Ask Paul: Will Mum lose her pension if she sells her house?


Published on

Dear Paul,

My mum is 83 and owns her own home outright. She wants to know if there is a way to sell her home and give me, my sister and brother our inheritance now rather than after she is gone.

I live with my mum. My sister has a large house that we could move into, and my brother has a home in Sydney. 

ask paul clitheroe will my mum lose her pension if she sells her house

She does not want to lose her age pension and has stated that she will not take advice from anyone but you. 

Is it better for her to stay in her own home and get help in, as she can't do what she wants to anymore. 

Of course, I will stay with her, but I have medical problems as well. Thank you in advance. - Maria

Give your mum my love, Maria. I am very humbled that she values my advice. Seriously, though, my very flawed 'money crystal ball' is no better than anyone else's.

I always have a good chuckle when I read about so-called financial experts with a 'proven money-making scheme'. If I ever developed one of these, I'd keep it quiet and use it myself! The reason scammers flog their schemes to investors is pretty simple: they don't work.

But where I think I can help your mum a little is with some commonsense thinking. It's lovely that she wants to sell her home now and pass the money to the three of you, but I just can't support that idea. There are two reasons for this.

First, it's a fact that if she sells her home, which would be free of any tax, to maintain her pension she could only pass on $10,000 to the three of you. To be clear, that is just $3333 to each of you a year and a total of $30,000, meaning $10,000 each over five years.

Sure, she could gift all the money to you, but the entire amount, less the $30,000 over five years, would be deemed to be her asset and it would dramatically impact her pension. So, it is important she understands that selling her home would potentially have a big effect on her pension.

Second, I just don't think it is a good idea to go into old age with zero assets. I appreciate you kids would help her into an aged care facility if needed, but I have seen many situations where the money goes into mortgages or a business owned by the kids and it's lost.

I know this is a pretty negative thing to say, but I see it all too often. Many a generous parent has been left in poverty with few choices about their care.

So, yes, I believe she should keep her home and bring in care as required. None of us knows our future health needs and the home may be required to support a high-care nursing home.

If she is finding the pension is not enough, along with various government 'stay-at-home' packages, an option for her is to look at the government's Home Equity Access Scheme, where she could use the equity in her home to get up to 150% of her pension in additional, non-taxable payments.

Please pass on my best wishes.

Ask Paul: Where are they now?

Has your question appeared in Ask Paul over the years? We want to hear from you! If Paul Clitheroe has published an answer to your question, email [email protected] to let us know how your situation turned out. We will publish a selection of these in the new year.

Get stories like this in our newsletters.

Related Stories

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.
Sue Neame
November 1, 2023 5.18pm

Why is the pension in this country so antiquated compared to the nz one....65 year olds throw their hat in air and have a great time living life and doing whatever they wish.....they can gift and help their family members with paying off their house, debts whatever without losing their well earned pension . Over here as you point out they are penalised if the gift to any one.....they can work on as well as pick up the pension.......what's the go. I hear so often how great it is in this country yet if one partner dies the surviving person will almost certainly become self funded because of their accumulated assets......Please explain.......this is not the first time l have asked this question only to receive NO answer...after all we are or were told this surposed to be the lucky country

Kathleen Roach
November 1, 2023 8.17pm

Hi Paul

I am now 75 years old and cannot do any salary sacrifice. I can't even do it after I receive my pay. I am not sure what they call it. The Govt wants us to keep working yet I can't put any money in. I don't have much super and I don't own any property so how do I look after myself when I finally stop working. Please advise I have some shares and have seen some information on investing in EFTs. Again please advise. Thanking you in advance. Kathleen