When does your house cease to be your primary residence?

Paul wants to know what happens to his pension if he pays rent to live in a holiday house?


Q. Paul
Can pensioners rent a property to use as a holiday/extra home when they own their own home outright (no mortgage) and collect the pension? And if they do, will this affect their pension?

They would be renting from a relative (their investment property) but it will be via a real estate agent, so funds will not be being passed directly from pensioner to relative. Rent would also be indicative of what is being charged in the area, so no discounts would be applied. The reasons are that the pensioners would like a holiday home to use on a regular basis and can afford to do this, they don’t want to sell or use the equity in their current home as it is close to family and they don’t want it to affect their pension.

Read: Plea for early pension access

A. It sounds like you are just talking about taking holidays, which you are allowed to do without having an effect on your pension. Your principal home will continue to be an exempt asset, unless you choose to rent it out and earn a profit while you are not living in it.

Your house will continue to be assessed as your principal home and you will be considered a homeowner, for any absence up to 12 months. After a 12-month temporary absence your home will no longer be considered your primary residence.

If, however, you leave your home and do not intend to return to it at some stage, the home will be treated as an assessable asset, which could affect your pension payment.

Read: Ten reasons wealthy homeowners shouldn’t receive the pension

Even if you live in the home that you own for only five months a year and live the rest of the year in holiday rental accommodation, the home that you own will remain your principal home for Centrelink purposes.

While these rules do not apply in your situation, there are also reasons that you can leave your primary place of residence for more than a 12-month period.

These include to care for another person in a private residence, entering into a care situation, or loss or damage to your principal place of residence.

Read: Major changes to Centrelink payments

Another situation that has become more prominent during the pandemic are the rules for Australians who have been stranded overseas.

When a person is temporarily absent from Australia, if the department is satisfied that they are unable to return due to circumstances beyond their control, there will be an extension granted to the period for which the home will be considered a primary residence.

As long as your primary residence remains vacant while you are living elsewhere and you return to it regularly, renting out another property should have no effect on your Age Pension.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben