With a large portion of the population rapidly heading towards retirement, understanding how home ownership might affect your potential pension is a must. 

Reaching retirement age in Australia and finishing up at work doesn’t mean that you automatically get access to the aged pension. In fact, the kind of pension and benefits that you may be entitled to generally depends on your age, income, and of course, your assets – with one of the key factors being home ownership. 

If your income or assets are above certain limits, your potential pension payment will be reduced, or you may not be eligible at all. Like it or not, there are also a number of rules linked to home ownership and qualifying for the aged pension, many of which can get confusing for first time navigators. 

Aged Pension Means Testing For Home Ownership

On 1 July 2021, the aged pension criteria linked to minimum ages increased to 66 years and 6 months for people born from 1 July 1955 to 31 December 1956, inclusive. For those with a birthday on or after 1 January 1957, you’ll have to wait until you turn 67, as this will be the Age Pension age from 1 July 2023.

Most Australians fear that the age pension won’t exist by the time they retire. It’s a view shared by more than half of Australians, and almost two-thirds of those aged under fifty-five. Although the Federal Government’s most recent retirement income review has indicated that the aged pension won’t be going anywhere anytime soon, having somewhere to live in our old age is still considered to be a top priority for many. 

Along with your income, the aged pension assets test takes into account the value of assets you own, before determining the amount of your pension, if any. This could include:

• A car
• Business assets
• Property (not including your primary residence)
• Super and retirement income accounts (yours and your partner’s)
• Investments, such as cash, shares, term deposits and bonds
• Private trusts and private companies.
• Any deposits you might’ve paid to live in, like a ‘granny flat’ or retirement village
• Any cash gifts or assets you might’ve given to family members or friends

For most people, the asset limits determine how much your assets can be worth before your pension may be reduced, but home ownership – or your primary residence – is exempt from the assets test. In addition, for every $1,000 your assets are over the limit, your pension payment reduces $3 a fortnight – this is called the taper rate.

Ultimately, if you own the home you live in – providing it’s on less than two hectares of land – it won’t be counted as an asset in the assets test. However, owning your home could still affect the rate of your fortnightly pension payment, as the asset limits set by the Government are different for homeowners and non-homeowners. 

As a homeowner with the prospect of retirement in the not so distant future, you might be considering downsizing for a variety of reasons: it could be to boost your finances, reduce your expenses, help you pay for care, or to move into a more suitable home, a better location, access the aged pension, or you might even just want to take advantage of the current property boom.

The fun part of downsizing is that the concept is usually around having more cash flow to do as you please with, instead of spending it on the general responsibility of having a larger property. In turn, this is usually linked to a decrease in stress levels, allowing you more freedom to pursue a lifestyle of your choice – and did we mention the range of tax and superannuation benefits on offer?

Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?

Take The Stress Out Of Selling Property 

As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.

Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.

If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.