“We are a couple on the pension but have a shared asset with a third party and would like to sell this asset which means we would have $350,000 cash to place in the bank and use for renovations and personal expenses. We are currently not over the assets test, nor would we be with the cash from the sale, but would Centrelink reduce our pension payments anyway?"
-Question from Tony in Melbourne
Top answer provided by:
Kurt Grainger
Hi Tony, great question.
When it comes to assessing your eligibility and payment rate for the age pension, Centrelink use both the income and assets test, with the test that provides you with the least amount of pension being the one applied to your situation. Upon sale of the asset, you are required to update your income and assets within 14 days. This can be completed via your MyGov account.
For the assets test, included are all of the assets you own (including assets such as motor vehicles, caravans, contents, cash, superannuation and investments) with the exception of your principal residence. The current assets test limit for a homeowner couple is $901,500 and $1,118,000 for a non-homeowner couple. If your total assets (excluding your residence) are less than the threshold, you are eligible for a part pension. To be eligible for the full pension, you would need to have less than $405,000 in assets for a homeowner couple and less than $621,500 in assets for a non-homeowner couple.
You are then also assessed via the income test. Within the income test, only the income from your investments is assessed. For real estate investments, the income is the net rent amount and for your other financial investments such as shares, cash and (some) income streams, the amount of ‘deemed’ income. For these particular assets, Centrelink assume an income rate. Currently for a a member of a couple who currently receive a pension entitlement, the first $44,500 of your financial investments are deemed to earn 0.25% and then the remainder of your financial assets are deemed to earn 2.25%.
Assuming that the shared asset you hold is already listed within your means testing for age pension purposes, then the selling of the asset itself should trigger little to no impact on your current entitlement as the asset itself would already be listed.
As an example, if you are selling a real estate asset that you currently have listed within the assets and income test as having a value of $350,000, then for assets test purposes, there will be no change to your assessment as the $350,000 real estate asset is effectively replaced by $350,000 in cash.
For income testing purposes, again assuming that the asset you are liquidating is currently a real estate asset, there would be a slight change in that at present you are currently assessed against the net rent of the property and upon sale of the investment, with the proceeds being placed into cash, the amount will become a deemed investment.
For the purposes of this particular example, I am going to assume that you are assets tested. I am also going to assume that your shared asset is currently listed as being valued at $250,000, however with the recent rally in process you have managed to sell the asset for $350,000.
Once you have notified Centrelink using your Mygov account to update your assets, your total assets will have increased (in this example) by $100,000. Provided you remain under the assets test limit, it is likely that you will receive a reduced payment as a result of having an increase in your assets. The amount of pension you are entitled to reduces by $3 per fortnight per $1,000 of assets (for both singles and couples). Therefore, an increase in your assets of $100,000 will see your pension payment reduce by $300 per person per fortnight.
If you then utilise the proceeds to renovate your home and for personal expenses as you mention, you will again notify Centrelink of any changes within 14 days and as your assets are now reducing, it is likely your payment rate will increase to reflect as such.
Good luck with your endeavours Tony
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Comments1
"Best answer of the three in my opinion as it also addressed the potential difference in income testing of the current asset vs the post sale bank account treatment"
Mark Gardener 15:33 on 11 May 22