The pension ramifications of downsizing the family home.
Debbie helps Toby understand the pension ramifications of downsizing his family home.
I am 69 and on a part Age Pension. I’m considering selling the family home and downsizing to something smaller and more manageable. My current home is probably worth $550,000 and I’m hoping to have a little extra left over to spend on the extra costs which come with moving home and perhaps some travel. What I need to know is how Centrelink might view this property transaction. Am I in danger of losing my Age Pension?
A. Downsizing is a popular means by which to release the equity in your home, as well as moving to somewhere more manageable. Of course, it’s important to understand the impact to your Age Pension of having additional funds at your disposal.
Firstly, when you sell your principal place of residence, you have 12 months in which to purchase another home. During this time it is important to note that only the proceeds from the sale of your property which you plan on spending on a new home, are classed as an exempt asset. Centrelink will require you to advise it of how much from the proceeds of the sale will not be going towards the purchase of your new home.
Under certain circumstances, for example if you are moving into a new build and experience a delay which is beyond your control, or are legitimately struggling to find a new home, the exemption under the asset-free period can be extended to 24 months.
While the funds are exempt during the asset-free period, any income derived from the funds will be subject to the income test. This may affect your Age Pension entitlement or payment rate.
Once you have found a new home, the exemption ends as soon as you move into the house, as the new residence is deemed liveable. Making renovations and improvements for lifestyle reasons would not extend the exemption period. Currently, if you are a single homeowner, you can hold assets to the value of $748,250 before you lose your part Age Pension.
During the time you are looking for a new property, you may find that you need to enter rental accommodation. If this is the case, then you may be entitled to Rent Assistance. If you are eligible for Rent Assistance you can receive up to $124.00 per fortnight. Rent Assistance is calculated on how much rent you actually pay. If you pay less than $110.00, you will receive no assistance and the maximum amount is only paid for rental payments over $275.33. To find out if you are eligible for Rent Assistance, simply advise Centrelink when your circumstances change and it will advise what payments, if any, you will receive.
Most state and territory governments have abolished stamp duty concessions for pensioners purchasing property, but there are still some available. You should contact your state revenue office for further details.
Before making any financial decisions, you should seek independent financial advice. If you don’t have a financial planner, you can find one in your area by visiting the National Information Centre for Retirement Investments Inc (NICRI)
Find out more about Rent Assistance by visiting HumanServices.gov.au
Find a planner – NICRI.org.au