Will renting out a room affect your pension?

Helen is hoping to supplement her pension by renting out a studio flat that is part of her house. Will Centrelink regard this flat as an asset?

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Q. Helen

I have a small studio flat attached to my house that I rent out. The idea was to give myself some extra income when I go on the Age Pension. Will Centrelink deem my house or part of it as an asset？

A. As the studio apartment is part of the main house – i.e. would be on the same title and could not be sold separately – it would not be considered a separate asset to your principal residence, which is exempt from the assets test.

The only way it could be declared as an asset would be if it was on a separate title.

However, you will need to declare the rental income to Centrelink.

You can earn extra income while on the Age Pension under the Work Bonus, but income earned as rent is not included in that scheme.

The Work Bonus applies only to what Centrelink considers active work, such as lawn mowing, working in a café, bookkeeping or plumbing.

Centrelink does not consider managing an investment portfolio or rental properties as ‘active’ work.   

If you are going to rent an area of your house, Centrelink may not include the whole income when assessing it for the income test.

According to the Department of Social Security if you provide accommodation only, 70 per cent is treated as income, if you provide bed and breakfast, 50 per cent of the income will be included in the assessment and if it’s full board, only 20 per cent of the rent will be treated as income.

If you rent the space to a parent, your child or children or a sibling, ‘rent’ from the rooms is not treated as income for social security purposes.

Have you considered renting a room to boost your income? Why not let us know your experience in the comments section below?

Also read: Centrelink Q&A: How would shared housing affect the Age Pension?