Skip to main content

Sale of a Home and the Assets Test

Another big week for a client. The client had advised Centrelink of changes to his assets – as he is required to do, and he 'lost' the pension.

He provided new bank balances which included proceeds from the sale of his home - $500,000. Unfortunately he did not advise Centrelink that it was his home that was sold, and the new asset levels placed him over the threshold for the pension!

We corrected the Centrelink records which resulted in him being provided with 12 months exemption from the assets test for the proceeds if the house sale; and we were also able to get him rent assistance for the period.

He was not on the same full pension as previously, as he was benefiting from the proceeds being invested in a term deposit. In simple terms he had invested the $500,000 in a term deposit of 6%; therefore receiving approximately $30,000 per annum in interest. Therefore Centrelink reduced his pension by 50cents in the dollar for this interest - $15,000 pa.

Instead on the original full pension of $716pf, he now receives less than $140pf from Centrelink. But he also receives the equivalent of more than $1150pf in interest. His new new total income level is more than $1300pf, much more than he was previously receiving, and better that the original Centrelink outcome of no pension at all! Plus he is getting rent assistance.

A word of warning though, his ‘cash flow’ is severally impaired as he was not going to get his interest payment until the end of the term – yet his pension was immediately affected. He is now altering his term deposit to enable a better cash flow.

Comments

Popular posts from this blog

The Age Pension Work Bonus Scheme and Periodic Work

Several recent queries have suggested we update our knowledge base on the Work Bonus Scheme (WBS). The WBS provides a facility whereby the first $6,500 of age pensioners 'wages' is exempt from the income test. The WBS can apply to both you and your partner thereby providing a total of $13,000 of exemptions. In a previous blog entry we discussed how a couple on the full pension was ‘earning’ more than $20,000 on top of the full pension. Each were employed on $6,500 pa and had a $250,000  bank account earning a deemed income less than the 'other' income threshold. This is because the WBS is in addition to the the income test threshold allowance of just over $7,000. So a total of more than $20,000 can be exempted from all classes of income test. Now it should be noted the WBS only applies to only certain classes of employment - refer below. What happens if the age pensioner does not earn a consistent wage - i.e. not a steady amount over the year - yet sti...

1 July 2015 Age Pension Deeming Rate Changes

This article summarises both the recent and forecast changes to the age pension, specifically the changes to deeming rates. SUMMARY 1 July 2015 - every July the Government reviews the deeming rates, income and assets thresholds 20 March 2015 - every March and September the Government reviews the pension rates. Our age pension calculator reflects the above changes and forecasts age pension entitlements as at 1 July 2015. 1 July 2017 - a major change in age pension structure is proposed.  Our age pension calculator forecasts a reduction in the age pension that most pensioners can expect. DEEMING RATE CHANGES 1 July 2015 - The deeming thresholds have changed slightly while the deeming rates have remained unchanged, with the ‘upper’ rate of 3.25% still well above cash rates - refer below, for financial investments worth up to $48,600 (for singles - previously $48,000) and up to $80,600 (for couples - previously $79,600), a ...

The Age Pension and Airbnb

We have received quite a few requests for information regarding running and Airbnb – or equivalent – while receiving the age pension. There appears to be two reasons why people are considering this option: To reduce their assessed asset base leading up to new pension rules in 2017. To avoid ‘losing the pension’ pensioners are considering home renovations to enable the provision of an income generating service such as Airbnb. Recent press articles have implied pensioners are ‘hogging’ prime residential space.   So what happens if an age pensioner provides a service such as Airbnb? Currently Centrelink will treat the income as a ‘board and lodging’ category income. In a more traditional ‘board and lodging operation’ the declared income is more easily declared. We understand this is currently understandably being reviewed by Centrelink. So what happens if the income is sporadic? Then it falls into a type of wage/income reporting where fortnightly income reportin...