The concept of the Australian dream has long been synonymous with owning a family home. It's a symbol of security, a place to raise a family, and, for many, a significant part of their retirement plan.

However, recent discussions have revealed a contentious issue that could impact retirees with high-value homes.

The Actuaries Institute suggested that the government consider including the value of family homes above $2.1 million in the age pension asset test.

This move would encourage retirees to downsize and release some of the estimated $1.3 trillion in housing equity held by Australian retirees, according to the Institute.

Actuaries Institute suggested including the value of family homes over $2.1 million in the age pension asset test.

This proposal, detailed in a discussion paper, suggested that the value of the family home above the threshold should be included to assess the eligibility for a full or part age pension.

The Actuaries Institute's recommendation is an inflation-adjusted echo of the 2010 Henry tax review, which suggested that homes above $1.2 million owned by retirees should be included in asset testing.

With a 4 per cent annual indexation, today's threshold would be around $2.1 million, potentially varying by region or postcode to reflect the diverse property market across the country.

Currently, the family home is exempt from the asset test for the age pension, a policy that the Actuaries Institute believed should be reconsidered.

The inclusion of high-value homes in the asset test could lead to a reassessment of entitlements for a number of age pension recipients, similar to the estimated 10,000 affected if the policy had been implemented in 2010.

National Seniors Australia and the Combined Pensioners and Superannuants Association (CPSA) have both rejected the idea.

National Seniors Australia Chief Executive Chris Grice advocated for ‘a universal pension with appropriate tax reform’.

On the other hand, CPSA believes the current asset limits for the age pension were ‘sufficient’, stating, ‘the Australian government has plenty of other options to make homeownership more affordable for younger generations.’

Counting the family home in the age pension asset test has long been a taboo subject, and the government has previously dismissed the notion.

However, Andrew Boal, the report's author and Chairman of the Actuaries Institute’s Retirement Strategy Group, argued that Australia should not shy away from this debate, especially considering the recent tax changes for superannuation accounts exceeding $3 million.

‘One of the things we’ve seen recently is the introduction of the additional earnings tax for superannuation accounts of more than $3 million, so difficult changes can be made,’ Boal said.

The 2020 Retirement Income Review highlighted that retirees often avoid tapping into their housing wealth to fund retirement, even with limited income.

This is despite various incentives and home equity release schemes available to them. With data showing that over 60 per cent of retirees have less than $250,000 in superannuation, the report suggested additional measures to support asset-rich, cash-poor retirees.


These measures include abolishing stamp duty for downsizers over 55 and allowing those who access equity in their home through schemes like reverse mortgages to make a 'downsizer contribution' to their superannuation.

Furthermore, the report recommended that the age pension asset test exempt amounts up to $300,000 for singles and $600,000 for couples when the family home is sold or equity is accessed.

Boal mentioned that every measure would enable asset-rich, cash-poor retirees to live more comfortably and reduce the risk of depleting their retirement savings.

Additionally, these measures would address the family housing shortage.

Key Takeaways

• The Actuaries Institute has suggested that the Australian government include the value of family homes exceeding $2.1 million in the age pension asset test.
• The institute believed that this change would contribute to releasing part of the estimated $1.3 trillion in housing equity held by retirees, encouraging them to downsize.
• Senior groups, including National Seniors Australia and the Combined Pensioners and Superannuants Association, have rejected the proposal, arguing for other solutions.
• The report also recommends abolishing stamp duty for downsizers over 55 and allowing contributions into superannuation from those utilising equity release schemes, in addition to exempting certain amounts from the age pension asset test when the family home is sold or its equity is accessed.

What are your thoughts on the proposed changes to the age pension asset test? Share your experiences and opinions in the comments below.

 

[Suzanne rose]

Absolutely ridiculous the family home needs to be left alone.

I have lived in my home since 1988.

I live in a Sydney suburb which consist of middle and low incomes .

My house is valued at around $2.3 million which in Sydney .
Average house prices in Sydney are now around $1.2 to $1.4 . My house is on large land .

You can't buy groceries or pay bills with your house.

I totally agree that other assets be included eg personal assets, money in the bank ect .

If they want pensioners to down size then they need to put in place exempt stamp duty and fees for seniors who downsize.

Why should I or any other people be forced to sell their family home all because it becomes part of the asset test.

A friend of mine could never save for a deposit for a house due to her luxury life style of expensive cars and holidays.
I did without so I could save and pay off my mortgage.

Now I own my house and she is still renting and doing it tuff as she was a huge spender.

At least the government do not have to pay those who own their own home rent assistance.

SO LEAVE PEOPLES PROPERTY THEY LIVE IN ALONE

 

[darrellh]

NZ and Uk pay all pensioners the same amount regardless of assets and income. Yet look at Australia looking at everything single thing you have have scrimped and saved for (if you have) so they can reduce uour pension by as much as they can. You do have to wonder. And now they want the family homes taken into account. what a cheek. Ours is not valued anywhere near what they are looking at but we have spent money to make it how we want it and to be safe and secure. Why would we sell because the government says we should and be where we no longer feel safe. They have rocks for brains. It may suit some people but definitely not all. Stop trying to force people to doing what they don't want to do!

 

[Knell]

hmm...interesting question. If I were to own a property valued at say $10m - would I feel any ethical or moral responsibility about getting a hand out from struggling, hard-working, tax-paying people? I would like to think I would.

 

[MaggieMay1948]

Stop hitting o pensioners. Start by taking away negative gearing on investment properties if you want to address the housing shortage for young home buyers. Then, build more low income/social housing for rental and put, say, 5+ year leases on them so they are regularly reviewed for the occupants' change in circumstanes (eg children growing up and either leaving the family home or earning an income). Rents should be based on income too.

If you start messing around with pensioners' homes that they worked and paid for all their lives you will introduce a "why should I bother buying a house" attitude by the younger generation and that won't help the ongoing situation ar all.

High time the governments started taking out all those things thar are in the "too hard basket" and began dealing with them, eg high flyers' tax avoidance, corporate tax avoidance, preventing criminals and bikie gangs from washing their dirty money by purchasing real estate, preventing non-residents buying real estate, taking over empty properties (there are plenty in and around Seaforth Balgowlah NSW etc bought bt Chinese, never lived in or rented out and just left there to deteriorate.

 

[gbaerken]

So if you built a very palatial home in some rural area, which if it was in Melbourne or Sydney etc would be worth many millions you remain unscathed. But because you live in a family home which may not be as palatial as the rural home and may have been built many decades before but because the suburb is now in demand and it's worth many millions you get penalised. This is utter crap and just a money grab. If these politicians want more homes on the market tell them to sell their assets. Albanese owns at least 4 and one which he sold after divorce was worth $2.25 million in Marrickville. Here look at Albo's properties

 

[Penny4]

The old adage whereby people are asset rich and cash poor. I know of a few that are both, and they don't even pay for private health. If the pension asset test is governed by a home's worth, then it should be checked geographically - not all-emcompassing.

 

[carolcaz]

Seriously leave the aged pensioners alone they have worked hard for what they have and gone without a lot in life to do it unlike the young of these days got and want everything handed to them. We have spoiled our children and because of that they do not know how to save or go without to get a home.

 

[Rain72]

A better idea would be to stop punishing retirees for having lived responsibly. Do as most other countries do and pay EVERYONE over retirement age a pension, then apply sensible taxation.
Knell, I very much doubt you'll find ANYONE with a $10m property - or even $5m - collecting a pension. There may be quite a few folk whose family home has increased in value to over $2m and I think it's a disgrace that anyone should think to penalize them for that if they don't have an adequate living income. Nobody should be forced out of their home in retirement.
What about those who reverse mortgage? Will the loan be deducted from the value?
How will the value be calculated? What of folk whose property is deemed valuable but who can't sell it for a decent price? A friend had a farm ostensibly worth $3 million, but due to planning for future infrastructure, he couldn't get anyone to even consider buying it, even after reducing the price to $900,000.
There are way too many complications, as is the case with the current very seriously flawed pension system. Just pay it to all retirees and tax it. Other nations do that and it works.

 

[alistev]

Personally I am tired of supporting asset rich;cash poor who can afford to sell properti/es to live. Some of us have lived on struggle street to get a modest home in a then modest neighborhood, which over time has put their 60yo fibro home within a higher value range. Not their problem really. A home is built within the house regardless of where in these cases.
Try getting to those with high quality assets, excluding home, above 1.5mil to downsize and look at the squeal. The power boat, Audi etc are they needed when accepting a govt aged pension aimed for those who have next to nothing? Average pensioner has problems buying food, rates, power on $500/week - so go rub Peter to pay Paul even if it does cost high flyer votes. there are plenty of low flyer votes to replace and will feel like voting for a more budget-level thinker. People forget what it is like down here when they get a few bob in the pocket or in jobs making rules for mates forgetting those others down here. If can afford luxury then don't need a pension.

 

[Keza59]

hmm...interesting question. If I were to own a property valued at say $10m - would I feel any ethical or moral responsibility about getting a hand out from struggling, hard-working, tax-paying people? I would like to think I would.

this article is discussing the house value of $2.1, not $10m.
If you have worked HARD all your life, had two jobs (paid taxes & more on the second job), renovated your home to how you like to live why should you be penalised for that decision !!
Leave the family home out of the argument of the housing issues the government faces.
I have done the right thing and paid my way, and paid for others benefits with my taxes.
That’s the Australian way..

 

[Knell]

A better idea would be to stop punishing retirees for having lived responsibly. Do as most other countries do and pay EVERYONE over retirement age a pension, then apply sensible taxation.
Knell, I very much doubt you'll find ANYONE with a $10m property - or even $5m - collecting a pension. There may be quite a few folk whose family home has increased in value to over $2m and I think it's a disgrace that anyone should think to penalize them for that if they don't have an adequate living income. Nobody should be forced out of their home in retirement.
What about those who reverse mortgage? Will the loan be deducted from the value?
How will the value be calculated? What of folk whose property is deemed valuable but who can't sell it for a decent price? A friend had a farm ostensibly worth $3 million, but due to planning for future infrastructure, he couldn't get anyone to even consider buying it, even after reducing the price to $900,000.
There are way too many complications, as is the case with the current very seriously flawed pension system. Just pay it to all retirees and tax it. Other nations do that and it works.

"Knell, I very much doubt you'll find ANYONE with a $10m property - or even $5m - collecting a pension." - Well I do! What about those of ill-gotten gain, hiding cash by way of expensive properties? Many have made their superannuation (?) funding this way...but then, not prepared to support themselves with those said funds?

 

[Tactful]

This idea is to force people on the pension to sell up and go into lifestyle villages. I, for one, do not wish to live in a chocolate box with tiny rooms.
I object to boffins dictating where I can live. This is coercive control of the older population.

 

[alistev]

I too worked 2 jobs in my time but due to the nature of the care and share job I was medically retired at 55 at a time when private health funds and income protection were deemed to cover costs. I am now in a 'need' and struggling within very limited funds so when those who can afford to 'give' a bit to those who also did 'the right' thing and had it work for them it stings. Good on you for being able to work and save in a job that may not have the same physical and mental AND financial deficits. I know of friends who are. But also have close friends from same 'care and share' who live with pain requiring constant treatments costing more than medicare or not covered by medicare that still have to be found. These are the ones who kept you going to maintain the 2 jobs +/- partner support finances. A little consideration towards them now is appreciated. As I say if someone can afford luxury they don't need a full single Aged Pension of less than $500/week to survive.

 

[Tony@51]

So you sell your house for 2.1 mill that then takes you over the threshold so you lose your pension this is not a win .

 

[Rob44]

F*** the Actuaries Institute. Haven't the stupid b******* heard of inflation? That is what has raised the price of the family home from $75000 in 1986 to more than $1 million plus now. It is about time Australia re-established the government-guaranteed Old-age Pension for all who are 65 and over. Paul Keating's clot-headed "pensioner's assets test" and private superannuation stuff-up is directly responsible for changing the rules so that it became logical for the cashed-up impending elderly 35 years olds (us lot of decrepit oldies now) to have sought whatever cheap houses we could as secure investment against such scams as the Great Financial Scam of 2007-2008. As a treasurer, Keating was the worst little treasurer Australia had to have.

 

[alistev]

what those in power are looking for is to sell large houses and downsize so that others may have a chance of a home for young children. When you use the 2/1mil to downsize there will still be enough for a pension unless you buy luxury in which case Asset rich:cash poor comes into play again. Majority of our age worked hard for not much reward - some had the 'luck' of a great saving/purchase opportunity - others still doing the same, living the same, etc had 'luck' go the other way. So downsizing semsibly in this current situation that those coming up now find themselves - is it that hard? Socialism or whatever it was called then needs to return from individualism. Asset nil:cash nil so don't have that major problem of money worries, however, can rest in pain and disability knowing that I and others in similar situations are happy with our lot. Funeral paid, live on budget line, have friends who are happy to sit by the water and chat, trustee home, pay increasing rates etc... Life carries on. Be thankful for what you were allowed and give those who tried and 'killed' for doing the same a bit of a go. Aussie way.

 

[Knell]

what those in power are looking for is to sell large houses and downsize so that others may have a chance of a home for young children. When you use the 2/1mil to downsize there will still be enough for a pension unless you buy luxury in which case Asset rich:cash poor comes into play again. Majority of our age worked hard for not much reward - some had the 'luck' of a great saving/purchase opportunity - others still doing the same, living the same, etc had 'luck' go the other way. So downsizing semsibly in this current situation that those coming up now find themselves - is it that hard? Socialism or whatever it was called then needs to return from individualism

Good point!

 

[Rob44]

this article is discussing the house value of $2.1, not $10m.
If you have worked HARD all your life, had two jobs (paid taxes & more on the second job), renovated your home to how you like to live why should you be penalised for that decision !!
Leave the family home out of the argument of the housing issues the government faces.
I have done the right thing and paid my way, and paid for others benefits with my taxes.
That’s the Australian way..

The government faces housing issues that are the making of every Australian government since 1983. If the UK, bankrupted after WW2 can put in train a 200 000-a year public housing construction programme for every year until Thatcher screwed the country in 1979, why could not Australia? Because it's a Scrooge McDuck country; it is as simple as that!

 

[Rob44]

"Knell, I very much doubt you'll find ANYONE with a $10m property - or even $5m - collecting a pension." - Well I do! What about those of ill-gotten gain, hiding cash by way of expensive properties? Many have made their superannuation (?) funding this way...but then, not prepared to support themselves with those said funds?

Are you talking about our politicians?