Vikki has sold her home and plans to buy another. Is she still considered a homeowner?
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Q. Vikki
We have sold our home and are renting until we find a replacement. We realise that we have 12 months to purchase a home before the sale funds affect the assets test, but do the sale funds still have deeming applied? Are we still assessed as homeowners during this period or are we assessed as non-homeowners?
A. Firstly, only the value of principal home sale proceeds that are intended to be used to purchase, build, rebuild, repair or renovate a new principal home can be exempt under the assets test. If you are downsizing, the funds you intend to keep after the purchase of your new property will still be included in the assets test.
You will continue to be assessed as a homeowner during the period of time that proceeds from the sale of your home are exempt from the assets test, even though you are currently renting.
The proceeds from the sale of your principal home that are held in a financial investment are subject to deeming.
This will result in an increase in your total assessable income and, depending on your current level of income and assets, most likely reduce your fortnightly pension or payment. It could also change your pension or payment from being asset tested to income tested.
Case study
A pensioner couple sells their home for $900,000 and intends to buy another house for $850,000.
The couple decides to put the $900,000 in their bank account until they can find a home.
Under the income test, the $900,000 will be added to the couple’s other financial assets and deemed to earn income.
Under the assets test, only $50,000 will be counted as an asset as the couple intends to use $850,000 within 12 months to buy their new home.
The $850,000 will not be counted as an asset for pension purposes for 12 months or until they acquire their home, whichever happens first.
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