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Social security home proceeds exemption extended
Article published on: 25-11-2022
Legislation has passed and waits Royal Assent which extends the existing assets test exemption that applies to proceeds from the sale of the principal home from 12 months to 24 months.
In addition to the extension of the exemption period, an additional amendment changes the deeming rate applied to the exempt proceeds.
The new provisions apply to eligible sale proceeds where the property is sold on or after the commencement of the legislation.
The commencement date is 1 January 2023 if Royal Assent is received prior to this date. Otherwise, the commencement date will be one month after receiving Royal Assent. We will update you when the commencement date is confirmed.
Home proceeds exemption
An assets test exemption may apply to proceeds from the sale of a client’s principal home. The exemption applies to the portion of those proceeds which are intended to be used to purchase, build, rebuild, repair or renovate a new principal home. Currently, this exemption period is 12 months and will be extended to 24 months.
The exemption only extends to the amount that is intended to be used for these purposes. For example, if a client is downsizing and only 75% of the home proceeds will be utilised for the new home, the assets test exemption is limited to this amount.
Lower deeming rate
Exempt proceeds that are held in a financial investment, such as a bank account, are subject to deeming under the income test.
This change ensures that all of the exempt proceeds are deemed at the lower deeming rate only (currently 0.25%). The exempt sales proceeds will be isolated from other financial assets, which will continue to receive the benefit of the lower rate up to the relevant threshold (currently $56,400 for singles and $93,600 for couples).
The lower deeming rates and isolation of this amount will apply during the exemption period only. Once the exemption has ceased, the proceeds merely form part of the pool of all financial investments and normal deeming applies.
Discretion by Centrelink to extend further
Under the current rules, it is possible to have the assets test exemption period extended for an additional 12 months if certain criteria is satisfied. This extension is at the discretion of Centrelink and currently allows up to 24 months. Under this change, this exemption is still available which can extend the period to a total of 36 months.
The criteria used to grant an extension remains unchanged and requires the client to continue to have an intention to purchase a new principal home and:
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have made reasonable attempts to purchase, build, rebuild, repair or renovate their new home
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have made attempts within a reasonable period after selling the principal home, and
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any delays experienced are beyond their control.
All the criteria must be met to be considered for the additional 12-month extension
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