Rental housing crisis:
Swipe right for income
A recent suggestion by NSW Premier Dominic Perrottet has sparked debate about Age Pension income and how Centrelink treats rental income.
Speaking at the Sydney Summit conference in early February, the Premier expressed support for the idea of using technology for matching older Australians who have a spare room in their homes, with younger people finding the current rental market too expensive.
The idea had been floated by Sydney-based SGS Economics and Planning, a data solutions company which proposed the use of an App to match the needs, preferences and dispositions of potential homeowner-student combinations.
Of course it’s not the first time that such an idea has been floated, but as people-matching technology gets ever more sophisticated, it may be that the time is right to see if it works for this type of house sharing as well.
There’s a catch, of course, as the Premier noted. Given the recent $4000 increase in the Centrelink Work Bonus, it’s tempting to think that extra income from rental won’t be an issue. But it will. Under current rules, Centrelink will count rental payments as additional income which can be assessed for any Age Pension entitlements. So taking in a boarder may not lead to extra income at all. Instead, it could mean the loss of income you already receive. Confused, you could ask one of our age pension specialists.
(A short explainer on income is shared below)
Premier Perrottet called upon the Federal Government to ‘take a look’ at the provisions within current legislation (including taxation), for those receiving rental income.
The potential benefits of this scheme are not just financial. It could also help shift the dial on what can be a time of increasing loneliness for some older Australians who live on their own and have infrequent social interaction. Additionally, an exchange of services or skills is entirely possible, with language practice or tuition, meals, household chores and home maintenance all up for barter. It is also a housing proposal which uses existing stock, so the wait time for extra social housing to be built would be overcome, at least for some who need a roof over their heads.
Which income is affected by the Work Bonus?
The Work Bonus is applied to employment and self-employment income. This includes:
- working in and outside Australia
- paid leave while still employed
- director’s fees
- self-employment, that involves active participation.
Income which is not covered by the work bonus includes
- leave after you’ve ended your employment
- self-employment, that doesn’t involve active participation
- investments
- superannuation.
An active participation assessment is required before a decision is taken to use the Work Bonus for income from
- sole traders
- partnerships
- private companies
- private trusts.
What is active participation?
This refers to work that involves effort (which is the opposite of income from passive involvement)
Examples of work involving active participation cited by Services Australia include:
- bookkeeping
- lawn mowing
- plumbing.
Active participation does not include managing an investment portfolio or rental properties owned by you, a family trust or a family company.
One last thought.
Why, whenever this idea is floated, do policy makers always seem to wish to pair older and younger people? It can work well in many cases, for sure. But why not older homeowners with older renters? For instance, some of the 500,000-plus women aged over 55 in danger of becoming homeless? There seems to be some automatic thought that older people are just sitting around waiting for someone younger to help alleviate their penury or loneliness. Quite often people enjoy quality contact with someone from their own age group. Someone who knows Paul McCartney had a gig before Wings, for instance. Maybe even someone who won’t do an eyeroll when you forget how to use the remote control? Now that’s special companionship indeed.
What do you think?
Has Premier Dominic Perrottet highlighted a genuinely useful solution for those struggling to make ends meet? If so, would you jump on board?
Do the Centrelink concerns discourage you?
And if you did rent that spare room, would you prefer a young, older or similar age boarder?
You can also talk to one of our Advisers about how any additional income might affect your entitlements and what you might be able to do to maximise your entitlements.
The thought of renting a room out has been considered by myself and yes I am aware of the Centrelink rules which if you own outright your home it can cost you money from your pension to do this. Last time I checked the rules a home owner who is still paying their mortgage Centrelink will calculate amount owing/payments? then determine an amount that can be charged to a tenant before a Centrelink penalty will apply, this was in a case where the prospective tenant was applying for rent assistance, being on benefits Newstart unsure what it is called now. Another important thing to look at ” does your insurance company allow this” Some policies state, no more than two people who are not related – any more persons may affect any insurance claim. We took in a family of four when their house was destroyed by fire, I checked this with my home insurance and that was their advice, to upgrade my details (at extra cost). The home owner should be able to select the prospective tenant, age etc. This should be looked at Australia wide and would help the housing crisis, immediately in so many ways.
Interestingly we will actually be far worse off because, in an attempt to provide extra income in order to supplement our paltry aged pension entitlements, we started a small accommodation business from our principal place of residence, a bed and breakfast business. We are now told that in addition to the modest post tax income from the business (a registered Pty. company) being classified as income for the purposes of the income and assets test, the value of the part of our principal place of residence used to conduct the business, is also assessable as an asset to be added to the rest of our assets!. Rather puts a dampener on the notion that Australians should undertake employment as means to increase available funds for retirement?
I live in a small cottage but have a self contained studio next to my cottage if I rent the studio would that impact on the little sum of pension that I receive at the moment
Hi Paul, thank you for seeking clarity! It is possible that the rental income will reduce your pension, it depends on whether Centrelink are using your income value or asset value to determine your pension. Even if they are currently using your asset value, this extra income may tip the scales. I recommend you log back in to your existing account (HERE) and update your income and assets including the amount of rent you believe you could receive to see if it impacts your pension.
Perrottet should be hanged with all his closest clones like the Treasurer’s and Finance minister and others in this group they have good wages and perks and all the billions of taxes from every corner of a day to to day life of ordinary nsw people and still keep pensioners and aspiring pensioners on the loops with archaic regulations…Act and rules of government that are in need of real reforms
That, Terruso Enzo, applies to every single other state of the commonwealth. Most of these
politicians have no idea how the common people negotiate their daily lives around all these price increses.
I work (volunteer) in a community support organisation and regularly meet older women unable to pay their increasingly expensive rent from their age pension, and frightened of becoming homeless. Frequently these women are going without food and essentials like medical treatment just to keep a roof over their heads. I’ve been considering how to develop a data base of older people looking to share accommodation to share expenses of renting. This is different to home owners renting out a room – pensions would not be impacted by two renters sharing. We would need to find real estate agents and landlords who could link us to suitable properties. And I know with the housing shortage that wouldn’t be easy. As mentioned, sharing could help alleviate the loneliness so many older people experience. Homelessness and loneliness – two massive social problems of the elderly possibly lessened?