Q. My mum is single and due to retire next year. She currently has less than $30,000.00 in superannuation. She owns her own house outright (worth about $400,000). Ideally I would like her to live with me and we sell her house. Is there any way that we can sell her house without it affecting her eligibility for the Aged Pension from Centrelink?

A Assuming your mum is 65 or older next year, she will be eligible to apply for the Age Pension on retirement.  If she was to continue to reside in her home, she would be entitled to receive the full Age Pension of $827.10 per fortnight (including all Supplements).

If she was to move in with you and sell her family home, she would be assessed by Centrelink on the sale proceeds under the Assets test.  As a single non homeowner she is entitled to have assets of up to $339,250 to receive the full Age Pension.  Assets counted, include personal assets such as contents and furnishings, motor vehicles and investment assets.

Centrelink apply two test to determine entitlements;  an Asset Test and an Income test.

Assets in excess of the $339,250 threshold reduce her pension entitlement by $1.50 per fortnight for every $1000.

Investments assets are deemed to earn a rate of return, these are assessed against the Income Test. Income (deemed or earned) in excess of $156 per fortnight will reduce her pension entitlement by 50c per dollar assessed as income. The first $46,600 of investment assets are deemed to earn 2.5% and amounts above this are deemed to earn 4%.  If the actual income you receive from your investments is more than the deemed income, the extra income is not counted when assessing the rate of pension.

As a consequence of deeming,  your mother would be assessed under the Income Test.  Accordingly she would be entitled to receive $588 a fortnight as an Age Pension (including all Supplements).

She could increase her Age Pension entitlements by gifting up to $10,000 each year up to $30,000 over a rolling 5 year period.  She could prepay her  funeral or purchase a funeral bond.  Otherwise she could spend some of the money on herself for example take a holiday.

Whilst it is desirable to maximize entitlements to the Age Pension, it is important to keep perspective. Unless you are at risk of losing the Age Pension and all associated supplements and benefits, it is still better to retain assets then worry about missing out on a small amount of Age Pension. Your mother would still receive an entitlement to receive the Age Pension (albeit not much) as long as her assets remain under $890,750.


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