“As an aged pensioner, when do I have to advise Centrelink I have sold an investment property? Is it when the contract of sale is signed, when it becomes unconditional or when the property settles?"
-Question from Stuart in Melbourne
Top answer provided by:
Mina Nguyen
Hi Stuart,
Centrelink matters can be tricky to navigate. The right answers are not always easy to find – and yet it’s so important to understand your obligations when it comes to rental properties and Centrelink entitlements.
It’s great that you’re already thinking ahead to how this property sale could impact your Age Pension. To begin, let’s set the scene with some context around Centrelink’s treatment of real estate assets.
How does Centrelink assess your real estate assets?
Centrelink applies income and assets tests to work out how much Age Pension you’re entitled to receive. ‘Assets’, in Centrelink-speak, is a broad term that includes things such as financial investments, home contents and personal assets, superannuation, shares, managed funds, money in the bank, and real estate holdings.
When it comes to real estate, your principal home is generally not included in the assets test, but any investment properties you own will be.
To receive the full Age Pension, there’s an upper limit to the total value of assets you can own. For couples who are homeowners, this upper limit is currently set at $419,000, while for single homeowners it is $280,000. Non-homeowners can have more assets before their payments are affected ($504,500 for singles and $643,500 for couples).
If your assets exceed these limits, you may still be entitled to a partial pension. In fact, single homeowners can have up to $622,250 in assets, while homeowning couples can have 935,000 before their Age Pension is cut off completely. Non-homeowners can still receive a partial pension with assets up to $846,750 (for singles) and $1,159,500 (for couples).
It is also helpful to note that, when it comes to real estate, ‘assets’ actually refers to ‘equity’. For Centrelink purposes, the value of any mortgages will be deducted from the total market value of your investment properties.
How will selling an investment property impact your Centrelink entitlement?
Since you’ll no longer be earning rental income from your investment property, you may have less income to show on Centrelink’s income test. Depending on your current circumstances, this may positively impact the amount of Age Pension you’re entitled to receive.
However, the outcome very much depends on what you intend to do with the sale proceeds. Money sitting in the bank is ‘deemed’ by Centrelink to earn an income (regardless of whether it actually does), and this can impact your income test.
Of course, there are a number of other ways you could use the money, but this is the part where I would strongly recommend sitting down with a financial adviser to review your options and tailor a strategy to suit your personal financial situation and goals.
When is a property considered to be sold, for Centrelink purposes?
You’ve signed a contract with a buyer, and perhaps the contract is now unconditional, meaning it’s almost certain the sale will proceed as planned. However, the property is not technically sold until settlement has occurred.
This is the date when money and assets officially change hands – you are paid the sale proceeds, while the buyer becomes the registered owner and takes possession of the property. The settlement date is generally set 30 to 90 days after the sale contract is signed, although longer settlement periods are sometimes negotiated. Until settlement, you still own the property.
What’s that saying, ‘don’t count your chickens until they hatch’?
So, to answer your original question, the property is only considered sold once settlement has occurred. This means the sale date is the same as the settlement date, and you will need to notify Centrelink of the sale within 14 days of settlement.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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