Centrelink Q&A: Can I upsize so I can claim the Age Pension?

Font Size:

Judy wants to sell her home and investment property to become eligible for the pension. Is this a legitimate tactic.

•••

Q. Judy
I am a self-funded retiree and am thinking of selling my investment property and my current residential property and combining the funds to buy a more expensive but smaller residential property closer to the coast. If I choose to pursue this option would I then be eligible for the Age Pension? Currently the only income I receive is from the investment property and I only have limited assets aside from the investment property.

A. Selling your investment property and your current home and buying a more expensive home is a perfectly legitimate strategy that can open the door for you to become eligible for the Age Pension.

Your primary place of residence is exempt from the assets test, and currently it doesn’t matter whether your home is worth $300,000 or $3 million.

We often refer to taking this option as upsizing and there are plenty of retirees who explore this option.

There are a couple of things to consider before you pursue this option, however.

Firstly, if you do decide to upsize, it is worth keeping in mind that, as a general rule, the transaction costs – such as stamp duty and marketing – can swallow up to 10 per cent of the value of the homes you are selling.

For this reason alone you should consult a financial adviser before you commit to making the decision and understand the full implication of whether the situation will allow you to live comfortably in retirement.

Many retirees find that having all of their wealth tied up in their house quite restricting and you may struggle to maintain the lifestyle you expect if you are relying solely on the Age Pension.

Secondly, and as hinted at earlier, having your primary residence exempt from the assets test is the current ruling, but like all laws these can be changed at any time.

Exempting the home from the assets test is one of those topics that appears on the radar of governments frequently so your situation could come unstuck in the future.

Hopefully if any government did change the rules regarding the primary residence exemption, previous rulings would be grandfathered in place, but there are never any guarantees.

Have you upsized your house to help with your pension eligibility? Would you recommend it to others?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

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

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

How the Pension Loans Scheme and Pension Boost can help boost your income

Learn about the Pension Loans Scheme, how it can help you boost your Age Pension, and how Pension

Can you make a downsizer contribution if you sell land?

Yvonne has sold half of her block and wants to know if she can use the downsizer measure.

Centrelink Q&A: What are the rules around sharing property?

Barrie is buying a unit to share with his daughter and wants to know the pension implications.

Written by Ben

9 Comments

Total Comments: 9
  1. 0
    0

    Thanks for the clarification.
    Two things “Judy” needs to bear in mind: Firstly, IF the Government does decide to penalise pensioners by including the value of their home in calculating the pension, Judy’s move to a more expensive house could cost her some of her planned pension down the track.
    Also, don’t forget capital gains tax, which will be payable on the investment property when it is sold. It will be considerable.
    As the article says, get understandable and honest financial advice.

  2. 0
    0

    Certainly the way I see it; good strategy, of course capital gains tax applies as the comment by On the Ball suggests but getting the age pension into the future is worth the initial hit. Living closer to the coast also has benefits.

  3. 0
    0

    Trouble is a financial adviser will instead advise to go into a managed fund so they get a commission

  4. 0
    0

    I wonder how a grandfathering rule can apply here…drawing the line by age?

  5. 0
    0

    Worked fine for us. Remember you only pay tax on 50% of the capital gain on an investment property if owned for more than 12 months and that is added to your other income for the year to calculate the tax rate, so unless you earned a high income and made a huge gain, it’s not a big deal. Besides which the house we bought on the coast has increased in value much more than our previous residence and investment property.

  6. 0
    0

    Capital gains tax can be a killer on the investment property. Consider ploughing as big a lump sum into Super if you are still working (even part-time). Discuss this with your Superannuation representative as it costs nothing to ask We did and it saved us quite a bit.

  7. 1
    0

    I’ve thought about doing that, but am put off by the constant chat about including the home in the assets test. It’s really hard to plan for retirement when they keep moving the goalposts.

    • 0
      0

      Agree with you about moving the goal posts. If your upsize is not monumental you should have no worries about doing it. Of course upgrading your place from $500’000 to a house worth $3 million might throw up questions. For most of us upsizing has more to do with moving to a more accessible property as we age and that means closer to services. That is where the higher prices come in.

  8. 0
    0

    Alternatevely you could buy a house that needs upgarding and use some of you surplus money here that is not means tested


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Finance

Tobacco and childcare drive cost of living increase

The Consumer Price Index (CPI) rose 0.9 per cent in the December quarter. According to the Australian Bureau of Statistics...

Age Pension

Retirement system ‘uncertain for almost all retirees’

Australia, a nation of almost four million retirees, has one of the world's best retirement systems. The 2020 Mercer CFA...

Finance

The big question: How much do I need to retire?

Life expectancies continue to rise, and with that comes a host of challenges. For governments, there's the increasing cost to...

Finance

Understanding the true cost of retirement

The Australian government spends billions on boosting retirement incomes. The two biggest costs, the Age Pension and superannuation tax concessions,...

Age Pension

Adequacy of retiree nest eggs

YourLifeChoices conducts several surveys each year to gauge the financial, physical and mental health of our 260,000 members. The aim...

Age Pension

Age Pension payments in 2021 – what you need to know

World heavyweight boxing champion, Olympian, ordained minister and successful entrepreneur George Foreman returned to the ring at the age of...

Age Pension

Services and rebates that can save you hundreds

Last year, I put together a retiree checklist. In 2021, there are some additions. This is a long list and...

Age Pension

Pension rates, PBS entitlements, health fund changes

YourLifeChoices keeps you up to date with retirement income changes. PBS co-paymentsThe maximum co-payment for general patients for drugs listed...

LOADING MORE ARTICLE...