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Ask Paul: Will I lose my disability pension if I inherit $100k?

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Dear Paul,

I'm currently on a disability pension and live in public housing in Queensland.

My mother recently died and I may inherit around $100,000 (unsure of the amount, as awaiting probate). I don't work and have no superannuation.

ask paul clitheroe will i lose my disability pension if i inherit $100k?

My assets, including my car, furniture, etc, would be worth about $10,000. 

I'm terrified that I'll not only lose the disability pension but will get kicked out of public housing.

I do intend to prepay my and my son's funeral, cremation plots and plaques. What do you suggest, please, so I keep my housing and pension?

I understand your concern here, Beverley. I need you to call your Queensland Housing Service Centre to discuss your personal situation, but reviewing the Queensland public housing information, I do not think you will be about to be ejected from your home or lose your pension.

Let's assume you do get $100,000, with your current $10,000 in assets. Looking at this logically, while it will be a wonderful help to you, it will not put you in a position to buy your own home, and the returns from investing it of around $5000 a year hardly make private rental possible.

In Queensland, eligibility for public housing is that you earn under $609 a week and that you don't own or part-own a property. A single-person household in public housing can have $116,375 in assets - you would be below this amount.

With your disability pension, I also do not see an issue. If you invested the $100,000 in a term deposit at, say, 5%, that would give you a bit under $100 a week.

But you are allowed to earn up to $102 a week before you lose a dollar of pension. When it comes to assets, you do not lose a dollar of pension until you have above $543,750.

If you do receive $100,000, clearly for both social housing and your pension, your circumstances will have changed, so you should advise both.

But my read of the relevant rules indicates that it will not impact either your home or your pension.

What you should do is to ring both your Housing Service Centre and Services Australia, or pop into their offices and check, but I am quite confident that the amount you are likely to receive will make your life better but not impact your home or pension.

Finally, be careful with prepaid funeral plans. Some of them can be a dreadful ripoff.

Ensure you deal with a reputable funeral provider and do check the fine print. All too often these prepaid plans do not deliver the funeral you were expecting. Take care!

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Comments
John Pearce
December 6, 2023 4.54pm

You say

"With your disability pension, I also do not see an issue. If you invested the $100,000 in a term deposit at, say, 5%, that would give you a bit under $100 a week.

But you are allowed to earn up to $102 a week before you lose a dollar of pension. When it comes to assets, you do not lose a dollar of pension until you have above $543,750."

You really need to understand 'deeming' before making assertions such as these. Income from $100k invested isn't counted, it's the deemed income from an asset. This is 4.5%, although much less for the first $50k of all assets.

In this case the deemed income is way below the threshold, but $540k is far above the threshold. You wouldn't lose any pension on the asset test, but definitely would on the income test, as 4.5% of $540k is way over the allowance. So you definitely would lose some pension with $540k, although not with $110k.

https://www.servicesaustralia....

Neil Rogan
December 10, 2023 10.06am

Dear John (😆),

YOU have to "really understand 'deeming' before making assertions such as these."

Centrelink, deeming rates (as per Centrelink website) are: "If you're single -

The first $60,400 of your financial assets has the deemed rate of 0.25% applied. Anything over $60,400 is deemed to earn 2.25%."

If you're a coupe the $60,400 is replaced by $100,200 BUT the deemed rate for theses amounts is still 2.25%, NOT 4.5% as you have stated. This is a huge difference! The pension adjustment calculations per the Centrelink income test also involves a 50% reduction rate of income, thereby meaning that $540K financial assets (investment income & 'garage sale price' of owned Assets) for a non homeowner does NOT result in you being "way over the allowance".

John Pearce
December 11, 2023 10.49am

Deeming rates were halved over Covid. You would be foolish to rely on that not reverting to the previous v rates of 0.5% and 4.5% respectively. Indeed, given the current financial climate, it would be prudent to expect an increase from these rates.

It pays to understand the history and context of such things.

Cheryl Laenen
October 20, 2024 11.07pm

My niece, who is on a disability pension and lives in public housing in Qld. has inherited 50% of her mother's estate. It looks like this could be about $600, 000.00. She does not want to lose her public housing. How can she avoid this?

My niece has a daughter, who is in grade three; however, due to my niece's disability she is unable to bring her daughter up on her own and therefore her daughter lives with a family friend who has paid for the child's education at a high-end private school, as well as most other costs involved with rearing a child. Instead of placing money from the inheritance in a trust for her daughter, which I am assuming would be seen as a gift, is it possible that she pays the friend, taking care of her daughter, the amount of money spent on education etc. as a debt, thus reducing the amount of money she has from her inheritance. Likewise could she pay for her daughter's education in advance (if the school is in agreement) to help reduce her assets so she does not lose her public housing. Any suggestions on how best to not let her inheritance interfere with her eligibility for her public housing and hopefully not reduce her disability pension would be much appreciated.

My niece's disability would make it very difficult to manage owning a home, while at the same time it would be extremely difficult to purchase a home anywhere near where her daughter lives, with the amount she may inherit. Her mental health has improved significantly since she has been living where she is presently, and it is more than likely that to move from the area would be detrimental to her state of mind.