How early should we 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
My husband and I will both retire in six and five years respectively. We live in our own home valued at about $700,000. We will have this loan paid off by the time we retire.

Hubby has an investment property with a current estimated value of $340,000, but we still owe approximately $250,000. We also have a joint investment property with a current estimated value of $360,000 with $320,000 owing.

We are being given conflicting information from friends as to how this will affect our 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: 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 you 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 earning interest which is assessed as part of the income test.

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

For instance, if you plan to pass the properties to children, or transfer the titles to anyone else without selling them, you will need to do this five years prior to retirement.

And if you pass the titles to someone else without compensation, that will be treated as a gift and will affect eligibility for the pension.

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. 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.

For more information, visit Services Australia here.

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

YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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