Will downsizing affect my pension?

Elise is unsure how the proceeds of her house sale and gifting may affect her Age Pension.

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.





    COMMENTS

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    joy44
    24th Mar 2014
    12:21pm
    Elise,
    Make an appointment with the financial advisor at centrelink.Once you have had a chat they write down all the information they have talked to you about .We have done this a couple of times and found them very helpful
    Grateful
    24th Mar 2014
    7:27pm
    Depends on what else you have got as an asset or income. Impossible to give any advice on what you have stated. But, gets back to basics, if you have a $1.2 million asset do you really NEED an additional government handout like a poor person???
    Nightshade
    25th Mar 2014
    9:47am
    My house is worth $600.000 on the market - I am 1/2 of a millionaire - my house is a dump & I have no money to heat it let alone fix it - I still have an outside toilet - people say $600.000 wow your rich - I am somehow rich great !
    When I sell up & relocate I will have very little left - I need a bit of furniture at least - cheap & nasty is okay - the stuff I have now could easily go out for the hard rubbish collection & it would not be scavenged trust me.
    Bes
    24th Mar 2014
    12:26pm
    http://www.finance.gov.au/publications/parliamentarians-reporting/former_parliamentarians_expenditure_P31.html
    Check the above web page to see where Australian Tax is being paid to ex politicians who are now (and have been for years) retired and contribute NOTHING more to Australia.
    In Australia we are governed by the original system bestowed upon us by England.
    Six colonies with their own government and state Governor and a Federal government and Governor General.
    Seven governments and 13 houses of Parliament, all to be paid for (inclusive of the above retired list) before one cent is available for the upkeep of Australia.
    It ain't broke but it sure is becoming uneconomical! Time for a Republic??
    Nightshade
    25th Mar 2014
    9:56am
    Actually Mr. & Mrs. Mack several houses down - their brick house is probably valued at one million dollars = $1.000.000 or over - on today's market - the green Holden Torana is an antique - $1.000 worth to a collector or $50.00 to have removed - their furniture is at least 50 years old except for a couple of TV tables - you know those $20.00 tables that fold away - for eating in front of the TV set. Like me they have an old TV set still & a set top box from Coles = $30.00
    RICH - RICH - HEY MA WE'RE RICH.....
    Nightshade
    25th Mar 2014
    9:58am
    p.s.
    Mr. Mack did some work on the kitchen & bathroom years ago with the help of a mate & their toilet is inside -
    Nightshade
    25th Mar 2014
    10:02am
    Mary God bless her had holes in her floor - but hey she put a piece of board over them & a cheap rug on top.
    She had a piano though - $250.00 her kids sold it for upon her death.
    Nightshade
    25th Mar 2014
    10:10am
    Mr. & Mrs. Boccabella lived 2 doors down in a weatherboard dump - 3 kids all doing well - no one came to visit - he died - after the funeral they came & took a frail Mrs. Boccabella away to live in the back room of their house - last we heard she passed away 4 years later. After she died the son - A BUILDER of all things - demolished the old broken down house that he had let his parents live in for all those years - & built 2 town houses which they sold for $245.000 each...
    After Mr.s Boccabella dies - before she died - the builders son Danny lived there with his girlfriend - Mrs. Boccabella's grandson Danny.
    Nightshade
    25th Mar 2014
    10:15am
    Ruby across the road - frail - old - 2 daughters - who knows what ever happened to her - one minute she was there & the next she had vanished & the house was sold - quick as a wink like. No for sale sign no auction nothing - maybe they were afraid that Ruby's friends & neighbors would ask questions.
    Nightshade
    25th Mar 2014
    10:18am
    The house next door - her grandson came to live with her & she became ill - then slowly iller & iller & then we did not see her at all - she just disappeared - then there was an auction. &580.000 was the last bid - then the went in to negotiate the final price.
    btony
    25th Mar 2014
    11:02am
    Why not buy a 500,000 apartment then live on the rest, instead of trying to offload money just to keep your pension. Just how much does a 71 yr old need to live on ?
    biddi
    26th Mar 2014
    2:26pm
    Sold my house and bought a house for $500K, resulting in 100K
    'change'. I lost my pension but feel so happy to be free of
    Centrelink and totally independant.
    TerryJ
    25th Mar 2014
    11:48am
    I agree with other commenters about using your assets to look after yourself NOT your kids. Get proper financial advice. My mother-in-law is in a retirement village reluctantly because she didn't want to use her asset (her house) to finance the move to a retirement village because she wanted her girls to benefit from her house. She said she worked hard all those years to pay off the house so she had something to leave her kids. I told her she had worked hard all those years to have something to look after HERSELF when she got older, her kids can look after themselves. Now she is comfortable, being looked after (she is in early dementia) AND her kids will probably still have something when she is gone. But first and foremost is looking after YOURSELF, forget helping the kids. This is also the reason why they have rules about gifting - it beggars belief that people want to give away hundreds of thousands of dollars to their kids so they can get an old age pension they really don't need. Forget handouts people, the old age pension will be a thing of the past in the next 20 or so years. Young people should be planning their (self funded) retirements NOW.
    Grateful
    25th Mar 2014
    12:40pm
    Totally agree TerryJ. If one doesn't NEED that $200,000 and happy to give it away to their kids, then they don't NEED any government assistance. Use that $200,000 to support yourself and when THAT runs out (don't forget that you wanted to give it away for nothing) then apply for the pension (of course, if you haven't got more stashed away).
    Oars
    28th Mar 2014
    11:04am
    Terry you are spot on. These days the kids have been given many opportunities- some took advantage- others just blow it. We could never offord to have trtrip around the world before we settled down like the kids do these days. No, let them fend for themselves - after they turn 21 yrs old- kick them out and let them SURVIVE. That's what they will need to do sooner than later. Have a french made to tuck you in if you are a "cheeky bloke" or get the gardener to "share a cuppa" if your a sheila. Live now- they will survive- so the song goes.
    scorps
    26th Mar 2014
    4:24pm
    I want to sell my house because its too big an empty nest and needs too much maintenance to keep it up to scratch. Would love to sell it and have enough money to live on for the rest of my life, but dont think there'll be quite enough for that. I dont really want to buy anything else, at least not for awhile, as not too sure where will want to live permanently and dont want to just swap one problem for another. Renting would be good I think and would allow moving around as well as travel. If the money does run out though, would a centrelink pension be enough to live on if you had no assets at all? I reckon we could do with a register of single oldies in similar situations and maybe get some cooperative living going. what do you reckon ?
    PD
    16th Feb 2016
    11:02am
    In the answer to this question the following is stated - "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".
    What could these be?
    In our case we want to seel the house then go do the big lap and then look to replace the residence. That may take longer than 12 months. Could this be one reason for an extension?


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