How early do we have to sell investments to claim the Age Pension?

Jacqui and her husband are approaching pension age and are worried they have not left enough time to sell their investment properties.


Q. Jacqui
I was born in April 1960 and the government retirement age for me is 67. I have six years to retirement. My hubby was born in May 1957 and his retirement age is also 67, but he has three years until retirement. We live in our own home valued about $700k. We will have this loan paid off by the time we retire.

Hubby has an investment property with a current estimated value of $340k, but we are still owing approximately $250k. We also have a joint investment property with a current estimated value of $360k while we are still owing $320k.

We are being given conflicting information from friends as to how this will affect our full pension in approximately six years. We have been advised that we need to be rid of our investment properties a minimum of five years prior to retirement to receive a full pension. Is this correct? There is no way we can keep them after retirement as we are negative gearing them.

Read more: JobSeeker and the Age Pension

A. I am not sure who has advised you that you need to sell your properties five years before you retire, but that is not correct. That is, if you are planning to sell the properties.

If you are planning to sell your properties, that money will become an asset and what your do with that money could also have an impact on the income test.

If you put the money into a deposit account, it will be deemed to be earning a certain amount of interest. This income is then assessed as part of the income test.

Read more: Superannuation work test explained

Given property market trends, your two investment properties could be worth considerably more money by the time you sell them.

This could give you more assets than you are currently thinking about when it comes time for your Age Pension assessment.

The conflicting information you may have received regarding the five-year deadline to get rid of your properties may relate to what you do with the properties, if you are not intending to sell them.

Read more: How to sell excess land and keep the Age Pension

If you are planning to pass the investment properties to children, or in fact transfer the titles to anyone else without selling them, then you will need to do this five years prior to retirement.

If you pass the titles of the properties to someone else without receiving compensation in return, the full amount will be treated as a gift and will affect the amount of pension you’ll receive.

If you sell or transfer an income or asset and you get less than its value or nothing in return, that is considered a gift.

Gifts are assessed to see how they reduce your assets and whether they go over the allowable amount for gifting.

You are allowed to gift up to $10,000 in one financial year or up to $30,000 over five financial years, but this cannot include more than $10,000 in a single financial year.

If you gift over this amount, Services Australia will count the excess in your assets test and also apply deeming and include it in your income test.

Any gifts you made in the past five years may count in your income and assets tests.

Are you aware of the rules around gifting? Let us know in the comments section below.

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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.