My brother is in his mid-50s. In March 2021, his employment in hospitality was unstable and he moved back to live with our elderly parents, who are in their 80s. He intends to be a full-time carer, when needed. My parents had made it clear that my brother can live in their house for life, so he has leased his house – worth some $1.4 million with a $500,000 mortgage – and is receiving rental income of $2500 a month. He has $200,000 in superannuation and has taken out a $250,000 loan for a business. He’s unsure how to organize his finances. He is considering selling his house to clear all his debts and buy a cheaper house, (possibly without a mortgage) to rent out, and he has talked about selling his business in a few years’ time, to take care of our parents. Should he keep the property? If he does, would that affect him getting a carer’s payment in due course? What is my brother’s best approach to set himself up?
To obtain a tax-free carer payment, which comes at the same rate as the age pension, both the carer and the care receiver must meet residence rules and qualify under the income and assets tests. Also, the doctors treating the care receiver must provide medical reports to Services Australia.
Your brother would need to provide care all day and doctors would have to confirm one or both of your parents has a severe disability or illness, or is frail and aged. You don’t make it sound as though they are at that stage.
A tax-free carer allowance also exists – less than one-fifth of the carer payment – and care is required for at least 20 hours a week. Again, the carer must be providing daily care to someone who has a disability or severe illness, or is frail and aged.
If your brother is focusing on a life interest that will be left to him in his parent’s will, they can be complex. Furthermore, if your parents live longer and reach the stage that they need 24-hour intensive care that he cannot provide, they may need to sell the house to pay for a move into an aged-care residence.
Presumably, your brother was granted a business loan because he had a business plan that was convincing and his house would likely have been put up for security. His main job now should be to make a success of his business and repay the loan over time.
If the business fails, then he will likely have to sell his house. In the meantime, he can hopefully use the rent to meet some or all of his mortgage payments.
My father passed away at the beginning of the year. My mother has had an easy time with every organization she has had to deal with, except the Australian Taxation Office, when it comes to searching for lost super. She had difficulties having her identity accepted, despite providing all the necessary paperwork, together with verified documents of his death. The date of death was another problem, as she only has a letter from the coroner stating that he cannot ascertain an exact date, instead giving her a date range. The ATO apparently requires an exact date.