Parton’s Case – [2023] AATA 1903

This case illustrates the consequence where the net sale proceeds was not entirely applied in the application of the replacement home.  Mr and Mrs Parton, rather like Bill and Wilma (refer article:  Downsizing and the Age Pension), sold their home and did not immediately acquire a replacement home.  Once they acquired the replacement home, they did not use up all of the sale proceeds.  They intended that a portion of the net sale proceeds would be used in repairing and modifying their replacement home.

The issue to be resolved was how the retained net sale proceeds affected their entitlement to the age pension.

The Tribunal held that once they acquired their replacement home, any amount of the net sale proceeds which was not used to acquire the replacement home ceased to be subject to the special rules applying to the sale proceeds of the family home.  The used proceeds would be counted as an asset and while, for income means test purposes, the unused sale proceeds would be included in the pool of financial assets to which the normal deeming rates would apply.

The Tribunal did note that if the Partons then applied the unused portion of the sale proceeds in the repair and modification of the replacement home, the amount used in this way would become part of the replacement home and therefore be disregarded for the purpose of the assets means test and cease to exist as a financial asset for the income means test.

As the relevant events of the Parton’s situation occurred before 1 January 2023, the sale proceeds would only be excluded from the assets means test for 52 weeks and not 104 weeks.  Additionally, the balance of the sale proceeds would form part of the ordinary pool of financial assets to which the 0.25% and 2.25% rates apply.

NOTE:  This article was prepared as at August 2023.  The article has not been updated in light of subsequent developments.