Renovating the family home v2 SECONDARY

Renovating the family home

Renovating the family home can reduce assessable assets and increase Age Pension entitlements.
Considerations for your clients

  • The family home or principal place of residence is not an assessable asset, so any money spent on repairs or renovations contribute to its value and are exempt from the assets test. 
  • Making a small to medium investment in improving the comfort, safety, or efficiency of your clients’ home in retirement may boost their Age Pension entitlements as well as providing other financial benefits. 
  • For example, installing a solar energy system could reduce your clients’ power bill throughout retirement. And modernising the bathrooms using energy saving water devices could not only improve the comfort and value of the home, but also reduce ongoing water bills.
  • That said, clients should consider that the capital they inject into their home will no longer be readily available to use to fund their retirement, although it may make living more comfortable and enjoyable.

Case study: Building value

Kevin and Helen love their family home which they bought, back in the 70’s, for $34,000 and is now worth about $950,000. They have $600,000 in super, $30,000 in personal assets and $50,000 in the bank. Their assessable assets total $680,000.

Whilst Kevin and Helen have maintained their home immaculately, it’s getting tired, with the 70’s kitchen and bathrooms needing a makeover to take them well into their retirement years.

They were planning on doing their renovations in a few years, but after speaking with their financial adviser they decide to bring forward the cost to enjoy their renovations sooner and get some more Age Pension today.

The building work (including solar panels and water saving devices) cost them $72,000, leaving them with about $608,000 in assessable assets.

This reduction in assets boosted their combined Age Pension by an extra $5,616 in the first year, increased the value of their home and reduced their yearly electricity and water bills.

Total renovation cost: $72,000

Increase to Age Pension: $5,616 + increased value of house + reduced utility bills
 Case study for illustrative purposes only. Age Pension entitlement increases are based on Social Security rates and thresholds effective 1 January 2021.