Investment property and the DSP

Due to a disability, Lily may have to move from her home to the investment property that she owns, but isn’t sure what this will mean for her pension or tax liability.

Q. Lily

I am living with multiple sclerosis and had to give up work. I have applied to Centrelink for the Disability Support Pension (DSP). We live in our own house, but it has stairs and at some point we might have to consider moving to a low-set or one-level house. We have an investment property which is low-set and rather than buying another house, we may move to this when the time is right. What we would like to know is how this might affect us in regards to our Centrelink payment or Australian Tax Office obligations, since it is an investment house. Modifications to the property will also be needed, so that it suits my needs.

My hubby may have to give up work to become my carer either full or part time, only time will tell. There is a lot of uncertainty in the air with regards to how my illness will progress and what my/our needs will be, as my hubby is not getting any younger either.

A. As you have already applied for a DSP, you should be aware that any investment property will be assessed as an asset. Also, any income derived from rent will be assessed under the income test. 

When, and if, a move is made to the second property, the initial property (if not sold) will be assessed as an asset and, again, income derived from rent will be assessed under the income test. If this house is sold, then any profit may be exempt from the Capital Gains Tax as it may be classed as a main place of residence. However, how you choose to invest that profit will again affect how it is assessed.

Life is indeed uncertain and you are facing a few challenges along the way. It would be beneficial for you and your husband to discuss your options with an independent financial planner or accountant, who can advise on different income and investment scenarios that will suit your individual and changing needs.

You can also make an appointment to discuss your individual circumstances with the Department of Human Services by calling 13 23 00.

Written by Debbie McTaggart


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