Some older people find moving in with families or friends a good way to live. For instance, if you own your home you may choose to sell it and put the money into extending a family member's home or creating a granny flat. If you live a long way from family, grandchildren and good friends you may move in with family or friends for a while but still own your home and plan to return to it. Perhaps, if you are renting a place on your own but finding it a bit lonely, you might think about moving in with friends or family and be wondering about how this will affect your Rent Assistance. Sometimes if you or someone in your family is frail or unwell a move can help to provide the care that is needed.
Moving in with family or friends can be a good choice for many retirees. Before a final decision is made, there are some important matters for everyone to consider:
- How will people feel about any loss of privacy?
- Will older people be able to cope with the noise and activity of children and teenagers? Some people will enjoy the natural exuberance of their grandchildren but others may find it tiring.
- Will there be a sense of isolation while other family members are out at work, school and other activities, especially if transport and opportunities for social interaction nearby are limited?
- What would happen if the family situation changed—for instance, if a marriage or relationship break-up meant the house had to be sold? This could mean the older family member might not have enough money to buy another house.
- What would be the effect of any move on Centrelink or DVA entitlements? It may be a good idea to see a Centrelink Financial Information Services Officer before you make a final decision. If you do move, tell Centrelink or DVA about your new living arrangements as soon as possible. Your pension rate might change or you might start to get Rent Assistance. If you are able to be paid more, Centrelink or DVA can only pay you more from the time you tell them you have moved. You can call Centrelink on 13 2300 or visit the Centrelink website (www.centrelink.gov.au). You can call DVA on 13 3254 or visit the DVA website (www.dva.gov.au).
Agreeing on expectations
If you are thinking about moving in with your family, you need to talk with them about how much help will be expected on either side. Will they be expecting you to baby-sit regularly? Will you expect them to do some of your laundry or drive you to appointments (which may be difficult if they are working)? Will they take on personal care tasks such as assistance with showering if your needs increase or would you prefer another arrangement? While families are generally keen to provide as much help as they can, some compromises may need to be made if all parties are to enjoy the benefits that multi-generational living can bring.
If you move in with friends, you need to be sure that issues such as financial responsibilities, privacy, overnight guests and the use of common areas such as bathrooms have been discussed in advance, even though it might be uncomfortable to talk about them. This can help everyone enjoy the benefits of sharing.
Demountable dwellings
A further option for older people to retain a level of independence yet remain close to their family involves siting a one-bedroom, prefabricated and self-contained demountable cottage or granny flat in the garden of an existing home. Although establishment of accommodation of this form is a private arrangement between the people involved, it still requires council approval.
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Moving into a granny flat
A granny flat can be a good way for older people and their families to enjoy each other's company. It also means help is close at hand should it be needed.
We usually think of granny flats as self-contained dwellings, attached to a family home or perhaps detached and located in the backyard. Either this kind of set-up or a right to accommodation for life or a life interest in a family member's home, can be assessed as a granny flat interest for Centrelink and DVA purposes.
What is a granny flat interest?
You may have a granny flat interest if you have contributed money or other valuable assets in exchange for your granny flat and your granny flat legally belongs to someone else, even though you have secure tenure. If Centrelink or DVA considers that you have a granny flat interest, you may be assessed under special granny flat rules.
Establishing a granny flat interest
Two situations can apply:
- You can transfer ownership of your home and obtain a right to continue to live there for the rest of your life, although you no longer own it—this is called a life interest, which means a right to reside for life.
- You can exchange some or all of the things you own, such as money or property, for a life interest in a private residence such as the home of a family member without getting legal title to the residence.
Did you pay a reasonable amount?
Centrelink and DVA also look at whether the amounts of money or assets you transferred for your granny flat are reasonable or if you have paid too much. Since granny flat rights are usually family arrangements, the free market does not govern the amount you pay. If you pay substantially more than your granny flat is worth, then the extra amount may be included in your assets. This may affect your rate of pension, and subsequently be included in the assets test for aged care.
Proof of a granny flat interest
It is sound practice to have a legal document drawn up by a solicitor to give evidence of a life interest. Documents will protect your security of tenure and will help to prevent any problems in the future, if your or your family's situation changes. Centrelink and DVA may accept that you have a granny flat interest, even if it is not in writing. They may ask for a statement that the arrangement has begun.
Granny flat rules: home ownership and Rent Assistance
There are special rules for assessing granny flat interests. How much you contributed in exchange for your granny flat interest determines whether you:
- are considered a home owner by Centrelink or DVA, even though you do not have title to the granny flat
- are not considered to be a home owner, and may be able to receive Rent Assistance if you pay enough rent.
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Extra allowable amount
The amount you contributed to your granny flat is compared against a figure called the extra allowable amount. This figure is the difference between the home owner and non-home owner assets test thresholds. The extra allowable amount is $124,500 at December 2008. This is the amount which determines whether or not Centrelink or DVA will treat you as a home owner. If your contribution is more than the extra allowable amount, you are classed as a home owner. If your contribution is less than the extra allowable amount, Centrelink or DVA will treat you as a non-home owner. You can find out what the current extra allowable amount is by calling Centrelink on 13 2300 or by visiting the Centrelink website (www.centrelink.gov.au).
For example:
Elaine
- Elaine was a non-home owner who had $55,000 in assets. She and her son Don agreed it would be a good idea if she moved closer, and that he would extend his home to give them both privacy. They agreed that Elaine would have the right to live in the extended home for life. This means Elaine would have a granny flat interest for Centrelink purposes.
- Elaine contributed $45,000 for her granny flat interest. She kept $10,000. Before the money was paid, they each saw a solicitor and drew up an agreement to ensure their interests were protected.
Elaine's pension:
- Elaine is classed as a non-home owner, because she paid less than $124,500 for her granny flat interest.
- The $45,000 contribution is counted as her asset. No income on it is assessed under the deeming rules in the 'How deeming works' section..
- Elaine's pension is not affected by the move under either the income or the assets test. Her total assessable assets are $55,000, including the $45,000 contribution. She has the higher, non-home owner asset level.
- Elaine remains well within the non-homeowners assets test limits. For further information on the amount of assets allowed before your pension is reduced call Centrelink on 13 2300 or visit the Centrelink website (www.centrelink.gov.au).
Elaine pays enough rent to get some Rent Assistance in the
'Rent Assistance' section.
Jessica
- Jessica transferred only half the title of her home to her daughter and kept the right to live in it. Jessica's right to continue living in her home comes from her continuing joint ownership.
- Centrelink will not assess Jessica under its granny flat rules. Centrelink classes her as a home owner.
- Centrelink may assess the value of the property Jessica has given to her daughter under the gifting rules in the 'How gifting can affect aged care costs' section..
More about financial assistance if you move in with friends or relatives
Sometimes it helps, if a lot of care is needed for someone who is ill or frail, if the carer is living in the same home. This section talks more about Rent Assistance and other financial assistance you can get from Centrelink and DVA when you move in with friends or relatives. It also explains how your home is treated under the assets test while you are away.
Some people move in with friends for other reasons, so this section also explains what happens if you are in good health and move out of your home to stay with friends or family.
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If you are a home owner
If you move to receive care because you are frail or in ill health
If you move in with someone else because you are frail or in ill health, you may be eligible for Rent Assistance immediately, even if you still own your home. The person caring for you does not have to be receiving a payment from Centrelink or DVA.
To qualify for Rent Assistance in this situation, you need to be:
- receiving a substantial level of care for at least two weeks, and
- receiving a pension or allowance, and
- paying enough rent.
Even if you are receiving Rent Assistance, you can continue to get an exemption for your home under the pension assets test in these circumstances. Centrelink and DVA exempt your home from the assets test for two years from the time you move to receive care, including a move to residential aged care, to give you time to decide what you want to do with it. During this time the lower assets test limit for home owners, applies to you. For information about assets test limits see in the
'Assets test' section.
Your home may be exempt for more than two years if you are a member of a couple, one of whom stays in the home. This is because Centrelink and DVA do not count your home as an asset while your partner lives there. The two-year exemption period does not start until your partner leaves the home.
If you rent out your home, Centrelink and DVA will assess the net rental income according to the income test. For more information about the income test see in the
'income test' section. Net rental income means not all of the whole amount you receive for rent may be counted. Certain deductions, for instance the cost of agent's fees and essential repairs, can be applied to the amount that is counted.
If you sell your home during the exemption period, you must tell Centrelink or DVA. What you do with the sale proceeds may affect your pension. Centrelink or DVA will write to you towards the end of the exemption period, asking for details of your home and an estimate of its value. If the value of your home may affect your pension, Centrelink or DVA will arrange a valuation at no expense to you.
When the exemption period ends, the value of your home will be counted as an asset. Your pension will be assessed against the higher non-home owner assets test limits.
If you move to provide care for someone else
You may leave your home to provide substantial care in another home for someone who cannot care for themselves. There are special exemptions under the assets tests for home owners who have left their home to provide substantial care for someone. These exemptions are the same as those for people who moved because they are frail or in ill health (see previous section).
If this happens you may be immediately eligible for Rent Assistance, even if you still own your former home. The person you are caring for does not have to be receiving a payment from Centrelink or DVA.
To qualify for Rent Assistance in this situation, you need to be:
- providing a substantial level of care for at least two weeks, and
- receiving a pension or allowance from Centrelink or DVA, and
- paying enough rent for the property where you are providing care.
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What is considered a substantial level of care?
Centrelink and DVA will accept that people need a substantial level of care and are receiving it, if they meet one or more of the following criteria:
- They are receiving Disability Support Pension and because of their medical condition they require assistance.
- They are over age pension age and regarded as frail.
- They can provide medical evidence stating they left their home because of illness or infirmity.
- They can provide evidence that they need help since their recent discharge from hospital.
- They have been assessed by an Aged Care Assessment Team and have been approved for residential respite care or care in a residential aged care home.
- Their carer is being paid Carer Allowance.
- Their carer is receiving Carer Payment.
If you are in good health
You may move in with friends or relatives while you and they are in good health but still own your home and plan to return there.
In this situation, for the first 12 months:
- Centrelink and DVA do not count the asset value of your home.
- Your assets are tested against the lower home owner assets test limit.
- You cannot get Rent Assistance.
- If you rent out your former home, Centrelink and DVA will assess the net income.
After 12 months:
- If you still own your former home, Centrelink and DVA will count it as an asset because you are not living there—you will be tested against the higher non-home owner assets test limit. For more information on assets test limits see in the 'Assets test' section.
- You may be able to get Rent Assistance if you are paying for your accommodation. For more information about Rent Assistance see in the 'Rent Assistance' section.
- If you rent out your former home, Centrelink and DVA will assess the net income. Net income is explained in the 'Your finances' section.
If you are not a home owner, and you move in with friends or relatives
If you pay enough rent, you may be able to get Rent Assistance as soon as you move.
In some cases you may be paid at the sharers rate, which is lower than the rate for people who live alone. For more information about Rent Assistance see in the
'Rent Assistance' section.
If your home is left unoccupied
Check your policy and contact your insurance company.
If your home is left unoccupied, failure to notify your insurance company may result in claims being rejected.
You may also want to make sure your neighbours are aware of the situation and have your emergency contact details.