Mary wants to care for her mother but is concerned that might mean she will lose her Age Pension.
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Q. Mary
My mum is on an Age Pension and is thinking of moving in with me so that I can look after her. Friends have told me that if she leaves her family home – which is in her name – that Centrelink will no longer pay her the Age Pension. Is this correct?
A. There are a number of factors to consider, but, yes, essentially your friends are correct.
If your mother no longer resides in a home that is in her name, it will be included as an asset in the assets test for the Age Pension and, depending on the value of the property (and her other assets), it may result in her pension being cut.
However, depending on your family situation, you can enter into a granny flat interest arrangement, that can be used in these situations, so that your mother can continue to receive the Age Pension if she transfers her property to your name in exchange for being able to live with you for the rest of her life.
Under a granny flat interest arrangement, an individual ‘pays’ for the right to live in accommodation for the rest of their life.
Granny flat interest rules are designed to recognise arrangements made by families to support elderly people and the rules do not have any test on age or relationship, nor do they put a measure on the support provided. The rules do, however, reduce the effect of gifting to make the costs involved in securing the right to live in the accommodation for life less prohibitive.
The value of a granny flat interest is simply the amount paid for that interest, be it $1 or $1 million, as long as the person:
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- transfers the title of their home, or
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- pays for the construction and fit-out of premises, or
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- purchases property, or contributes to the purchase of a property in another person’s name in return for a life interest or the right to live in that accommodation for life.
Your mother may be subject to a reasonableness test if she transfers assets into your name. If the amount of money or value of property exchanged is more than the value of the granny flat interest, the excess is considered to be a deprived asset and, under gifting rules, could affect the amount of pension she is paid.
Services Australia also needs to know what was transferred to secure the granny flat right, in order to determine if your mother is depriving herself of assets.
Hopefully, this will help you to determine how your mother’s Age Pension may be affected, but you can also contact Services Australia to discuss your individual circumstances.
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