Is upsizing an option?

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

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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?

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Related articles:
https://www.yourlifechoices.com.au/how-to-boost-your-income
https://www.yourlifechoices.com.au/finance/superannuation/a-downsizing-dilemma
https://www.yourlifechoices.com.au/finance/property/rules-around-sharing-property

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

Written by Ben

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