Warning to pensioners: Don’t lose your homeowner status
Age Pensioner ‘homeowners’ could lose their homeowner status if they’re away from their residence for a lengthy period. That could mean that their home becomes an asset—the same as an investment property—and possible loss of pension.
One year absence from home
In simple terms, you may be away from your home for 12 months less a day without losing your homeowner status. So, if you decided to travel around Australia for no more than 364 days, it would have no impact on your status.
However, if Centrelink becomes aware that you’ve been away from your home for 365 consecutive nights or more, you could be treated as a ‘non-homeowner’ with your home regarded as an investment property for the purposes of the Age Pension assets test.
The impact of losing your homeowner status depends on the value of your principal residence. If the total value of all of your assets, including your home, is less than $450,000 then, as a non-homeowner, you wouldn’t be impacted by the assets test at all.
But you could lose your Age Pension if you have substantial equity in your home because being rated a non-homeowner, your former home is counted as an investment property.
Betty, a pensioner from Melbourne, was staying with her sister on the Gold Coast. She intended to return home after the long Melbourne winter was over, but she had a fall and fractured her leg.
So she stayed on with her sister until she could walk confidently again. However, to return to Melbourne in autumn and then back to the Gold Coast for winter seemed a bit of a bother.
Betty stayed on for a second winter.
At the same time, she allowed her daughter, Bella, to live in her Melbourne home. Betty thinks this as simply a private family arrangement, with Bella minding her mother’s house.
Centrelink sees it differently.
Centrelink knows Betty is having long-term health treatment in Queensland. But the Council Rates notice includes a capital improved value of one million dollars for Betty’s Melbourne home—and she has been more than 12 months on the Gold Coast.
Her Age Pension is cancelled because her home is now considered an investment property for the assets test. She also loses her pension concession card.
Extensions to the one year rule are rare
In special circumstances, Age Pensioners could be away from home for more than a year and not lose their homeowner status.
Centrelink would expect you to show documents proving that you’re, for instance, trying to have your home restored, but essential building work is being delayed by factors beyond your control.
Two year transition from living at home to being an aged-care resident
Permanent residents in Commonwealth regulated aged-care facilities are allowed to continue as homeowners for two years after vacating their former home. However, once 730 nights have elapsed since the aged-care resident and their domestic partner have moved out, the home is treated as an investment property.
Selling one home and buying another
You do retain homeowner status and have the money you’re paid on the sale exempted from the Age Pension asset test for a period of up to one year from the sale until settlement of your next home purchase.
However, while you’re between homes, you’ll be deemed to be earning interest on the money from the house sale for the Age Pension income test.
Consider recently widowed Mary who wants to sell her sea-change retirement home to return to suburbia near her children. She wants to look around before deciding where to buy her next home.
Mary sold her retirement home for $800,000. She has financial assets of $100,000 together with $25,000 of personal possessions including her car. As a single Age Pensioner, Mary is entitled to the full Age Pension.
While she’s between homes she remains a homeowner for the asset test with her $800,000 as an exempt asset. But the $800,000 is included in her financial assets for the income test.
This means that the income test could reduce Mary’s Age Pension rate substantially while she’s between homes.
Your responsibility to inform Centrelink
Age Pensioners must tell Centrelink within 14 days of any major change of circumstances. Moving out of your principal residence is one such major change. The sale or purchase of real estate is another.
If there’s anything you are unsure about, talk to Centrelink staff.
This is part of a continuing series about Centrelink by Christine Hopper the Director of Financial Care Services, an independent advisor. Financial Care Services is focused on mature people considering a change of lifestyle including retirement and particularly new living arrangements in: retirement lifestyle community villages; granny flats; supported or assisted living; and Commonwealth regulated aged care. She can be contacted through https://financialcareservices.com.au.
Christine talks to Centrelink as a customer and on behalf of clients. She understands the range of Department of Veteran Affairs and Centrelink income support benefits, their relevant means tests and eligibility conditions. She’s an actuary who also holds a Bachelor of Science, a Diploma of Financial Planning and a Certificate of Theology.
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