"I purchased 4 hectares of rural land 12 years ago and subdivided the block into three parcels, with the aim to sell two and remain living on one. The proceeds of selling two blocks was meant to secure my retirement income. However, the blocks have been on the market for many months and there are no buyers. I am 68 and have barely $500 to my name. I live in a small hut without running water, gas or electricity. Can I still apply for the aged pension despite owning three parcels of land?”
-Question from Franziska in Queensland.
Top answer provided by:
Ryan Scherini
Hello Franziska,
Firstly, I’m sorry to hear about your situation. It’s never a great feeling when our plans don’t come to fruition.
Property is a unique asset class, and every property has its unique features. However, in my opinion, property, like most assets all operate on a simple philosophy of ‘supply and demand’.
When buying farming or rural properties, the demand for your properties shrinks significantly, as you need to find a buyer who not only wants to accept your price, but also wants to live in your town, on the specific land you have available, and they must consider potentially higher build costs as the supply of trades is restricted (as I’m assuming there is no existing property on the land). Whilst I don’t know specifically where you live, I suspect this could potentially be your major issue with your property. If you’re emotionally attached as they’re to serve a greater purpose, being your retirement, it would be prudent to seek professional advice about the value and marketing of your properties.
However, to answer your question. Centrelink will exclude your residential property up to 2 hectares from the assets and income test. Should your land exceed 2 hectares, there are some additional requirements to have your property exempt.
- Must be on a single title
- You must have lived on the property for 20+ years
- You must pass the extended land use test
In short, the land use test is looking to see if you’re using your land to its fullest capacity to generate income/returns from the land. You can read more about the land use test here.
From what you’ve explained, 4 hectares split into 3 titles would suggest the extended land use test is not an issue for you. However, it could mean that the title of land that you live on is an exempt asset for the means tests. The other titles would likely be considered an asset, regardless of the saleability of those properties.
You have a couple of options that you may wish to discuss with Centrelink directly. You could seek a more favourable valuation for the properties so that you overall assets fall below the thresholds. Alternatively, you could seek Asset Hardship for these properties.
Asset Test - Centrelink
With the asset thresholds, I’m assuming you’re a single, therefore the two caps you need to be aware of are $280,000 to receive the full pension and $609,250 before your age pension entitlements would completely cut out. If your assets fall between these two numbers, you’ll lose $3 in pension for every $1,000 you’re over the lower threshold (i.e. $280,000). I’m unsure what valuation you’ve put on the 2 properties you’re trying to sell, but if they’re not selling at that price, you could speak to Centrelink about using a lower valuation, so long as it’s reasonable in their eyes.
Asset Hardship Provisions
If applying the above test fails and you’ll still exceed the threshold or receiving a reduced payment. You could speak to Centrelink about Asset Hardship. To be considered for this, there are some things to be aware of.
- You must be in severe hardship and your available assets are less than readily available funds limit ($25,677.60 for a single)
- You must be on a reduced pension or not eligible due to the assets test
- You own an asset which you can’t sell, or Centrelink wouldn’t reasonably expect you to sell it
- You can’t borrow against the asset or Centrelink wouldn’t reasonably expect you to borrow against it
- You’d otherwise receive a pension under the income test
- You’re unable to qualify for any other Government help
To apply for Asset Hardship, you’ll need to contact Centrelink directly and speak to them regarding your situation. You can read more information on the asset hardship provisions here.
With Centrelink, it’s always best to put your application in as soon as possible. Whilst they’re assessing your case, which in your situation could take several weeks, they’ll always backdate any payments to your application date. Therefore, the later you leave things, the more you’re potentially missing out on. If, because of the way your assets are calculated, in the interim results in your missing out on the age pension. You could also discuss the Commonwealth Seniors Healthcare Card. Whilst this won’t provide you with income, it may assist you in the short term with expenses around your Council rates, medication costs and other benefits – see here.
The information provided is general in nature. It does not consider your objectives, financial situation or needs. Before acting on anything you should consider the appropriateness of the information provided.
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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