The Age Pension and selling the family home

Leigh is selling the family home but is concerned she’ll lose her Age Pension.

Leigh is selling the family home but is concerned that having a lot of money in the bank will mean she loses her Age Pension and that she’ll have to pay capital gains tax (CGT) on her windfall.

Q. Leigh
I will soon be selling my family home and moving to another city. As I'm in the lower price range for a new home, I'm competing against a lot of homebuyers, investors and owner-occupiers. It took me nearly a year to find my current home, so I’d like to buy and live in a campervan while searching for a place.

My question is: as I will have a swag of money in my bank account from the family house sale, do I lose my part Age Pension? How can I tell Centrelink that swag of money is only temporary? And if I'm lucky enough to make some money on the sale and subsequent purchase, will I have to pay a capital gains tax? 

A. When you sell your principal residence, the proceeds from the sale that exceed the amount that you intend to spend on a smaller home are assessed immediately. The amount you intend to use to purchase a new residence can be an exempt asset for a period of 12 months. This is to give you time to choose a suitable home. Should something prevent you from doing so within the time frame, you can apply to the Department of Human Services to have this period extended by up to 12 months.

All the proceeds from the sale that are held as financial assets are deemed to be earning income.  

Any deemed income will be assessed under the income test, which may affect your Age Pension payment. Any amount left over after you buy your new home is considered an asset and will be assessed as such. 

Because you’re planning on buying a caravan to have somewhere to live, this may mean you’ll be assessed as a homeowner, and the caravan will not be considered an asset. This information is general, and you should confirm your personal circumstances with a Centrelink Financial Services officer.

As you are selling the family home, it is unlikely you will have to pay capital gains tax as the family home is exempt, as long as it has been held in your name. You should confirm this with a tax accountant or financial planner if you think your circumstances are different and may result in a CGT liability. 

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    COMMENTS

    To make a comment, please register or login
    Nan Norma
    20th Nov 2017
    11:25am
    She may also qualify for rent allowance if she is paying site fees while living in a campervan.

    20th Nov 2017
    3:07pm
    How interesting is this? I was thinking of selling my house and travelling for a while - waiting for a unit to become available in the area to which I want to retire. This article will certainly make me think again about such plans.
    Nan Norma
    20th Nov 2017
    7:55pm
    That's the beauty of this site, you learn so much.
    GeorgeM
    21st Nov 2017
    4:22pm
    That's why the Govt needs to give all Universal Age Pension (at least those who have levied / paid taxes here for say 20 years), and get out of the way. That will allow all to do whatever they wish with their assets (downsize, etc) without worrying about stupid Tests, and save the Govt heaps of money in Centrelink Admin. All actual income over and above OAP can be taxed.
    Knows-a-lot
    20th Nov 2017
    3:27pm
    Does all of this apply if one's pension comes from the Department of Veteran Affairs?


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