How does Centrelink assess my deposit?
YOURLifeChoices subscriber Victoria is looking after her mother’s interests and would like to know how Centrelink assess any deposit paid to enter a retirement village.
It appears a lot of retirement villages only have a lease option. My mother is looking at a unit that will cost $365,000 but that amount is guaranteed to be repaid when mum leaves. How does Centrelink view the $365,000 paid? Is the person classed as being a homeowner for pension purposes? Also, a lot of the expense is in the body corporate in these retirement villages. Is there any protection for tenants on how much the body corporate can be increased annually?
A. Provided by Centrelink
The amount you pay as an entry contribution to a retirement village can affect whether you are classified as a homeowner for pension purposes or entitled to Rent Assistance.
Currently, if the amount of the entry contribution is higher than the ‘Extra Allowable Amount’, then:
- you will be treated as a homeowner of the retirement village unit, and the "homeowner" pensions assets test will apply
- the entry contribution will not be counted as an asset for pension purposes
- if retained, the vacated former home is assessed as an asset, except where the customer receives a substantial level of care from the retirement village, in which case the former home is exempt for two years.
- Rent Assistance is not payable
The ‘Extra Allowable Amount’ is the difference between the non-homeowner and the homeowner asset test limits at the time the arrangement is entered into. From 1 January 2012, the extra allowable amount is $135,000 for singles and each member of an illness separated couple. For couples who are not illness separated, the Extra Allowable Amount is $67,500 each.
If your entry contribution is equal to or less than the extra allowable amount at the time of entry, you are assessed as a non-homeowner. Your entry contribution will count as an asset. You may qualify for Rent Assistance.
If you pay an entry contribution for the right to live in a retirement village, you will need to provide the ‘purchase contact’ or ‘entry agreement’ to Centrelink in order for us to calculate the amount of Rent Assistance you may be entitled to receive. The contract or agreement should contain details about the ongoing maintenance or service fees you may be required to pay. Retirement villages are administered under specific state-based retirement village legislation.
With regards to body corporate fees, as retirement villages are governed by state and territory law, the protection offered to residents can vary. Before your mother signs any agreement, she should have the paperwork checked by a lawyer who specialises in such agreements. Also, it may be worthwhile contacting the residents association of the village in which she is interested.
If you need further clarification or would like to have this explained in relation to your own circumstances, you can call a Financial Information Services officer on 13 2300
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