In this guide
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.
Below we have three videos. Part 1 is a general overview that would apply to most pensioners. You should also watch part 2 if you are buying in a land lease community, or part 3 if you are not purchasing a new home straight away.
Part 1: General overview
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.
Part 2: If you are moving to a lifestyle village
Hi everyone. Welcome back. If you are watching part 2 of what happens to my Age Pension if I sell my home, please make sure that you have watched part 1, which contains general information for selling a home and buying a new one.
This section we’re going to look at what happens if you are moving to a lifestyle village, a land lease community where you purchase the home that you live in and you lease the land. So the same information applies of what you have to tell Centrelink. You still have to tell them what you sold your former home for and how much you’ve purchased your new home for, and what happened to any leftover funds. But you also need to tell them that you are paying rent. The documents that you need to provide Centrelink are very similar, except in addition, you will need to provide them with something showing the agreement with your lifestyle village. The agreement is important because it tells Centrelink what is the arrangement that you have with this facility, because some facilities are eligible for rent assistance and some are not.
So if you’re in a retirement village, a traditional retirement village that’s covered by retirement village legislation, then you are not entitled to rent assistance. However, if you are in a land lease community and you’re covered by a residential tenancies legislation, then you will probably be entitled to rent assistance. And so you need to show Centrelink, the contract, the purchase agreement so that they can see the conditions that you’re there.
And also you need to show them your residential site agreement so they can see how much rent you’re paying and that it is an agreement for a long term rent. Of course, you also need to show them what happened with any leftover funds, and you need to make sure that you show that money trail of the money going in and out and the resulting balances.
So a word of caution here. So this is an unusual Usual situation for Centrelink. So there are a number of Centrelink staff that aren’t aware because it’s not a very common situation, although it is growing for most people this is not applicable. So in the situation that you’re in one of these communities, you are considered by Centrelink to be a homeowner, but you’re also entitled to rent assistance. Now, homeowners have a lower assets test threshold because their home is exempt from the asset test. So make sure you need to make sure that Centrelink have recorded you as a homeowner. You are a homeowner and you are paying site fees and you are entitled to rent assistance.
So we deal with a lot of people in these communities, and often it is an error that Centrelink make because they don’t understand the situation. So take the time to make sure you’ve got all your documents when you do attend Centrelink and that they understand your situation.
So what is the impact on your pension? And what’s different than if you were going to a normal traditional home? So the same thing applies, with all the information that you need to understand. So whether you are being assessed under the income test or the assets test. So whether, whether in other words, whether the assets test is reducing your payment more than the income test or the other way around. How’s the deeming work? And of course, you get rent assistance now.
So rent assistance, where you’re paying your site fees to rent the land, you could qualify for rent assistance. So the current rates for rent assistance are for a single person. The maximum rent assistance is $211 per fortnight. And for a couple it’s a combined rate of rent assistance. So the combined amount is $199 per fortnight, and you get half each. Now to receive the maximum rent assistance, you have to be paying at least, um, $430 a fortnight for a single person, or $506 for a couple. Now, most of these villages, you are paying that in rent, in site fees, that is the amount that you would be paying. And if you’re paying a bit less than that, that’s OK. You can still get rent assistance. You just won’t get as much.
There is a difference here in the assets test threshold. If you are eligible for rent assistance. What actually happens is that the cut off point will be a little bit higher. So this is because the rent assistance is added on to your pension. And so when the reduction happens it takes longer for the cut out to occur. So in other words you’re getting your pension and you might be getting $500 a fortnight of pension. And then you get your rent assistance on top. If you’re being assessed under the assets test. And you your assets reduction reaches zero for your Age Pension or your disability pension, then it will continue to reduce your rent assistance until it hits the the cut-out. So this means the cut-out limit is extended a little bit. So for a single homeowner, the usual cut off is $566,000. But the cut off limit with if you’re getting the maximum amount of rent assistance would be $636,000. And for a couple, it makes the cut off limit for those receiving maximum rent assistance as $1,111,000.
The next part that we have for you is if you are not purchasing your new home straight away, you might be going on a holiday, you might be visiting family, or you might be building a new place and waiting for it to be ready. So there is a different rules that apply to the money that’s left over from your sale, because some of it can be exempted from the assets test. So if that’s your situation, please go on to part 3 when you are not purchasing your home straight away.
Part 3: If you are not purchasing a new home straight away
Hello everyone. Welcome back to part 3 of our series on What happens to my Age Pension if I sell my home. This part three is talking about the situation where you are selling your home, but you might not be moving to your new home straight away. Maybe you are spending some time travelling. Maybe you’re building a new place. Maybe you are wanting to move interstate and you’re taking some time to find the right place. So what happens to your Age Pension in that situation?
Best if you would watch part 1, which is the general conditions of when you’re selling your home. But just to recap on that is what do you have to tell Centrelink and what you need to tell them is the sale price of your former home or did you get for it? And how much of those proceeds are you intending to use to buy your new place? And the key is what you are intending to use and what have you done with the sale proceeds? So where’s the money gone? The documents that you’ll need to provide.
So to show them the sale price of your former home, you’ll need to show them a document that shows that sale price like a settlement statement. Or sometimes it’s called the statement of adjustments, something that shows what you got and the disbursements that came out. So what you were left with the net price, and how much do you intend to use on a new home? So you could write a letter to Centrelink. You can tell them verbally, but I always like to have things in writing. Tell Centrelink how much of those funds you are intending on using to to complete the purchase of your new home, because that would include stamp duty and those costs and things as well. And thirdly, you need to show them a document that shows them what you’ve done with the sale proceeds. They like to see the money trail. So a bank statement or a statement showing money going into your account, and then if you’ve transferred it somewhere else, then show that transaction coming out of your account into the next one and the resulting balance. That’s what they want to see – what’s left.
Now, how do you tell them? You can tell them online if you can access your myGov account and you have Centrelink linked to your myGov account, you can go online and do an online update and upload your documents to your record. You can also advise them on the phone. They will want to see documents, which then leaves you with uploading them online or taking them into your local office. You can also go into the local office and advise them of your changes, and make sure you take all your documents with you. You might need to make an appointment, which of course means you need to go back onto the phone and make an appointment. So if you can manage that maze of getting through, but you do need to make sure that you tell them within 14 days.
The portion of the sale proceeds that you intend to use to purchase, build, repair, or renovate a new home are exempt from the assets test for a period of up to two years. So if you had a home that you sold and you you sold your house for $1 million, you had you’ve got a little bit left over that you want to use to fund your future lifestyle, but you’re intending on using, say, $800,000 to purchase a new home. It’s the $800,000 that is exempt from the assets test. As long as you are making an attempt to find a new home.
So during this period of time, you are classified as a homeowner. It’s the money for your home that is exempt. So keep in mind that your home is an exempt asset. So when you’ve sold your home and you’ve got the money for it, and you’re going to use that money to purchase a new home, that money is exempt. That’s why they still call you a homeowner during that time.
Two years has gone past and you haven’t been able to complete the purchase of your new home. Perhaps there’s been delays in the building, or perhaps a sale contract fell through, or some other problem that happened that’s beyond your control. You can have those proceeds of your sale exempted for a further 12 months. You do need to show them evidence that the delay has been beyond your control.
Although the funds are exempt from the assets test, they are still subject to deeming rules, although they are deemed at the lower deeming rate. There is a deeming calculator on the SuperGuide website that you can put your figures in, and see how that would affect you.
These are the usual deeming rates. The first are for a single person. The first $62,000, is deemed at 0.25%. That’s the lower deeming rate, and with the remainder deemed at 2.25%. And for a couple, the lower rate applies to the first $103,800.
So here’s an actual example with some figures. So we have Fred and Wilma whose home is worth $1 million. Fred has a super pension of $320,000. And Wilma’s super is $140,000. So $460,000 in their super accounts. Plus they have a bank account with $15,000. So all in all, they have financial assets of $475,000. They also have home contents in their cars worth $30,000. The total assessable assets are $505,000, and they each receive an Age Pension of $810.10 per fortnight.
Fred and Wilma decide they’d like to travel for a little while and look at real estate options on their travels in other states. So they sold their home and they had net proceeds of $1 million. They would like to spend $800,000 on a new home. So the $800,000 is exempt from the assets test and deemed at the lower rate for up to two years, as long as they still have the intention of buying a new home.
Let’s have a look at what that looks like. There’s all their assets listed $15,000 in the bank, $460,000 in super together. They have spent a little bit of money, so they’ve spent and bought a caravan. They’ve spent a little bit of their extra proceeds. They had $200,000 left over. And so they’ve put that extra $150,000 in the bank. And their assessable assets are now $687,000, which means under the assets test, they would receive a pension of $537 per fortnight each. The $800,000 it’s intended for their new home is exempt from the assets test.
But don’t forget the deeming. So although the sale proceeds have an assets test exemption still subject to deeming rules. Remember they have $475,000 of financial assets before they sold. They spent some money on their caravan and set aside $800,000, which is intended for their next home, leaving an excess of $150,000 from their sale proceeds. So they now have $625,000 of assessable financial asset and $800,000. That’s assets test exempt.
So this is how the deeming would apply to this situation. So Centrelink deem the first $103,800 because they already had that money at 0.25%, meaning they’re assessing an annual income of $259 for everything over that, which is $521,200 is deemed at 2.25%, which actually equals $11,727. The exempt proceeds of $800,000 are deemed at that lower rate of 0.25%, and so the annual deemed income on that exempt asset is $2,000 only. So that gives them a total assessable income or deemed income of almost $14,000, which equals $537 per fortnight.
Now we’ve got to look at the assets tests and the income test. Remember, Centrelink applies both tests all the time and they pay you the lower of the two figures. So under the assets test they had $687,000 of assessable assets, which gives them a pension of $537 per fortnight under the income test. They have fortnightly assessable income of $537 from their deemed income, and that would pay them a pension of $821. So for this couple, they are going to be paid under the asset test, and they will receive a pension of $537 per fortnight each. It doesn’t matter if they’re $800,000 exempt asset is sitting in a high interest account, and that could be earning 4 or 5% interest. It’s irrelevant. They’ll only assess the lower deeming rate for that.
Just a few things to be careful of. So up until January 2023, you could only have an exemption for 12 months and a further 12 month exemption in the event of unavoidable delays. The rules changed on the 1st of January 2023. Although most of the Centrelink staff should be aware of that, just make sure that you are aware of it so that you can be sure that if your house has been sold after January 23rd, you are entitled to two years of exemption when you are seeking to extend the exemption.
Centrelink will ask for evidence and details. They will ask you what attempts you’ve made to obtain a new home, and that you’ve been making reasonable attempts within a reasonable time frame, and that the delays have been beyond your control. So they might want to see, you know, homes that you’ve put in bids for or contracts that you’ve had with builders, those kinds of things during the period of exemption. Now, this is an important one. During that period of an exemption, you are considered a homeowner. As I mentioned before, I have seen a number of times where Centrelink have incorrectly recorded customers as non homeowners during that time. I mean, that kind of makes sense. You don’t own the home that you’re living in, but because those proceeds that are intended to buy the house are exempt, you are still considered a homeowner. So make sure that they have recorded you correctly as a homeowner.
Thanks for watching this recording. We have got other videos recorded to assist you when you are selling your home, so make sure you have a watch of that. If you’re looking at going into a land lease community, you might be interested in watching part 2, which is where you might be eligible for rent assistance.
