Ask Paul: Can we spend enough to qualify for the pension?

Dear Paul,

After the sale of our house, do we have to provide evidence to Centrelink of what we spend our money on, if we go on a spending spree for age pension cut-off purposes? - Will

Thank you for your question, Will.

Fortunately, while we have perfectly sensible rules guarding our pension system, I am pleased to say that you can spend your money how, when and where you like.

You may be thinking of the deprivation provisions, where you can only gift up to $10,000 a year and $30,000 over five years and have this count in your income and assets test for the pension.

So, you could gamble, drink or smoke your money away, fly business class overseas, or do whatever you please with no impact on your pension.

But let's pause for a moment. Throwing away money on stuff you don't really want is nuts.

Sure, I appreciate as you have less money and less investment income you will get more pension. Let's look at the income test. As a couple, your living-together pension cuts out at $3836.40 combined a fortnight, so you may be eligible for rent assistance.

For each dollar you earn under this, until you get to the amount where you get maximum pension, you increase your pension by 50 cents.

Life is short. I understand that after the sale of your house there are things you will want to do. A holiday or a new car, for example.

But my head is full of questions. Why not buy yourself a smaller home or apartment that is an exempt asset for pension purposes and draw full or near full age pension without having to pay rent?

Despite some extra assistance for non-homeowners, all evidence is that life is easier for pensioners who own their own home. They also have an asset to sell if and when healthcare is needed.
Regardless, before you go on any sort of spending spree, I really want you not to waste money.

I also want you to sit down, seek advice if that helps and make a sensible decision regarding the money you have to invest, your housing situation and a logical analysis of what is a sensible amount of money to have invested, supported by a full or part pension.

One thing I can tell you for sure. If you waste money to improve your pension, you won't ever get it back.

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