14th Jul 2016
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Does a home business make a house an assessed asset?
Man on the phone to centrelink discussing whether or not his home will be considered an asset

Rod is keen to retire and run a small trailer parts business from home. However, he’s been told that a home business will mean his house is assessed as an asset – is this true?

Q. Rod,
I am 66 years old and run a small part-time trailer parts business from my shed at home, from which I make between $7000 to $10,000 per year.

I would like to retire from my main job and apply for the Age Pension and supplement it with my home-based business.

I have been told my house will be classed as an asset if I work from home – is this correct?

A. What you have been told isn’t strictly correct. If you use any part of your home, such as a garage or office, solely for the purpose of running a business, then Centrelink will count a portion of your home’s value as an asset, but not the whole value.

Unfortunately, as you would be classed as being self employed, you would not be eligible for the Work Bonus, which would enable you to earn $250 per fortnight before your Age Pension is affected.

I would suggest that you make an appointment to see a Centrelink Financial Information Services officer to discuss your situation or if you have an accountant with Centrelink experience, you could ask for advice.

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    COMMENTS

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    18th Jul 2016
    11:09am
    Using any part of your home may also allow you to certain tax advantages for it's upkeep as a business.
    Tom Tank
    18th Jul 2016
    11:18am
    Exactly Fast Eddie. I used to work from home and could claim a percentage of electricity use etc. If you can claim on tax then it will be considered to be an asset.
    MICK
    18th Jul 2016
    11:55am
    And if/when you sell you will be paying Capital Gains Tax on the portion you were using as a business. Good luck.
    Sundays
    18th Jul 2016
    12:59pm
    Check with Centrelink because money from 'hobbies' is treated differently. This used to be $5,000 per year and people making candles, restoring furniture etc did not have their pension reduced, or part of their home treated as an asset
    Adrianus
    18th Jul 2016
    1:02pm
    What sort of tax advantages would apply to Rod with his income at less than $10,000pa?
    Anonymous
    18th Jul 2016
    1:36pm
    Frank, if Rod classifies what he is doing as a spare-time or part time activity pursued for pleasure and/or recreation and his turnover is less than $20,000 p.a. he would pay no tax and therefore not be entitled to tax advantages. One cannot claim back tax which they have not paid.
    *Imagine*
    18th Jul 2016
    11:43am
    And yet another example of our ridiculous retirement income "system". We have a positive work focussed person here, who has to worry about losing part of his pension because he has the work ethic and desire to help himself. Then, we have a whole army of government employees (costing millions) who are determined to ensure that he doesn't get 50 cents more than he should, all in the name of equity and safety nets. Pay the man a decent, basic pension to which he is entitled and let him use his nouse to make more money (on which he will pay taxes) if he wishes. What is wrong with Australian administrators that drive them to be so blind as not to see the failures in our inequitable retirement income system that is based on some types of income and some types of asset?
    MICK
    18th Jul 2016
    11:56am
    Spot on. Those who try to make a future for themselves have become targets.
    Adrianus
    18th Jul 2016
    1:05pm
    When Rod was working full time he got taxed more the harder he worked, so what has changed?
    Anonymous
    18th Jul 2016
    1:10pm
    Trying to further oneself has more penalties than being a deadbeat on the dole. To work hard and make something of your life has become a disincentive due to ever-changing legislation geared for the government to confiscate any of your hard earned gains/savings. This country is rapidly becoming socialist in the way it is being governed.
    *Imagine*
    18th Jul 2016
    6:58pm
    Frank - what has changed and what is totally indefensible even by Abbot and Hockey standards, or those even further to the right, is that Rod may have paid tax when he was earning big wages but he would have had to be earning heaps under PAYE be penalised like he is as a pensioner i.e. to have his income reduced by fifty cents in the dollar, and his place of work seen as a saleable asset that would see him taxed at $1.50 (soon to be $3) per fortnight for every $1000 of property value. The "system" is aimed to make the plebs all equally poor. A shortsighted policy if ever there was one. Wealth is created when the masses have money to spend. No point in giving tax cuts to business if there is nobody to buy the goods and services that they provide.
    eggles01
    19th Jul 2016
    3:37am
    to imagine,mick and fast eddie,go back to school and learn to read,he is not on the pension yet!!! you can easily make out you lot are greens/labor bill shortens fools as you are preaching shortens language the same as :the medicare is going to be scrapped and you will not be able to see a doctor as you will not be able to afford it:, for your information the medical centre I see my doctor as has now stopped bulk billing because you lot of greens/labor HWOS,(by the way HWOS is not misspelt,the first letter is HUMAN) you work out the rest, would not pass the $7 per visit for the first 10 visits,a pensioner has now got to pay $90 for the visit and they get $37 back from medicare,you fear mongering fools!!!,
    *Imagine*
    19th Jul 2016
    9:01am
    Oh dear - poor eggles01. Sounds like you really do need the doctor.
    If you read the above properly it informs you that Rod is planning to go on the pension and wants to know if his workshop will be an asset if he does. That is what we are responding to. And for your information I did not vote labor and would never vote for the Greens in a fit. I always think carefully before I vote and place the vote where I believe it will do maximum good. This last election it was Xenophon, next it may be ALP or LNP who knows? Now please relax and destress, you are not doing your blood pressure any good.
    MICK
    19th Jul 2016
    9:17am
    Good response to a rusted on response Imagine. It never ceases to amaze me that the Liberal Party has its stooges on websites denigrating any view of the world other than its own as being from Labor of Greens voters.
    For the record I also did not vote Labor or Greens. Xenophon got back into office on more than good looks. People voted for him and for good reason.
    ex PS
    21st Jul 2016
    6:45am
    Imagine, you make some good points, but everyone needs to recognize that administrators do not set the rules and guidelines that they have to work by.
    Don't get angry at the administrators, place the blame at the feet of the politicians who set the rules.
    MICK
    18th Jul 2016
    11:54am
    As always people who try to do the right thing and avoid the pension and other welfare benefits are penalised. I find the rules regarding tax on your own home outrageous and in all areas those who help themselves are penalised from pillar to post.
    It's no wonder people hit the pension and welfare as they do.
    Rae
    18th Jul 2016
    6:26pm
    It was recently pointed out Mick that the aged pension is a considerable asset paid for by the taxpayers.

    If you had to save that money to buy an allocated pension equal to the aged pension and the several thousands of dollars discounts it gives you then it would be worth hundreds of thousands of dollars.

    Self funded retirees are denied this asset due to their prudence and diligence.

    Some did not even get tax concessions.

    Not very fair at all.
    Alex
    18th Jul 2016
    7:59pm
    Rae, people are not being denied the pension because of virtues they may have such as prudence and diligence, they are denied the pension becasue we have let our Government get away with not paying it. All retirees have paid for the pension by virtue of a 7.5% levy on earnings that has been in place since 1946. Australia is the only country that does not honour its obligation to pay a contributory aged pension from the levy it imposed and still collects for that purpose. Not everyone had the opportunity to have superannuation and save no matter how prudent and diligent they were and people who receive the pension should not be constantly assailed.
    Yes those of us who have superannuation are being deprived of the aged pension we have paid for but that is not a reason to argue that people who do not have superannuation or other savings should not get a pension. Our Government expects people to save for their retirement two and three times over, it penalizes them for anything extra they might earn to pay for major expenses, and expects them to still work to support themselves well into old age.
    Supernan
    18th Jul 2016
    12:04pm
    Suggestion : You could set up a Private Company to run your business, pay your self a wage which allows you to claim the work bonus. And claim % of power, property insurance, telephone & internet as company expenses & reimbursed youself that way. You need to see a good CPA or Chartered Accountant to make sure you set it up properly & understand it. Your house is always counted as an asset if you have an asset based pension.
    Sundays
    18th Jul 2016
    12:55pm
    Supernan, that is not quite right. Your family home is exempt from the Asset test which is why some people are able to live in very expensive homes, but qualify for the pension.
    HarrysOpinion
    18th Jul 2016
    12:07pm
    In Rod's case (subject of this story) He is not earning enough to worry about income tax as his earnings are below $18,200 pa.
    If you are an Australian resident for tax purposes, the first $18,200 of your yearly income is not taxed. This is called the tax-free threshold. Therefore, by claiming the threshold, you reduce the amount of tax that is withheld from your pay during the year.

    In 2015–16 the $18,200 tax-free threshold for pay as you go (PAYG) withholding purposes is equivalent to:

    $350 a week
    $700 a fortnight
    $1,517 a month.
    When your taxable income exceeds your tax-free threshold you pay tax on the excess.
    HarrysOpinion
    18th Jul 2016
    12:17pm
    Frankly, if Rod has the tenacity to become Self-Employed at his retirement age, the government should pay people like him a reward "Bonus" instead of making their lives more complicated.
    in2sunset
    18th Jul 2016
    12:26pm
    Agree HS - stopping the pensioners bonus scheme was a huge disincentive.
    Adrianus
    18th Jul 2016
    1:10pm
    What if Rod was self employed at half his retirement age? Should that tenacity be rewarded also?
    HarrysOpinion
    18th Jul 2016
    4:13pm
    Frank - At half his retirement age of 33.5 yrs, Rod being self employed, could be / should be, earning more then $10,000 per year. If he couldn't, then he'd be better in full time employment until his retirement or if he can't find a job there's always NewsStart and possibility of retraining for an occupation. Subject is about older people not younger people who have a 90% better opportunity to gain employment then older people For example, when I could not find work in 1976 (age 29) I started my own Painting & Decorating business and self advertised mail box to mail box, day in day out, until I landed a contract. By chance I succeeded a contract with a Real Estate Agent heavily into Renovations of properties in an affluent area. When this ended I gained full time employment in another industry where I started at the lower rung of the ladder and succeeded to middle line management. By age of 33, I earned the role of a State Manager. At such a young age young people need self determination, belief in their ability of skills, a mentor and training. Older persons at time of retirement who adapt their skill to operating a small self-employed business out of a garage or home-office do so knowing that any extra income they earn will reduce their pension entitlement payments so that's good for the tax payers and welfare expenditure. The government should refocus and encourage older people to continue working be it part-time or being self-employed and reward them for their tenacity with an annual bonus. After all doesn't the government splash out vast sums of bonus ($10,000 ?) to some corporate employers to employ people? Problem is that corporate employers don't employ many older people. So the government should have a separate bonus scheme for the elderly who continue to work and save the government welfare expenditure.
    jackie
    18th Jul 2016
    12:20pm
    Why should a senior person be punished for working from their own home? He is risks exposing himself to home robbery and being sued for injury. The same if he were renting a business and he could claim on the rent. What a stupid rule. All politicians can work when they retire and still get the full pension. These needs to be changed.
    Anonymous
    18th Jul 2016
    2:51pm
    Jackie, we are headed to becoming a welfare state and this is what quite a few politicians, along with their "moneyed" friends want. This is a power-hungry mentality fuelled by the desire for more and more wealth. You may well think that politicians have enough wealth and, yes, they do,but they are being continually pushed (and paid under the table) by big business to change existing or enact new legislation with the sole purpose of making more money. This greed is infectious and rampant in ANY government. Politicians are only in office to fill their pockets with money and acquire as much graft as possible while they can. They are as full of false promises as they are bullshit and there are VERY FEW who can be trusted, and those won't last long in office as they are not in collusion with the vast corrupt, lying, egotistic majority.
    We will see even more corruption, theivery, and greed with this newly returned group of sods as the writing is on the wall that this is their last reprieve and they will be extorting all they possibly can over their next last few years!
    HarrysOpinion
    18th Jul 2016
    4:38pm
    This begs the question, " How can politicians be allowed to make welfare policies and legislated rules when they are not subject to the same impact of rules on their lives when they retire" ?
    The whole concept of government integrity stinks of self-serving, careless duty of care and as Fast Eddie suggests, corruption.
    Alex
    18th Jul 2016
    2:51pm
    This is the only country in the world where retirees are not allowed to do some work or earn a little extra income without having their aged pension cut.
    Anonymous
    18th Jul 2016
    2:53pm
    This is also the only country in the world where the retirement age is as old as 70!
    marls
    18th Jul 2016
    7:59pm
    its also one of the very few countries where the aged pension is means tested. my mother in europe gets, her australian pension, italian pension, my fathers pension as he is deceased, and a small pension from belgium as my father was in the war. in europe when the spouse dies the other partner is entitle the the deceased part of the pension
    Anonymous
    18th Jul 2016
    11:22pm
    The surviving spouse in the U.S. gets their deceased partner's pension, as well. The government here certainly offers no favours!! The useless lot can burn in hell.
    Aussiefrog
    18th Jul 2016
    3:16pm
    What about if you have an investment property valued $150,000 and rent it $200/week, would you lose any of your pension?
    Alex
    18th Jul 2016
    4:13pm
    If your income is greater than the current amount allowable about $81/week if you are single or $144/week for a couple you will lose some of your pension for each dollar you earn over the allowed amount.
    What you will lose in total depends on your other assets and income and on whether there are outgoings from your property to offset the rent. It also depends on whether your are considering a couple of a single person.
    HarrysOpinion
    18th Jul 2016
    4:24pm
    Yes. The gross rental income will reduce your pension by the Deemed Income Rule. The rental property will be counted in your Assets Test and subject to the Taper rule if it exceeds the maximum allowed.
    Alex
    18th Jul 2016
    7:37pm
    Correction of my terrible typing. I got distracted as I wrote this and had not finished editing the last sentence when I posted.
    'What you will lose in total depends on your other assets and income and on whether there are outgoings from your property that offset the rent. It also depends on whether the assets and income considered are for a couple or single person.'
    Aussiefrog
    19th Jul 2016
    6:11am
    Thank you my friends, I appreciate your replies.
    Robyn
    20th Jul 2016
    4:02pm
    Sorry to come in late on this discussion. My husband and I ran a bed & breakfast for 10 years. We were on Newstart allowance and Centrelink wanted to classify part of our house (ie the area where the guests slept) as an asset. After objecting, our case finally went to the tribunal and because we could argue that the guests also came to the main part of the house to eat, and because the b&b rooms were also used for friends and family to stay, we were assessed on income only.


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