All Topics / Legal & Accounting / Centrelink – Principal home holiday rented for part of year

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  • Profile photo of Johnno123456Johnno123456
    Member
    @johnno123456
    Join Date: 2013
    Post Count: 3

    I am thinking about renting my principal home out as a Holiday Rental for part of the year (up to 5 months).

    I have lived in it for 24 years.  I am on a Centrelink age pension.

    Will Centrelink still regard my home as my principal place of residence for the purposes of the Asset Test?

    I realise that if the Holiday Rental option is successful that it will mean that my pension will be reduced or stopped altogether under the Income test.

    My question is about how Centrelink will regard the property under the Asset Test.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Interesting question.

    I don't know the definitive answer but would suspect it would not be classed as your main residence while you are absent. So this may effect your pension. Once you move back in you may be able to count it as a main residence agian.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of FreckleFreckle
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    @freckle
    Join Date: 2012
    Post Count: 1,680

    What are you trying to achieve Johnno?

    Profile photo of Johnno123456Johnno123456
    Member
    @johnno123456
    Join Date: 2013
    Post Count: 3

    Thank you for responding.

    I live in a location close to the beach which is a very popular holiday destination for 5 months of the year.

    There are many houses around me which are 'holiday rentals'. A local real estate agent who specialises in holiday rentals tells me that if I add an en suite to the master bedroom and refurbish generally, spending around $50K all up, that the house could be marketed at a rate of $2.6K per week (let's say a nett of $2K for 80% of the time).  I would go and live elsewhere for say $300 per week for that period.

    I am in discussions at the moment with my bank to increase my line of credit with them to fund the refurbishments.  The bank asked if my proposal would trigger a change in the status of my principal residence with CentreLink.

    The CentreLink website says that "Assets that are assessed under the assets test include the value of any real estate, including holiday homes, you own (this does not include your principal home).

    This property is the only property I own and it is my intention that, although I would be elsewhere renting for 5 months of the year, I would continue to live in the home for 7 months of the year into the foreseeable future.

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    There was a recent article In API that dealt with people on the pension such as yourself. Whereby a outside investor purchased a option to buy their property (PPOR) ie in 15-20 years time.

    Part of the option involved the vendor receiving $250 per week (because they were on the pension and struggling for cashflow and didnt want to sell and move elsewhere)

    This income was deemed to not be "assessable income" from centrelink and they made a ruling on it because the income was derived from the persons PPOR. They therefore didnt lose there Pension amount and had a extra $250 a week to spend.

    Not sure how it would work exactly in your situation. It could be something similar. t if your allowed one principal place of residence and income exemption on money earnt by your ppor.

    I would just be careful when approaching for a ruling from centrelink to say. That your wish to rent out your Principal place of residence whilst you .. (go off travel, live somewhere else, look after grandkids) I wouldn't go saying you were going to rent out a holiday home because its clearly just your home.

    Profile photo of Rob G.Rob G.
    Participant
    @rob-g.
    Join Date: 2010
    Post Count: 70

    Instalments of capital from a deferred PPOR disposal would not be considered ordinary income for tax law, so maybe that swayed Centrelink.

    Renting is different.

    Not sure how Centrelink would treat this for assets test.

    Profile photo of Johnno123456Johnno123456
    Member
    @johnno123456
    Join Date: 2013
    Post Count: 3

    Thanks for your input.

    I will speak to Centrelink this week and let you know what happens.

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