What are the pension implications of buying a second house?

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Beverley wants to buy a cheap house for her son and wants to know if it will affect her pension.

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Q. Beverley
I am currently living in my own home. If I were to buy a second home for my son and myself, how will it affect my Age Pension? The second property is valued at only $135,000.

A. You haven’t given me a lot of information, but I will run through some of the scenarios and what they will mean for your Age Pension in this situation.

Firstly, if you are buying the house outright from your current funds, then this second house will be assessed as an asset by Centrelink.

If you are single, you can hold up to $268,000 in assets and still claim the full Age Pension, so your eligibility will depend on the value of your other assets.

If your son pays board in the house, Centrelink does not consider board and lodging from immediate family members as income, therefore, you should be able to receive contributions from your children towards their living expenses without your Age Pension being affected.

If your son is contributing towards the purchase of the house, then only the portion of the house that you pay for and own will be assessed as an asset.

If you are taking out a loan to purchase the property, only the portion of the house that you own will be treated as an asset by Centrelink.

If you are going to live in the newly purchased property with your son, then your current property will become the assessable Centrelink asset.

This is the scenario that could have the biggest effect on your pension. If your current property is worth more than the property you are purchasing, and more than the $268,000 mentioned above, you may no longer receive the full Age Pension.

If the property is valued at more than $583,000 and you are single, then you may no longer receive an Age Pension payment.

Have you purchased property for your adult children? What were the financial implications of your decision? What advice would you give to others in this situation?

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Written by Ben

2 Comments

Total Comments: 2
  1. 0
    0

    Also look at the Gifting Rules applying to the pension, especially if someone’s name is written in the title deeds.

  2. 0
    0

    If a loan is taken out to purchase it will only reduce asset value if secured against the new property, not current home lived in.
    Also assessable asset will depend on percent ownership showing on title and whether gifting is considered eg joint ownership but she contributed more than 50%


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