Purchasing another residence 108-04070020

Once a customer sells their principal home, they can use the portion of the sale proceeds as an exempt asset. This is to purchase, build, rebuild, repair or renovate a new principal home.

For sales:

• before 1 January 2023, the asset is exempt for up to 12 months, with the possibility of an extension up to 24 months total in some circumstances
• from 1 January 2023, the asset is exempt for up to 24 months, with the possibility of an extension up to 36 months total in some circumstances. The exempt amount that is invested in financial assets is also deemed at the lower deeming rate only, which is currently 0.25%

If a customer purchases or starts to build a new home before selling their existing home, there are no sale proceeds to exempt until they sell their old home. Complete an assessment to determine which property is their primary residence.

If the proceeds from the sale are:

• held as a financial investment, including income streams that are subject to deeming, for example Category 9 Account Based income stream (type AIS) purchased after 1 January 2015 or a Category 3 Asset Tested short term income stream (type TIS if term is 5 years or under)
• invested in a financial investment classed income stream, record the product on the SVDI screen with the Investment Type as 'OTH'. This will enable deeming to apply to the adjusted account balance. Code the amount the customer intends to spend on their new principal home:
• For sales before 1 January 2023, the Loan/Encumbrance Amt field in Process Direct. Once the customer has purchased the new home, or as they make progress payments on building a new home, update the Loan/Encumbrance Amt field in Process Direct
• For sales from 1 January 2023 ongoing, the New Home Deduction Amt: field in Process Direct
• invested elsewhere, they will be assessed according to the usual Income Test rules. This includes any income stream that is not considered a financial investment for example Category 10 Lifetime Pooled Income Stream purchased on or after 1 July 2019 (types LPO or LPS), Category 2 Life Expectancy Income Stream (type LIE) or Category 2 Asset tested long term income stream (type TIS if term is more than 5 years)
• See Sale of principal home Table 2

If a customer is eligible, an extended exemption may apply if the property sold on or after 1 July 2007.

For sales:

• on/after 1 January 2023, the exemption of the sale proceeds may, in some circumstances, be extended up to a maximum of 36 months
• before 1 January 2023, the extended exemption may be up to a maximum of 24 months from the time of sale

See Sale of principal home for eligibility for the sale proceeds exemption.

To gain an extended exemption for the principal home sale proceeds, the customer must have a continuing intention to apply the proceeds of the sale to purchase, build, rebuild, repair or renovate a new principal home. They must provide documentary evidence to support they have:

• made reasonable attempts to obtain a new principal home. This must be within a reasonable period. For example 6 months for homes sold prior to 1 January 2023 or 12 months for homes sold on/after this date, and
• experienced delays beyond their control in obtaining a new principal home

If the customer:

• cannot meet any of the above criteria, they cannot gain an extended exemption on the principal home sale proceeds
• meets the extended exemption conditions they are considered to be a homeowner during the extended exemption period

If a customer purchases land that they intend to build on using the proceeds from the principal home sale, they may be exempt from the Assets Test. This applies if the customer owns the land outright, or mortgaged. The maximum total asset value to be exempt must not exceed the sale price of the former principal home. For example if the principal home sells for $250,000, only assets up to the value of $250,000 can be exempt, this includes the value of the land. The Resources page has an example.

If a customer uses the proceeds to purchase another piece of real estate they will not be living in, record the new property as an assessable asset. The customer must identify the location of any real estate or business site they own or in which they have an interest.

A customer may sell their principal home and seek to have the sale proceeds Assets Test exempted. See Exempt asset from the sale of the principal

This is when they temporarily move into another property they already own while building or seeking to purchase a new home.

The property the customer temporarily occupies in this situation continues to be an assessable real estate asset (it is not assessed as their principal residence). The exemption of the proceeds of the sale of their principal home continues. The customer cannot have an exemption for the proceeds of the sale as well as the property they already own.

If, after purchasing a new principal home, a customer still owns their previous principal home, the previous home must be assessed under the Assets Test.

Assess the current market value of the property less any encumbrances on that house as outlined in Section 4.6.6.30 of Guide to Social Security Act. See the References page. This may be either a secured loan or an unsecured loan if the customer can demonstrate the loan is an encumbrance on that particular asset. Except for primary industry aggregation, it is not possible to offset an encumbrance on one asset (exempt or otherwise) against the value of another asset.

In some circumstances, a customer can only sell a retirement village unit by signing a contract to sell on the open market and/or back to the retirement village. They have to vacate the unit as part of that process.

Any amounts due to the customer are not subject to deeming until received. They are considered proceeds of sale if they are to be used to purchase a new home or unit in a retirement village. The customer is still assessed as a homeowner and may be entitled to Rent Assistance (RA).

The sale of home provisions cease once the customer has purchased their new principal home. If the customer has purchased their new principal home but does not move in immediately, the property becomes an assessable asset. The customer's homeowner status will be dependent on where they are currently living. If the customer is living in a home they own, this will become their principal home and they are a homeowner. If the customer is living in a home they do not own, they are a non-homeowner.

The temporary home vacation provisions cannot apply, as the customer has not previously resided in the new home. If a customer is unable to move in to their new home due to unusual circumstances beyond their control refer the case to Level 2 Helpdesk for advice. For example, customer is unable to move to their new home due to COVID-19 border closures.

Some customers may be eligible for RA:

• Income support recipients who have sold their former principal home within the last 24 months from 1 January 2023 onwards or 12 months before 1 January 2023 and are likely to use some or all of the proceeds of the sale (within 24 months from 1 January 2023, 12 months before 1 January 2023 of the sale) to purchase, build, rebuild, repair or renovate another home that will become their new principal home, or
• Income support recipients who have sold their principal home within the last 24 to 36 months from 1 January 2023, 12 to 24 months before 1 January 2023 and have made reasonable attempts, within a reasonable period after selling the home to purchase, build, rebuild, repair or renovate another residence, but have experienced delays beyond their control, and
• Living in a home they do not own, and paying rent