Will downsizing affect my pension?

Elise is considering moving to be closer to her sons and their families, but is unsure how the proceeds of her house sale and gifting may affect her Age Pension.

Q. Elise
I’m a 71-year-old widow and I’m currently receiving the full Age Pension. I’ve been considering downsizing my house and moving nearer to my sons and have the following questions:

1. I am assuming that the proceeds which I will get from the sale of my home will be $1.2 million. So if I buy an apartment for $800,000, how will it affect my pension? Is it just simply $1.50 less for every $1000 above $196,750?

2. If I give $200,000 to my sons for their mortgage, how will that affect my pension?

A. You’re on the right track, but there are a few things which you should first consider.

Firstly, if you sell your home then the proceeds are classed as an exempt asset for up to 12 months, while you’re in the process of buying a new home. This can be extended to 24 months under special circumstances. However, if you put the money into an interest-bearing account, you will be assessed on the income earned.

If you buy an apartment, this will obviously be an exempt asset. The remainder will be included in your assets. If your total assets, which includes shares, cars, household contents, etc., exceed the allowable limits, which is $196,750 until 30 June 2014, then your pension will be reduced by $1.50 for every $1000 over the limit. To find out more about what is considered an assessable asset, visit HumanServices.gov.au.

You will also need to be careful about gifting money to your sons, as there are limits on this. You can gift up to $10,000 per year, but no more than $30,000 in a five-year period. Any amount above this is still counted under the asset test as a deprived asset.

It’s also worth bearing in mind that your pension payment is calculated under both the income and asset tests and that you are paid the lesser amount of the two.

Before you make any final decision, I would suggest that you contact Centrelink to discuss your individual circumstances. You can call on 13 2300.

Written by Debbie McTaggart