Q: I’m 72 and my husband is 76. We receive an Age Pension, but I’m not sure it’s the full one, we get $713 a fortnight. We have combined savings of $210,000 after giving two of our children $150,000 each to use as a deposit on a house. We don’t have any superannuation so receive no income other than the pension and the interest we receive on those savings.
I was thinking of buying a rental property with our savings – using only the $210,000 amount as it’d be outside the capital city, so with no mortgage – on which I anticipate we’d receive a 7-9 per cent return. Can we do that without losing our pension?
A: Based on the information provided, I assume, if you provided the gift of $300,000 to your children relatively recently, the sum will have been considered a deprived asset and thus assessed by Centrelink until five years have passed from the date of the gift. This is based on Centrelink’s gifting rules which you can read more about here.
It would appear from your answer that you are assets-tested by Centrelink, so the conversion of cash to an investment property should have little effect under the assets test, as you are merely exchanging one asset for another.
And of course, the costs of acquisition would reduce your cash reserves, so it’s possible your pension may even increase slightly. If you are indeed assets-tested, the income from the property should not affect your pension either. I would hasten slowly in the acquisition of an investment property in a remote area, however, where vacancies could be a problem and it could be hard to sell if you have a change of heart.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.