If you’re a retiree, there might come a time when you decide to sell your home. There may be financial reasons, or you might want to move closer to family. Or perhaps your current home is too big and doesn’t meet your needs anymore.
When you’re selling and buying, there may be a time when you have the money from the sale of your home, but you haven’t found where you want to buy yet.
You could have a lot of cash sitting in a bank account ready to purchase your new place.
Usually, if you have money in the bank it can affect your pension. The good news is that Services Australia has a special rule for how the proceeds from the sale of your home are considered, while you’re waiting to buy or build your new home.
The money you get from the sale, which you plan on using to buy or build your new home, doesn’t count towards the assets test for 12 months from the date you exchanged contracts. The funds can be exempted for an additional 12 months under special circumstances.
This means the funds you’ve set aside for your new place may not affect your pension under the assets test for a possible 24 months.
So, if you sold your home for $700,000, and are looking to buy a new home for $500,000, only $200,000 is assessable as an asset for 12 months from the date of exchange.
All $700,000 is sitting in the bank though, so we’ll deem interest on the total balance.
This rule only applies when you’ve sold your principal home. It doesn’t apply for the sale of any other real estate you may own.
When you tell us you’ve sold your home, we will ask you to estimate how much you think you’re going to spend on your new place. However, you’re not bound to this figure.
That means that when you do finally buy your new place, there won’t be any implications for what you were paid while you were looking for or building your new home, even if the amount you eventually spend is different to what you had expected to.
Services Australia will still consider you to be a homeowner while you’re looking for your new place during the exemption period, but you may be eligible for Rent Assistance if you have to pay for rental accommodation while looking for, or building, your new home.
There are other things you might need to consider when selling your home. There is the possibility of injecting funds into superannuation through downsizer contributions, or you may have capital gains tax implications depending on how you used the property in the past.
If you are thinking of selling, I would strongly recommend you make an appointment to speak to one of our Financial Information Service (FIS) Officers. If you’d like to speak to a FIS Officer, call Services Australia on 132 300.
That’s all for this month. See you next time.
Hank Jongen is general manager, Services Australia
Do you have a question for Hank? Email [email protected] or share your thoughts in the comments section below?
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