Selling and buying property: Age Pension Impacts

Life often brings changes and transitions, including buying and selling property. If you’re an Age Pension recipient in Australia, it’s important to understand how such financial transactions can affect your pension entitlements.

Services Australia offers specific exemptions for individuals who are selling their homes with the intention of purchasing a new one. Today we’ll explore how selling and buying property can impact your Age Pension and what steps you should take to ensure your pension remains accurate during this period of transition.

The Exemption for Property Sellers

When you sell your property and plan to use the proceeds to buy a new one, Services Australia provides a special exemption. This exemption ensures that the money you receive from the sale, earmarked for the new home, is not included in the assets test for a specific duration, being up to 24 months from the date of the settlement. In certain circumstances, an extension may be granted.

Building a New Home

For those who are constructing a new home, the exemption also applies to the land purchased, provided its value is less than the amount received from the sale of your previous property. This means that, during this 24-month period, the funds and land will not impact your Age Pension eligibility or payments.

Informing Services Australia

To ensure the correct exemptions are applied and your Age Pension entitlements and payments remain accurate, it’s essential to inform Services Australia of your intention to purchase a new home. This proactive step ensures that the exemptions are properly considered, preventing potential unnecessary complications.

The Impact of Financial Investments

While the proceeds from the sale earmarked for the new home are exempt under the assets test, it’s crucial to be mindful of what you do with these proceeds. If you deposit the sale proceeds into a financial investment , such as a bank account or term deposit, Services Australia will subject the amount to deeming. Deeming is a set of rules  used to calculate the income earned on financial assets, regardless of the actual income earned.

Applying Deeming Rates

For the sale proceeds intended for the new home purchase, Services Australia applies the lower deeming rate, which typically results in a lower assessed income. However, any additional sale proceeds held in a financial asset, such as a bank account or term deposit, will be subject to the regular deeming rates. This means that, while the sale proceeds themselves may be exempt from the assets test, they will be deemed to be earning an income, and the deemed income calculation will be considered in the income test.

Conclusion

Selling and buying property is a significant financial undertaking, and it’s essential to understand its implications on your Age Pension. By being aware of the exemptions and deeming rates, and by proactively informing Services Australia about your intentions, you can ensure that your pension entitlements and payments are accurately assessed during this transitional period. For more detailed information and personalised guidance, consult with Services Australia or a financial adviser to navigate this process smoothly.