7th Sep 2017

Did you know your home is an Age Pension tax haven?

FONT SIZE: A+ A-
room available
Olga Galacho

There are many ways to make an Age Pension go further without becoming a job seeker. Receiving funds that do not attract tax could give you extra spending money on top of a full government payment.

Tax-free ways of making more moolah include becoming a homestay host to an international student. The Federal Government allows households to offer one or two rooms to student boarders without having to declare the fees they are paid.

However, if you have more than two homestay students, then the extra income must be declared to Centrelink.

Hosts can charge monthly fees of around $1000 for providing a furnished room, three meals a day, access to the internet and some other household services.



The students may be 18 years or older and attend university, or 14 years and attend a secondary school. Because of the extra duty of care under-age students require, they usually pay higher fees.

To find out if a state school near you is looking for hosts visit the Australian Government Schools International website. Most private schools also operate international mini-campuses and are always on the lookout for homes to host overseas students.

Other income sources generally exempt from tax and, therefore, a nice addition to a full Age Pension are:

  • a payment received on surrender of an insurance policy where you are the original beneficial owner of the policy
  • spouse maintenance payments
  • lottery and game show winnings
  • some scholarships, bursaries, grants and awards
  • rewards or small gifts such as cash birthday gifts
  • certain government payments, such as the carer allowance
  • certain overseas pay and allowances for Australian Defence Force and Federal Police personnel.

 

According to the Grattan Institute, about 1.5 million Australians are earning up to $4264 a year and are still receiving the full Age Pension. For couples, the earnings cap before the pension is affected is $7592 a year.

Some of these pensioners’ earnings are from paid work they perform. Under the Work Bonus rules, a pensioner’s first $250 of income a fortnight is not assessed under the income test.

Further, senior singles can earn a further $164 a fortnight and still receive the full Age Pension. And a combined income of $292 a fortnight – in addition to the Work Bonus figure – should not affect a couple’s government payment.

Related articles:
Home-based earnings
Should investment income be taxed?
New Age Pension thresholds





COMMENTS

To make a comment, please register or login
AutumnOz
14th Sep 2017
10:38am
If those on an old age pension are hosting and charging rent to international students without it attracting the usual penalties from Centrelink on income received why can't the pensioners offer their spare room to an older homeless person on the same conditions?

This would give a desperately needed home to an elderly person, and help relieve the stress felt and the dangers faced by the homeless, especially those who do not have help from family and friends.
maelcolium
14th Sep 2017
11:19am
Very good point Oz.
Triss
14th Sep 2017
8:20pm
Because, Autumn, hosting an international student is occasional whereas a homeless person would be a full time committment providing three meals and cleaning every day. People need time for themselves.
casey
14th Sep 2017
11:01am
No thanks. It was wonderful when the last of the kids finally left home. Why would
I want to go through that again with someone else's kid's.
in2sunset
14th Sep 2017
11:23am
Absolutely! A friend did this last year and she said no amount of money would make her do it again.
Eddy
14th Sep 2017
1:31pm
A crucial element is the character of the person being hosted. Several years ago we hosted a teenage girl from Brazil here as an exchange student. It was only for a few months as her original host family could not continue. She was a delight, we had so much fun with her, we still keep in touch after more over 20 years. However we would be reluctant to do it again for the same reasons put forward by casey and in2sunset.
Bren
14th Sep 2017
11:17am
The tax-free threshold moved on from $164 a fortnight (Grattan's 4264 pa) to its current $168 on 17/2017. Also, not everything that is tax-free is ignored by Centrelink for the OAP e.g; super lump sums are tax-free but deemable.
Rosret
14th Sep 2017
12:19pm
I think there comes with a cautionary tale when it comes to letting out a spare room.
1. If you are not on Centrelink payments you don't need to and if you are you will be penalised as it is income.
2. Advantage is so easily taken of old people. There are strict rules in retirement homes regarding the receiving of gifts and yet so many oldies are happy to say, "here, have this or that." Why would this be any different with a friendly face in a home stay.
3. If you have a home stay and you are robbed by the tenant then your content insurance is null and void.
4. How secure is your wallet/files. It is incredibly easy to steal ones identity if the person is welcomed into the home. Are you going to stay wake all night? Are you going to stay home and guard your home 24/7? Are you going to let them share your internet or phone line?
5. How is the arthritis? Making beds, vacuuming, cleaning baths and putting out the garbage are all jobs the elderly need help with not the other way around.
6. Who have you welcomed into your home? The person who has been rejected by the real estate agent, the violent or abusive person - you can't tell until they show their colours and that is always when no one else is around.
I wouldn't recommend this at all unless you absolutely knew who you are welcoming into your home.
Sundays
14th Sep 2017
1:29pm
ThIs article is confusing tax free income and income assessed by Centrelink. If you take in a boarder and provide 3 meals a day you must declare 20% of the income to Centrelink. You may still be under the Centrelink threshold depending on any other earnings you have but to suggest you don't need to advise Centrelink is incorrect. Fact check YLC!
KSS
14th Sep 2017
1:30pm
Hosting international students of any age is not for the feint-hearted. International students by and large are highly demanding, most will expect to be 'entertained' by the host 'family' at least for some of the time and they will complain long and loud if their 'needs' are not met.

Don't forget that although $1000 sounds like a lot (and it is) most homestays are short term and you would be unlikely to have a student for the full year. The extra expenses you will need to be prepared for are increases to electricity, water, heating/cooling, probably upgrading to internet access, food bills, insurance premiums, laundry costs, cleaning, petrol (for ferrying them about). And don't expect that you will get any help with any household chores either.

Of course it can be a fantastic experience for all when you get a student who is genuinely interested in being with you. They may even make you dinner, and you may learn from them too. Some even keep in contact for years after they return home. Just go into it with your eyes open and don't expect to actually make any money out of it all.
MICK
14th Sep 2017
3:52pm
A calculation: $1000 per month for a homestay student. Electricity and water consumed around $300. Three meals a day around $20 a day (= $600 a month). Internet around $20 a month. That means you are getting $380 A MONTH (= $88 per week) out of the deal and then have provide other services like cleaning.
Such a story (fairytale?) could only be written by a woman. Sorry....sexist I suspect but you get the drift. Unbelievable!
Rosret
14th Sep 2017
5:27pm
No MIck, you are also expected to be a taxi and tourist guide. $1000 is very unlikely to cover costs.
heemskerk99
14th Sep 2017
6:50pm
labor mick, as usual the total me, me, me, no profit in it for me, then again who would want to stay with such a mammon unless he/she can suck you dry
KSS
14th Sep 2017
8:29pm
Mick you must have gone to the ALP School of Economics. If the payment is $1000 a month and you deduct $300 for power and water costs, and deduct a further $600 for meals That leaves you with $100. Then deduct your $20 for internet which leaves you $88 for the month. Where is the other $298 you claim is to be made? Only ALP can try to convince others that a $300 loss is actually a profit!

And Rosret is quite right. Homestay hosts DO have to tour guide and taxi driver and inevitably end up paying for the student in these incidental costs. There is little to no profit in being a homestay host and in the main people do not do it for the money. As I said above, it can be a fantastic experience for all, sadly that is not always the case.
MICK
15th Sep 2017
8:43am
You have picked up an error KSS. Clearly rushing and having a shocker. Thanks for the clarification. Funny how you worked Labor into it. Thought the jerk was the only one who coul manage that sort of manipulation.
Electricity and water is about $300 a quarter so only $100 a month, so your costs are about $720 a month. That leaves you with $280.
The point I was trying to make (badly) is that the author of this piece was insinuating that retirees could make some money in retirement they did not have to declare. The above plus yours and Rosret's additions clarify that doing Homestay could actually cost you money.
As you said...do it for the experience. That is what travel achieves anyway. Cheers.
Cariad
14th Sep 2017
5:57pm
My husband and I have hosted several young people in the past and the money is not included in your taxable income. However if you think it is a money making machine, it is not. Remember you are paying for ALL their food and are responsible for their well being. You pay extra for electricity, gas and water as well. And there will be a stranger in your home. However, if you live alone, the company could be welcomed.
MICK
15th Sep 2017
8:44am
As per above.


Join YOURLifeChoices, it’s free

  • Receive our daily enewsletter
  • Enter competitions
  • Comment on articles

you might also be interested in...

How to budget (in retirement)

Are you brave enough to follow Kaye Fallick’s formula to save?

Why the rich live longer

The sad truth that income and occupation control your longevity.

Is a reverse mortgage for you?

Reverse mortgages may become more popular as a means to fund retirement.

Could annuities save your retirement?

Many Australians may turn to annuities as a way to fund their retirement income.

Retirement: the risk is all yours

The risk of funding retirement income has well and truly shifted – and now it’s all yours.