House sales and the Age Pension – how it works
You’re thinking of selling the family home, but worried it will affect pension payments? Here’s what you need to know.
Key Points
- Most real estate is included in the pension assets test. The exception is the principal home.
- Centrelink’s principal home sale exemption period extended for sales after 1 January.
- January 1 2023 asset exemption period is up to 24 months.
The good news is that Centrelink has extended the period you can use the proceeds from the sale of your principal home to buy or renovate your next home, without it affecting your age pension.
That means any part of the money you receive from the sale that is likely to be used to purchase, renovate, or build your new home is disregarded under the assets test from the date of exchange of contracts.
For home sales from the start of this year, the asset exemption period is up to 24 months.
Depending on your circumstances, you could get a further exemption of up to 12 months. The maximum assets test exemption period is 36 months.
Sale proceeds to be used to secure a new principal home will be deemed at the lower rate only. Any extra sale proceeds held in a financial asset will be subject to the regular deeming rates.
If you're building a new home, the land is also exempt for up to 24 months. This only applies if the land value is less than the amount you got from the sale of your home.
If you sold your home before 1 January 2023, the asset exemption period is up to 12 months. Depending on your circumstances, you could get a further exemption of up to 12 months. The maximum asset exemption period is 24 months.
Proceeds from the sale that are held in a financial asset will be deemed at the regular deeming rates.
Read about deeming and how the sale of your principal home affects the income test.
Watch this video about selling the family home.
The exemption makes allowance for unforeseen circumstances in building and renovating.
For example, delays in gaining building approval from the local shire council, accepting a quote for renovation work, or signing a contract to purchase a home. To gain an extended principal home sale proceeds exemption, you must have a continuing intention to apply the proceeds of the sale to purchase, build, rebuild, repair or renovate a new home.
Centrelink includes most real estate you own in your pension assets test. The only real estate asset not included is your principal home.
Real estate in the assets test includes any property that is:
- rented out
- left vacant for any amount of time
- let someone else live in for free
- lived in when you're not at your principal home.
Your principal home is the home you live in and the first 2 hectares of land it’s on. It must be on a single title.
Land over the first 2 hectares your home is on is included in your assets test.
For example, if your home is on 6 hectares of land, 4 hectares will be included in your assets test. There may be some exceptions, read about rural customers and primary producers.
A couple receiving the pension want to sell their house and buy another one. They plan to sell their house for $900,000, spend less on another house and use the difference improve the new house. They don’t have any super, and have $350,000 in the bank.
Any part of the money they receive from the sale that is likely to be used to purchase, renovate, or build a new home is disregarded under the assets test for 12 months from the date of exchange of contracts.
If the home is sold for $900,000 and the pensioner couple purchase a new home for $700,000, that leaves $200,000 to renovate the new home. The couple would qualify for the assets test exemption. As described, the duration of the exemption depends on whether the house was sold before or after 1 January 2023.
The exemption also applies to the $200,000 held until the money is spent or the exemption period is complete.
For further reading: Services Australia, Superguide
