My dad is on a full aged pension. He is selling his daughter (me) his house for $200k, although the house is valued at $430k. Will this affect his pension?
- Kate in Queensland
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Firstly the answer is yes it could, but we need to look at this in a few ways because there is also a chance that it won’t necessarily stop him from getting the full aged care pension because it depends on the level of the assets he has after the sale of the property but as your question is very limited, I am going to have to make a bunch of assumptions to try and explain what I mean.
Now, as for buying the house at below market value and why it could affect his pension it is because for Centrelink he has gifted you the $230,000 (that is the reduced the price of the house) and this gift is counted toward his assets minus $10,000 (which the amount he is allowed to gift each year without counting toward his assets) so assuming he has no debt or any other assets he now has $420,000 in reportable assets after the sale of what I would assume is his principal place of residence, here is a perfect site for reference:
Now, you have said that he is getting the full aged care pension so if the house he selling to you is in fact his principal place of residence and he isn’t going to be buying a new place then his asset test for 2020/2021 for a single person is $482,500 or if he is buying a new place, that is brought down to $268,000 and the new home won’t be counted as an asset. See the ATO website for the assets test:
So at the end of the day, if he is single and won’t be buying a new home, he will need to have less than $62,500 in assets above the sale of the home in order for it not to affect his pension, this is tricky because contents, car, a bit of savings or even just money in his super might just push him over that threshold.
Also, the strategy of selling his house for less than it’s worth might sound great for you but the problem comes into play when considering what he is going to do afterwards. Is he going to now be paying rent, living with you, or living in a nursing home all of these things need to be considered not just “will it affect his pension”, because those assets and gifts are counted for the nursing homes as well.
This type of purchase that isn’t at arms-length and clearly is a way to hand down assets and increase cash flow for your father really needs professional personal advice and all of the possibilities and information considered before being done.
Your question is a bit of a concern as well because this type of purchase (less than half the market value) can sometimes be seen as elder abuse from the outside (not saying it is but could be seen that way due to the large amount being gifted).
Please do me a huge favour and go seek advice from an independent financial adviser in your area along with your father before going ahead with the purchase so that all your bases are covered and he is not put in a worse off position, as I said before there are a lot more things to consider than just his aged care pension.
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