27th Feb 2010
Change of residence - will it affect their pension?
Author: YourLifeChoices

Q. Stuart
My parents are currently on the full pension and would not survive too well without it. They now live in a unit in Yeronga which they own. It is not a very pleasant unit as it is very closed in, dark and cold in winter. They are keen to get out of the unit and move to a more healthy environment. I am proposing to buy a house for them to move into. They would then rent out the unit and give me the full amount of this rental to help me pay the mortgage on the house. I anticipate that they would get in the order of $360 pw for the unit.

The most important issue is how this move would affect their pension. Would it be possible to get a ruling on this as they need the pension to meet day to day expenses and could not afford a pension drop. Therefore it would be essential to get this ruling prior to us continuing with the purchase of the house. Who would I write to to get a ruling and what information would they need?

A. Supplied by Hank Jongen, General Manager, Centrelink
Before making any decisions, it's probably a good idea for you and your parents to meet with a Centrelink Financial Information Officer (FISO). They can look at your parents' circumstances and provide information about the impact this may have on their Centrelink payments.

Centrelink's Financial Information Service is free and confidential and helps people to make informed decisions about investment and financial matters for their current and future financial needs. To make an appointment to speak with a FISO call 13 2300.

The answer to this question is dependent upon a number of factors, including the value of the home at Yeronga and any other income or assets. It would also depend on whether the move to your property was going to be permanent. From what you've told me, I'm assuming the move from Yeronga is going to be a permanent one, and that the title of the new property is in your name (not your parents). I've based the information below on this situation.

The value of their unit at Yeronga will become an assessable asset and your parents will be considered to be 'non-homeowners' (assuming the new house isn't in their name). Age Pension is subject to income and asset testing, which means your parents income and assets is used to work out the rate of payment that they receive. The test that results in the greatest payment reduction is the one used.

In order to continue receiving the full pension rate, their total combined assets would need to be less than $368,000. Assets over these amounts reduce pension by $1.50 per fortnight for every $1,000 above the limit (single and couple combined).

The income (ie. the rent money your parents receive) from the unit at Yeronga will be considered assessable income. This means that the net income (the gross income received less any interest paid and allowable deductions) will be assessed along with income from any other source. If your parents income is higher than $240 per fortnight (for a couple), it will reduce their rate of Age Pensions by 20 cents in the dollar each. In this case, their pension will be reduced by around $48 per fortnight.

If your parents have no interest in their new principle home, they may be eligible for Rent Assistance. More information about Rent Assistance is available here - Rent Assistance

You should also keep in mind that any rental income you receive will be considered assessable income for tax purposes.


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