Special Centrelink rules give downsizers help with rent if their new home is caught in a building bottleneck

Pensioners cashing in on WA’s property boom are becoming more frustrated as building delays upset planned moves from one home to the next. The delays have resulted in some seniors being forced to take out short-term rentals until their new homes are complete. But many are not aware they could be entitled to rent assistance payments from Centrelink, which can help offset some of the unexpected costs. The construction delays have been caused by a shortage of building materials and tradies, fuelled by low interest rates and COVID incentives designed to keep the industry running throughout the pandemic. Delays of up to a year have been reported by some Your Money readers. Those wanting to claim rent assistance must be in receipt of a Centrelink income support payment. Normally, a big injection of cash would result in you losing all or some of your payment thanks to means testing. Under special rules, proceeds from a house sale can be exempt from the asset test for up to 12 months, provided the money will be used to build or buy a new home. And under special circumstances, that period can be extended beyond 12 months if the home is not yet ready for occupancy. If the full proceeds are set aside for the new home, the full amount remains exempt from the asset test. You cannot, however, add extra money you might have saved to increase the amount that is exempt. While exempt from asset testing, the money will be counted as a financial asset for Centrelink income means-test calculations. Under this test, all of your financial assets — which includes cash, bank accounts, super, account-based pension funds, shares and gifts over a certain amount — are deemed to be earning a set rate of interest. For singles, the first $53,600 is deemed to be earning 0.25 per cent a year. The threshold for couples is $89,000, also at 0.25 per cent. The amount above these limits is deemed to be earning 2.25 per cent. The annual calculated figure is then divided by 26 to give a fortnightly amount and this is used against the income test. Singles have a total of $180 a fortnight of assessable income before their pension starts to reduce at the rate of 50¢ per dollar. For couples, the threshold is a combined $320 a fortnight. A couple with $300,000 in super and savings who sell their home for $800,000 would have $1.1 million in financial assets. The deemed income on this total would be $883.46 a fortnight. At 50¢ per dollar, and allowing for the exempt amount of $320 a fortnight, that translates to a $281.73 reduction in the full age pension of $1488.80 to leave them with $1207.07 a fortnight. But there’s a twist if they decide to rent. Providing the rent is greater than $394 a fortnight, they will qualify for rent assistance of $137.40 a fortnight. For a single, the maximum payment is $145.80 a fortnight if the rent is at least $324.60 a fortnight. A total of $800,000 invested in a suitable term deposit, could safely generate about one per cent a year. That’s $8000, or the equivalent of $307 per fortnight. While probably not covering the full cost of the rent when combined with rent assistance it should at least, reduce the pain.