‘Can you get the Age Pension if you bank the proceeds from your home sale?’

Q) My elderly mother, who receives the Age Pension, would like to sell her apartment (as it has too many stairs) and rent a more suitable property. Would she be still eligible for the pension if she put the money from the sale of her apartment in the bank? Her apartment is valued at $1.5 million.

Like many senior Australians at present, it sounds like Mum plans to cash-in on the recent surge in property prices. There are implications that need to be taken into account, however, and while there are some work-arounds, the effects will be considerable.

At present, the entire value of the apartment is exempt from Centrelink means testing.

Even allowing for costs of say $30,000 on the sale, when the net proceeds of $1.47 million dollars hit her bank account, Mum will need to let Centrelink know within 14 days. Centrelink will assess the full amount, plus the scrap value of Mum’s other assets under the assets test. Allowing $10,000 for the other assets, her assessable assets at an estimated $1.471 million will place her well above the maximum amount permitted under the asset test of $800,250, which applies from July 1, 2021.

Unfortunately, this would mean that Mum would lose her pension altogether and will be forced to draw-down on her savings until they eventually reach the upper threshold. While that threshold is indexed three times a year in March, July and September, it will probably be several years until the figures effectively cross-over and she becomes eligible for a part pension again.

To that end, Mum might be better off buying (rather than renting) another more appropriate home. That way, the money would be moved back into an exempt asset and she would retain the pension (or part of it).

If Mum goes down the path of selling the existing apartment and buying a new home, the money set aside for the new home can be exempted from the Centrelink asset test for up to 12 months while she buys her new place. She simply needs to apply for this exemption to be granted.

If the decision is made to rent in the future, Mum would at least qualify for the Commonwealth Seniors Health Card, which will ensure she continues to receive her PBS-listed medicines for $6.60 per script. Depending on where she lives, there may be other benefits attached to that card, as the add-on benefits vary from state to state.

One other option that may be worth exploring, is to see what support she can receive to remain at home. Many incorrectly assume that commonwealth support is restricted to paying for services such as cleaning and personal care. In fact, Mum can receive funding a few ways to assist with capital improvements, including the installation of a chair-lift in her current home. That might mean Mum can remain in her apartment for many years to come.

Information about the Commonwealth Home Support program and aged care home packages can be obtained through the myagedcare.gov.au website.

To read more about the Age Pension, click here. To read more finance articles by Nick Bruining, click here.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.