Upon entering a retirement village, such as Seasons, all residents are asked to pay an ‘Entry Contribution (EC)’. The amount of the EC has an impact on the age pension assessment for that person or couple and can determine if they are eligible for any rent assistance to help towards their ongoing residents’ fees
The following definitions are fundamental to the assessment of retirement villages for social security purposes:
EC greater than EAA |
EC equal to or less than EAA |
|
Homeowner/Non-Homeowner |
Homeowner | Non-Homeowner |
EC assessed as an Asset |
No | Yes |
Rent Assistance |
No | Yes |
Let’s consider two examples to determine a person’s homeowner status and eligibility to rent assistance.
Estelle moves into a retirement village on July 1, 2018. The entry contribution is $400,000. This entry contribution exceeds the EAA ($207,000 at July 1, 2018). Her only other assets are:
As a result, Estelle will be considered a Homeowner for age pension testing, meaning:
Under the Homeowner assessment, Estelle is entitled to the maximum age pension for a single homeowner of $23,598 per annum. If Estelle were considered a Non-homeowner (meaning the EC of $400,000 is assessed as an asset), her Age Pension entitlement would reduce to approximately $16,622 per annum.
Frank moves into a retirement village on July 1, 2018. The entry contribution is $185,000. The EC is less than the EAA ($207,000 at July 1, 2018). His only other assets are:
As a result, Frank will be considered a Non-Homeowner for age pension testing, meaning:
Under the Non-Home Owner assessment, Frank is entitled to the maximum age pension for a single homeowner of $23,598 per annum, as well as being eligible to apply for Rent Assistance.
If Frank were assessed as a Homeowner (meaning the EC of $185,000 is not assessed as an asset, however, he is then assessed against a lower asset test threshold), his age pension entitlement would reduce to approximately $17,245 per annum and he would have an entitlement to Rent Assistance.
As you can see, the difference in your Entry Contribution to a Retirement Village can have a significant impact on your age pension entitlements, so is worth considering prior to entering a new retirement community. If you are already in a retirement community and you think you may be eligible for rent assistance, you should inquire with Centrelink to confirm.
Important Note: The information provided about is in intended as a guide only. It is important to seek professional, accredited financial advice when considering whether the information is suitable to your personal circumstances.