individuals who live in lifestyle villages or caravans.
Where an individual living in a lifestyle village owns the dwelling they reside in but not the land which it stands on, they may be eligible for rent assistance where they pay ongoing maintenance, service or site fees.
The following table summarises the home ownership status, asset test assessment and eligibility for rent assistance for people living in lifestyle villages:
| Owns the dwelling and owns the land it stands on | Owns the dwelling and pays site fees for the land it stands on | Rents the dwelling and pays site fees for the land it stands on | |
| Home ownership status | Homeowner | Homeowner | Non-homeowner |
| Dwelling assessed as an asset | No | No | N/A |
| Rent assistance | No | Yes | Yes |
Example 4: Dwelling purchased for $400,000
Sam purchased a unit in a lifestyle village for $400,000. She pays ongoing site fees for the land that the unit is situated on. Given that Sam owns the unit in which she lives, she is considered a homeowner and the value of the unit is exempt from the assets test.
The site fees are considered rent for the purposes of rent assistance. Therefore, she may be eligible for rent assistance depending on how much she pays in site fees.
Example 5: Dwelling purchased for $100,000
Alex purchased a unit in a lifestyle village for $100,000 and pays ongoing site fees of $250pf for the land that the unit is situated on. Alex is considered to own the dwelling but not the land which it stands on. Therefore, Alex is assessed as a homeowner and the value of the unit is exempt from the assets test.
Although Alex’s age pension entitlement is subject to the homeowner assets test threshold, Alex is NOT considered an ‘ineligible homeowner’ for rent assistance purposes and therefore may be eligible for rent assistance for the site fees.
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