Q.  My husband, 71 and I, 65 receive a Totally and Permanently Incapacitated Pension (TPI) and war service pension.  We have no superannuation left or savings. We own our own home worth approximately $790000.

We have 2 sons in early 40’s who both are on a Disability Support Pension. We bought each of them a home about 10 years ago when both were working and we always wanted for them to have their own place so that they could be more independent.

One home is in my husband’s name and one in mine. They are each worth about $320,000. The sons have since married and have one child each. I don’t want them to lose 1/2 their house if a partner wants to move on.

We do not get rent, but they have to save up for rates, insurance, electricity, water and phones etc. Does the tax office look favourably that they are on a DSP and that they are not trying for government housing?

With the changes to the Assets test by Centrelink coming in Jan 2017, where will we stand? Will we lose the pension? 

I will receive an inheritance in the future, from my remaining parent who is 91, still fit and reasonably healthy. We anticipate to receive more than $400,000.

We need to understand the impact of the 1 January changes to our Age Pension and would we be better to receive an inheritance from my parent, who is not on a pension and able to gift either to us or our sons.


A.  The two properties your sons reside in are treated by the ATO as investment assets and as such receive no special consideration regardless of whether you receive an income return or not on the investment or the financial status of the tenants.

From a Centrelink perspective, they are counted as an asset for asset test purposes however as you are not receiving any rent, there will not be any impact under the income test.  Assuming the value is $640,000, the asset value will reduce your entitlement to the Age Pension by $3 per $1,000 of assessable assets in excess of $375,000 from 1 January 2017.

As you own the assets, your son’s partners could not claim on these assets in the event of divorce if you are alive.  However this may change once the boys inherit the assets and take title in their own names.

If you were to transfer title to the boys you would likely incur Stamp Duty and CGT costs. Also, for the next 5 years after gifting the properties:

  • under the asset test, the value of the properties would still be attributed to you, while
  • under the income test, the value of the properties will be treated as a financial investment subject to deeming

However the properties may also then be at risk in the event of your sons divorcing.

Based on your other assets that you have disclosed, it would appear that you will continue to receive a part pension after 1 January 2017.  However, when you receive the inheritance, that most likely will mean the loss of the Age Pension.

In dealing with the expected inheritance, and depending on your own personal circumstances, it may be beneficial to consider some or all of the amount being bequeathed to your sons (most likely via the establishment of a testamentary trust following your parents death) in order to avoid the assets being assessed for the purposes of your entitlements.

There are various strategies that can be considered to optimise Age Pension benefits and manage your current and future Estate Planning needs. You would need to discuss these with a Financial Planner and a solicitor who specialises in Estate Planning.

Follow Andrew on Twitter @AndrewHeavenFP. This article was originally published in The Australian