Question 1. As a couple we are currently on a part pension under the asset test. With super of $250,000 and two rental properties, both are old houses, one is paid and the other one is used as a security for the other one that has a mortgage of $147,000.

I bought the properties when the market was high. I want to sell it but in my calculation I might be losing more than $100,000. Rental income from both rental properties pay for weekly mortgage payments, insurances, rates and minor repairs.

I am 68 years old and my husband is 78 years old this year. If I sell the property with mortgage it will reduce our tested asset and increase our pension but I don’t think we will reach the lower threshold for a full aged pension, however it will get rid of the mortgage payments.

Can you suggest other ways of looking at my financial issues that can help me make a decision whether to sell and accept losses from selling but increase our pension?

To help you make a decision, consider the following:

• Don’t think about what you paid for the property and whether you will make a gain or loss, what’s done is done. Don’t ‘anchor’ the price in your mind to the original purchase price. What matters is the future prospects of the property and whether it’s likely to achieve future growth from this point forward
• Opportunity cost. What is the alternative if you sold the property? Where would the funds be invested?
• You have a large amount of your investments in property. You should consider diversifying into other assets. Should property suffer falls then it would affect a large part of your investments
• Currently the net value of your investment property (value less loan) would count under the asset test, so selling the property and having money left over would make no difference to age pension – please confirm this with Centrelink
• Whether you want to continue to manage property as you get older, if you do not sell now, have an exit plan to sell in the future.

You should also consider obtaining some personalised financial advice.

Question 2. Hi, I’m 63 years old and I have the disability pension. I would like to sell my apartment in Melbourne and move to Queensland – is that going to affect my pension? How long do I have to find a house to buy without losing my pension?

If you let Centrelink know how much you intend to spend on your new home (assuming you are buying a new home in Queensland) they will not count that amount in the assets test for up to 12 months, or until you buy the new home, whichever is sooner. This can be extended to 24 months in extenuating circumstances (such as you are building a home and the builder suffers delays).

Note the entire amount is still counted under the income test. During this period you are still considered a home owner by Centrelink.

Example:
You sell your home for $750,000 and let Centrelink know you are looking at buying a new home for around $650,000. They will only count $100,000 under the assets test, however, if the whole $750,000 is in your bank account it is deemed and counted under the income test.

Centrelink would be able to let you know how much impact, if any, this would have on your current disability pension.

Question 3. I am 74 years old. I do not work and receive no pension. I just inherited $250,000. Is there any way I can put this into my super? I have a balance of $300,000 in my super account.

Yes, you can now contribute to super up until the age of 75*.

(*Technically, you can contribute up to 28 days after the end of the month in which you reach 75, i.e. if you turn 75 in August, you can contribute up until September 28).

If you were 74 on July 1, you can use the bring-forward provisions and contribute up to $330,000 in after tax (non-concessional) contributions.

If you were already 75 on July 1, and relying on the rule listed above, i.e. 28 days after the end of the month, then you can only contribute $110,000.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

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