Centrelink warning for downsizing Baby Boomers over 'special' retirement rule

Yahoo

11-08-2025

Older Australians thinking about selling their home to downsize or move into aged care have been warned about Centrelink's "special rule". If you were looking into getting onto the Age Pension, you have to undergo income and assets tests to see if you're eligible for the payment.
But if you recently sold your home, you could be sitting on a huge sum of money that would normally disqualify you from the pension. Services Australia community services officer Justin Bott said this is where the unique rule kicks in.
"When you sell your principal home and immediately use the money to buy your new place to live, Services Australia will assess any funds that are left over after buying your new home under the standard income and assets tests, depending on what you've done with the money," he said.
"There is a different arrangement for people who have sold their principal home but are still looking for the perfect place to buy or are waiting to build it themselves."
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What is Centrelink's 'special rule' for Age Pension?
Bott gave the example of a retiree selling their home for $900,000 and using $700,000 of that to go into a retirement village.
That person would have a two-year exemption period before the $900,000 would count in the assets test.
That can be pushed to three years under exceptional circumstances.During that grace period, Services Australia would only look at the remaining $200,000 when assessing how much they could receive for the Age Pension.
But that $700,000 that's waiting to be used for the retirement village will be assessed as making interest at the lower deeming rate.
Deeming rates are the rates of return the government assumes people earn on financial assets, including shares, superannuation and bank accounts.
They can affect the means testing for Centrelink payments, including the Age Pension, JobSeeker and parenting payments.
At the moment, the rate is 0.25 per cent, but Bott said that "may change in the future".
So, while Services Australia would include the $200,000 in your assets test, your income test would also include a 0.25 per cent interest rate return on the $700,000, which is $1,750 over a year.
Does this special rule apply to other types of homes?
Services Australia will only grant this special rule when you sell your principal place of residence.
"It doesn't apply to funds from the sale of an investment property or holiday home," Bott added.
Your principal place of residence, and the land its on up to two hectares, also isn't included in the assets test if you still have it when applying for the Age Pension.
What are the limits for the Age Pension's asset and income tests?
These recently went up on July 1 to keep pace with inflation.
Income Test
Singles can now earn $218 a fortnight, up $6 a fortnight from $212, and still be eligible for the full pension.
Each $1 over the threshold reduces the pension by 50 cents a fortnight until it hits the new cut-off limit of $2,516 a fortnight.
Couples can earn $380 a fortnight, up $8 a fortnight from $372, and get the full amount. The new cut-off limit is $3,844.40 per fortnight.
Income includes employment income, along with income from other sources such as financial assets like super and savings accounts.
Under the Work Bonus, pensioners can earn up to $300 of employment income in a fortnight without it affecting their pension.
Assets Test
Single homeowners can now have assets of $321,500 and receive the full pension, up from $314,000. Couples can have $481,500, up from $470,000.
The cut-off threshold for singles to receive a part pension has increased to $704,500, up from $697,000, and for couples to $1,059,000, up from $1,047,500.
Single non-homeowners can have assets of $579,500, up from $566,000 and get the full pension, while couples can have $739,500, up from $722,000.
The cut-off thresholds have increased to $962,500, up from $949,000, for singles, and $1,317,000, up from $1,299,500 for couples.
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