Andrew is planning to sell his home but is worried the proceeds will stop his pension.
My wife and I wish to sell our house and move interstate in the new year. We are both on the pension and plan to sell our home and move interstate to rent while we look to buy a home. If we were to put the proceeds of our current home sale in the bank until we buy, would that impact on us getting the full pension we are receiving now? If it will affect our pension payments, is there a solution to overcome this situation?
A. It will really depend on your current financial situation.
When you sell your principal residence, the proceeds from the sale that exceed the amount you intend to spend on your next home are assessed as an asset immediately.
If you are planning to spend roughly the same amount of money on a new house as what you sold your old house for, then the situation is different.
The amount of the sale price that you intend to use to purchase a new residence can be an exempt asset for a period of up to 12 months. This is to give you time to choose a suitable home.
Should something prevent you from doing so within the time frame, you can apply to Centrelink to have this period extended by up to a further 12 months.
However, all the proceeds from the sale of your home that are held as financial assets (in your case putting the money into the bank) are deemed to be earning income.
Any deemed income will be assessed under the income test, which may affect your Age Pension payment.
Deeming rates are at record low levels with the first $88,000 of your financial assets being deemed to earn 0.25 per cent and the balance of funds over that amount being deemed to earn 2.25 per cent. So, whether this affects your pension payment will depend on how much money you receive from the sale of your house, plus the total of your other income.
Any amount left over after you buy your new home is considered an asset and will be assessed as such.
Have you sold a house while receiving the Age Pension? How did it affect your payments?
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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.