Question 1.
a. At present I receive a part age pension. If I sell my house (approx. $1.5million) before agent’s commission etc, and wish to spend the proceeds on another property within 12 months, the Centrelink website advises I can still receive the pension (if I can prove I intend to spend it on another house). How do I prove I intend to spend it on another house?
b. I see you have advised that some of the proceeds from selling the family home will not be counted for the Assets Test (Age Pension) for up to 24 months pending the purchase of a new Principal Place of Residence. I cannot find this policy stated on the DHS/Centrelink site anywhere. Help?
I will deal with these two similar questions together.
If you are on a social security payment, such as the age pension, and sell your home the proceeds may be exempt from the asset test for a period of time.
The exemption only applies on the amount ‘intended’ to be spent on a new home. For instance, if you sell your home for $750,000 and plan to spend $500,000 on a new one, then the $500,000 will be exempt from the asset test but not the $250,000.
Recent legislation has passed (and applies from January 1, 2023), which can be found here, which has extended the exemption period from 12 months to 24 months.
And it can be extended up to a further 12 months if extenuating circumstances apply, such as building delays outside of your control or settlement fell through for some reason.
The recent legislation also provides more concessions under the income test for this scenario.
Previously the intended funds would be deemed at regular deeming rates and then counted under the income test. Currently deeming rates are 0.25 per cent per annum for the first $56,400 (or $93,600 if you are a couple) and the remainder deemed at 2.25 per cent per annum.
Under the new rules the whole amount only gets deemed at 0.25 per cent per annum.
You just need to advise Centrelink of your intentions and it will have you sign a form/declaration.
Question 2. I have $400K in accumulative super and $200K in income stream. Do both count as asset? Can I sell my unit and buy a more expensive property by withdrawing a lump sum from my accumulative super account to reduce my assets? Will I qualify for the age pension in doing that?
The $400,000 in accumulation will count as an asset once you attain age pension age.
You could withdraw funds and buy a more expensive property if your only goal was to get the maximum age pension, as your principal home is not asset or income tested. However, this is not always the best strategy.
More importantly is living in a home and location that you enjoy. You could start drawing down on your super to live a comfortable retirement. Once your super funds start to deplete, your age pension entitlement starts to go up. That is how the system is designed.
My advice is generally not to have too narrow a focus, whether that be in age pension or tax etc. – take a balanced approach, always keep some funds up your sleeve for emergencies, and enjoy your retirement.
Question 3. My wife and I have assets of $742,000 and annual income of $36,287. This resulted in me getting a part pension of $238 per fortnight based on our joint application. Is the pension payment shared between my wife and myself given that the income portion of the income is derived by me and $553,000 of the assets belongs to my wife. Thanks.
For age pension purposes Centrelink treat a couple as ‘one unit’. That is all assets and income are combined, regardless of who owns the asset or who earned the income.
Therefore, if (or once) you are both age pension age you will receive the exact same payment.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
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