Assessing the Principal Home

It seems most people are aware that an age pension recipient’s principal home is exempt for asset test purposes. But when is a principal home not a principal home?

Defining the Principal Home

Centrelink say your principal home is the home that an age pension recipient lives in for the greatest amount of time each year and includes an area of adjacent land up to two hectares on the same title document. If the principal home has adjacent land in excess of two hectares, please refer to my article on “Adjacent Land”.

What if you own more than one home?

If an age pension recipient owns more than one home then the principal home is the one in which they spend the greatest amount of time unless they spend the same amount of time in each of them in which case the most expensive home is the home that is exempt.

If an age pension recipient spends more time in a home that they do not own (for example holiday accommodation or a relatives home) then the home that they do own, the home that they own remains their principal home.

What if it is a dual occupancy home?

If the home is a dual occupancy home built on land on the same title document as the age pension recipients home, factors such as who paid the construction or purchase costs are taken into consideration.

If the age pension recipient paid the construction or purchase costs and the dual occupancy is vacant or rented to a near relative, the dual occupancy is part of the principal home. If it is rented to a person other than a near relative is not part of the age pension recipients principal home.

If another person paid the construction or purchase costs and this person has an interest in the second dwelling, then the age pension recipient does not have an interest in the dwelling and it is not an asset of the recipient.

What if someone else lives with me who is not my partner?

If the principal home includes a self-contained living area (but does not come under the definition of dual occupancy) this area may not be defined as part of the principal home. If the self-contained living area is vacant or it is rented to a near relative it is still assessed as part of the principal home. But if the self-contained living is rented to a person other than a near relative, the area is not considered part of the principal home and therefore is assessable for assets test purposes.

What if I run a business from home?

Where an age pension recipient operates a business from their home, and there are distinct areas of the property used for business purposes, these areas are not part of the principal home and are not exempt.

What does this all mean for me?

Please be aware that this is just a snapshot of the information available on this subject and you should not make any decisions based on this article without seeking further advice about your individual circumstances.

If you situation is simple than more than likely you don't need to do anything. If you own more than one home, live in a dual occupancy home, share with someone or run a business from your home, then you need to check with Centrelink to see how you are being assessed. If you are concerned that you are not being assessed correctly, and you would like to understand how you might be impacted, then contact us and we will work through it with you.