Can Selling Your Home Impact Your Aged Pension Entitlements?

Many Australians are choosing to trade their larger family homes for more manageable and lifestyle-friendly properties as the family leaves home and their needs change. One common concern among older individuals is the impact on the aged pension when they make a transition during retirement.

When you sell your home, it inevitably results in an increased bank balance, which can potentially affect your retirement income. In this article, we will explore the various ways in which downsizing may influence the aged pension.

Means Test

Eligibility for the aged pension is determined by specific criteria, including a means test. This test takes into account your assets (such as property ownership and bank balance) and income to determine the pension amount you qualify for. Since your assets are reviewed three times a year, the decision to sell the family home can significantly impact the amount of pension you are eligible for.

That is, the profit from selling your home becomes an asset. It is important to understand how these changes in assets can impact your pension payments. The maximum asset value you can have while still being eligible for the aged pension may vary, which is why consulting with a financial advisor who specialises in this area can provide valuable insight into how the sale of your property will affect your aged pension.

Income Test

Apart from the asset test, the income test is another way in which selling your home could affect your pension. If you invest the money from your home sale and earn income from those investments, it could impact your pension payments. Understanding the rules regarding deeming rates and income assessment is crucial for effectively managing your finances. The income threshold to be eligible for the aged pension varies depending on your circumstances.

If you have high-value assets or your income increases after the sale, you may not qualify for the full aged pension. This is why it's important to take a strategic approach and understand your options to optimse your retirement funds while minimising the impact on your aged pension.

Importance of advice

Seeking professional advice, timing your sale wisely, exploring alternative investments, and staying informed about government initiatives can all be beneficial. It is worth noting that if you are aged 55 or above, you may be able to contribute funds from your home sale proceeds to your superannuation as a non-concessional contribution.

Our dedicated financial advisors specialise in aged pensions and retirement transitions, and are ready to assist you. Book a chat with Bill to help you optimise your retirement funds while minimising the impact on your aged pension.