What happens to my Age Pension if I sell my home?

If you receive the Age Pension, sell your home and buy a new one, you need to update Centrelink about your changes because it can impact your Age Pension. Karen Hunt from MyPensionManager walks through the key steps you need to take and gives tips to make the process as smooth as possible.

Transcript

If you receive the Age Pension, sell your home and buy a new one, you need to notify Centrelink about your changes because it can impact your Age Pension benefits. Karen Hunt from My Pension Manager takes us through the essential steps you need to take and gives tips to make the process as smooth as possible. If you find this guide useful, please remember to subscribe so you don’t miss out when we publish a new video.

Hi, everyone. Welcome to today’s session on what happens to my Age Pension if I sell my home. It’s a very common question that we get asked. And today we’ll be looking at a basic situation where you sold your house and you’re moving to a new one.

So the first thing that you need to know is what do you have to tell Centrelink? So it’s not enough just to tell Centrelink that you’ve changed your address. Of course, they need to know that, too. But they also need to know what was the sale price of your former home? How much did you get for it? What was the purchase price of your new home? How much did you spend of that money? And finally, what has happened to the leftover money? Where have you put it?

Now, to do this, you need to provide some documents to Centrelink. The documents that you need is something that shows the amount of the sale price of your home. So for example, a settlement statement, or sometimes it’s called a statement of adjustments, something that shows this is the price, this is all the expenses that came out, and this is how much we got out of the sale.

Then you need to show them a document that shows the purchase price of your new home. So that might be a contract, the purchase contract, or again, a settlement statement, as long as it shows your details and how much you’ve paid for the new home. And finally, they want to see the money trail. They want to see the money that you got from your house going into your bank account. And then any money that you’ve spent to purchase a new home, they want to see that coming out. Most importantly, they want to see the resulting balance.

So you need to give them statements that show money being deposited into your account from the sale, then money being transferred out of your account to fund the purchase. If sometimes it goes straight through the solicitors and that’s fine, that will be shown on the settlement documents. But if you’ve had money deposited into your bank, they want to know what you’ve got left. Centrelink record your assets where they are. So in other words, they want to know that you’ve got $60,000 in your bank account. Then when you sell, you’ve added $100,000. So now your balance is $160,000. They need to know how much is in that account. Centrelink, do not know how much you’ve got in your bank, you do need to tell them.

How do you tell them? This is the age-old question. You’ve got a few options. The best way to do it is online. If you can access your MyGov account and you have your Centrelink account linked to your MyGov account, you can go online and advise your change of address and update your circumstances through your online account. You can advise them on the phone, and the phone number for Age Pension is 132300. This applies to all pensions, but if you’re on Age Pension, that would be the phone number you would call.

And of course, you do have the option to go in person to your local service centre. If you’re doing that, take all your documents with you. You may need to make an appointment, which sends you back to the phone because you need to call up to make an appointment, or you can make an appointment through your online account. So you caught in a bit of a loop there.

If you have managed to get into your account to do an online update, this is where you go. So you go into your Centrelink online account through your MyGov account and you’ll see in the menu tab at the top in the black line there, you’ve got a tab that says My Details. You click on that and you’ll be given an option to update address details. Click on that and follow the work through until the end and then upload the documents that I mentioned before, selecting the Documents tab, which is on the far right side there.

When you do an online update for your address, it won’t ask you to upload the documents. However, when that piece of work goes through to a Centrelink officer, they will want to see the documents, and so they will request them from you. So you can short circuit the process by uploading the documents in the first place. If you haven’t managed to work out the online system, then you do have the option to call, and you might want to call if you need to make an appointment anyway, because if you turn up to the office unannounced, they may insist that you have an appointment. So if you call your payment line, depending on whether you’re on disability pension, carers pension or Age Pension, call your payment line and advise all the details. So as I mentioned, you still need to provide the documents and then you can upload them or take them into the local office.

When you move house, you have 14 days to notify Centrelink of your changing circumstances. Now that can seem like a really quick amount of time because you’ve got a lot going on. The reason that it’s important to notify them within 14 days is because if your change will result in a reduction in your pension and you don’t tell them straight away, then you’ll end up having a debt and having to pay some of that money back. On the other hand, if your change in circumstances results in an increase in pension because you might have spent more than you got for your house, then if you haven’t told Centrelink straight away, they won’t increase your pension until you tell them. So it is important to make sure that you notify them straight away and also make sure that they have actually actioned the piece of information that you’ve given them.

Now, what about your pension? What happens to your pension, the results? So to understand that, you do need to understand what your current level of income and assets are and what they’re already assessing. It’s a good idea for you to understand whether your rate is reduced under the income test or the asset test. Both income and asset tests are applied to your situation every day. However, when I’m talking about income tested, I mean that your situation is assessed under the income test because it’s the one that reduces your pension the most.

If you’re asset tested, then it’s because the asset test reduces your pension more than the income test does. How does the deeming play into all this? And sometimes we get asked, can I give some of the money to my kids? So we do have on the SuperGuide website, you will be able to find an Age Pension calculator. So we suggest that you use those kinds of calculators to help you figure out what your rates are. I’m going to give you some examples here.

So first of all, the Assets Test Threshold, and this is a recent update from the 20th of September. So the Assets Test Threshold for homeowners, for a single person, It’s $314,000 with a cut off at $566,000. Now, the threshold amount is the point at which your Age Pension or any pension starts to reduce.

So If you have assets up to $314,000 as a single homeowner, you would still be able to receive a full pension. But over that amount, it does start to reduce. For every $1,000, reduces your pension by $3 per fortnight. For couples, that threshold, the point at which it starts to reduce is $470,000. And the reduction for couples is a $1.50 per fortnight for each person. Cut off point for a homeowner couple is just over a million dollars.

Now, let’s look at a specific example of a couple who have sold their home. So Fred and Wilma have a home that’s worth $1,000,000. Nice and easy figure to work from. Fred has some super, $320,000. Wilma has a smaller super pension with a balance of $140,000. They’ve got $15,000 in the bank and they’ve got the home contents and their cars valued at $30,000. So their total accessible assets are $505,000 and they each receive an Age Pension of $810 per fortnight.

So after Fred and Wilmer have sold their home, they end up with a leftover amount of $300,000. So now their situation looks like this. So they’ve still got $15,000 in their bank account that they had before. Fred still has his $320,000 super and Wilma has $140,000. The proceeds from the sale is $300,000. They’ve still got their cars and their contents. So their accessible assets are now $805,000, which gives them a pension of $360.10 per fortnight each.

Now people always ask us, what about deeming? How does the deeming affect? If I’ve got all this money, I’m just going to get deemed. So currently the deeming rates are very low. They are artificially low because of a government promise to keep them at that rate for the time being. So a single person, the first $62,000 is deemed at a very low 0.25% and everything else at 2.25%. And for a couple, that lower rate is available for the first $103,800 deemed at 0.25%, and for everything over that, it’s 2.25%.

Now, again, on the SuperGuide website, you will find a deeming calculator that you can use to work out the exact deeming in your situation. But for this situation for Fred and Wilma, they have financial assets of $775,000. And so the deeming on that would be $15,451 per annum at these rates.

Now, that would only reduce Fred and Wilma’s pensions to about $800 a fortnight. So because they were reduced by a lot more under the Assets test, they will be asset tested. Now, some people aren’t asset tested, but they’re income tested. So for example, you might have a higher accessible income.

So if Fred’s superannuation was a defined benefit, or in another situation, you might still be working and have employment income. But in this situation, Fred’s Super is a defined benefit, and it pays $1,800 per fortnight. They would actually be payable under the income test. So the way that would work is that the income test reduction before the sale of their home, so how it was before, they would have had financial assets, which include Wilma’s Super and the money they had in the bank of $165,000. And that would result in deemed income of $66. The defined benefit would be assessed at $1,620, assuming that Fred had a tax-free component in there. And Centrelink would take 10% off and assess that at $1,620. With an accessible income of $1,688, that would pay them a pension of $841.50 per fortnight each.

After the sale, they have now got financial assets of $455,000. So the deeming on that would actually be $343 per fortnight, and that would reduce their pension to $466 per fortnight each.

Another question that we often get asked is, what if I give away the money that I’ve got left over and then Centrelink won’t reduce my pension. However, there are rules about gifting money. So gifting rules are that any amount that’s gifted beyond on the gifting limits will be assessed for a period of five years from the date that you gave it away. There are two rules that operate at the same time, and this can be hard to understand, but the two rules are there’s a maximum amount of $10,000 per financial year and a maximum of $30,000 in a five year period.

So if you give away $10,000 now in October, That’s for the financial year. If you then give another $10,000 next year in, say, July, now you’ve given away $20,000 in about eight months. That’s okay. That’s not beyond the limits. That’s less than $10,000 per financial year and it’s less than $30,000 in a five year period. You can then give another $10,000 the following financial year. But if you give $30,000 right now, then you’ve already met the maximum of $30,000 in a five year period and you’ve gone over the $10,000 per financial year.

So therefore $10,000 would be allowed and the other $20,000 would be assessed as gifting. Complicated rules. There is more information on gifting on the SuperGuide website. But basically, I would suggest that really think about what you’re giving away. Reducing your assets by $10,000 will increase your Age Pension, but only by $30 per fortnight. And if you’re a couple, it’s only $15 each. So is it really something that you want to do because you want to give the money? Or is it if you’re doing it to increase your pension, it’s maybe not the best strategy for you.