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.

 

[alistev]

Woah! has this opened the proverbial can. No win situation as govt will do what they see best for themselves, their mates and then the rest of us. WHoever is in. Labor versus Liberal/Naitonal all have money to be in their job so are going to do what is best for them. How many houses/property does the PM and those before him have/had?

 

[TIG2]

Always the seniors they come after. How about scrapping Stamp Duty for over 70s ? we just paid out $24,000 in stamp duty and then made to pay an extra $2000 as the house was just over $700,000 pretty average price these days. They Throw money at parents to have more kids they cant afford. How about attacking the tradies who work for themselves and claim reduced tax on everything from a blown light bulb in a home office, to petrol, clothes, you name it they can claim it. considering even the local handy man now charges $60 an hour, let them cover their own costs. Seniors worked hard for what they have, unlike the younger generation living on the unemployment as Jobs offered are below them. Overseas buyers should not be allowed to buy Australian property , lease only, and rented out within a month of purchase or the purchase is cancelled. Sick of being attacked by government, how about helping seniors for a change.

 

[Rob44]

and they don't even pay for private health

In which case they will sit in the triage section of the ED for many painful hours or wait several years to get their hernias fixed if they live where I do.

However, they will be able to totter off to the new AFL stadium planned by the Tasmanian misgovernment for $ 750 000 000 expenditure of taxpayers' money. Didya know that this AFL rort, sorry, stadium, will have the widest wooden roof ever built in the world? Wow! I wonder where the timber will come from?

 

[marni]

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

Could not agree more. The pensioners near me get $30,000 on top of the pension for aged care, which they then spend on home delivered cheap meals when they have a car and can easily walk to the shop. This is a way to stop people being on the pension. The cost of downsizing is ridiculous when you count all the taxes and legals. We downsized and put our money into super, which is the next thing they will attack. There is no way to guard your future with the constant changes.

 

[MaggieMay1948]

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.

If you read the full article, it says just that ie to be assessed by postcode.

However i still think they have a nerve continually going for the soft targets, ie pensioners, instead if tackling everything in their too hard basket. They need to sort out the CFMEU to get housing costs down for a start.

 

[Rob44]

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!

The UK and NZ government guaranteed Old-age pensions even survived Thatcher and her lunatic acolytes and also Rodger Douglas, worst little Treasurer NZ had to have.

But the Australian OAP didn't survive the ALP's Paul Keating; how odd!

 

[MaggieMay1948]

Could not agree more. The pensioners near me get $30,000 on top of the pension for aged care, which they then spend on home delivered cheap meals when they have a car and can easily walk to the shop. This is a way to stop people being on the pension. The cost of downsizing is ridiculous when you count all the taxes and legals. We downsized and put our money into super, which is the next thing they will attack. There is no way to guard your future with the constant changes.

Do not agree with home care at all. It's all a rort. Was designed to keep the elderly out of care not to buy home delivery etc. Should only be to have cleaners for the harder jobs, like changing beds, cleaning bathrooms and mopping floors etc and not for daily chores.

 

[MaggieMay1948]

The UK and NZ government guaranteed Old-age pensions even survived Thatcher and her lunatic acolytes and also Rodger Douglas, worst little Treasurer NZ had to have.

But the Australian OAP didn't survive the ALP's Paul Keating; how odd!

Just read the UK is looking at means testing their pensions.

 

[Suzanne rose]

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.

In Sydney house prices are ridiculous. I have a friend who has lived in Watson Bay all her life.
Her house is modest 3 bedroom brick home , no mansion , average land size . Her house is valued at 5.5 million . She has a small ammount of money and pays very high land rates.
Should she be made move from an area she has been in all her life , that she feels safe in ?

 

[Rob44]

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.

If I were to sell my place for $2.1 million (yes, that would be very nice!) what young family with young children could afford to buy it and pay an additional $50 000 in stamp duty on top? I suppose if a young family with young children could afford to pay $2.1 million, they could afford to pay that stamp duty........Although they might have to sell an SUV to help out.

 

[Suzanne rose]

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.

Why should I move from my home of 36 years that I had most of my 13 children in.
I live in the Canterbury Bankstown council area . My house is not a mansion but a two story modest home.
Why should I be forced to move from my home of so many years.

Should I sell it and downsize , then spend alot of money on overseas holidays so I can keep the pension.

I'm happy to downsize if the government brings in except taxes for buying.

I think most of the people who are so negative are actually renters !

 

[Suzanne rose]

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.

I didn't spoil my kids , even with a car , my rule is unless you can afford the up keep eg insurance, rego and repairs then you go without

 

[Rob44]

Just read the UK is looking at means testing their pensions.

Sad to hear. Before 1979 that country had hope. It is now a politician-induced shambles; however, the Pomgolians brought it on themselves by not bothering to vote so that a majority of 25% of the electorate guaranteed an overwhelming idiot majority of Tories.

Australia has compulsory voting with perhaps a 95% turnout to vote. Doesn't say much for the Australian electorate's intelligence, does it? Any drongo who offers a cut to income taxes, wins.

 

[Macarj]

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

I totally agree Suzanne I don't get the full pension $300 less just because we have 7acres even though the property is only valued at $1,000,000 can't go to Woolies and buy groceries with the extra 2 acres

 

[Rob44]

I didn't spoil my kids , even with a car , my rule is unless you can afford the up keep eg insurance, rego and repairs then you go without

My rule was walk or cycle to school and when you get to uni, I'll help you buy an old car in sound condition and you pay its running costs. And I'll help out with University costs.

 

[Penny4]

In which case they will sit in the triage section of the ED for many painful hours or wait several years to get their hernias fixed if they live where I do.

However, they will be able to totter off to the new AFL stadium planned by the Tasmanian misgovernment for $ 750 000 000 expenditure of taxpayers' money. Didya know that this AFL rort, sorry, stadium, will have the widest wooden roof ever built in the world? Wow! I wonder where the timber will come from?

Yes, and they don't even care waiting in the triage of the ED. They reckon they have paid enough taxes to not pay for health insurance. Those type make it more expensive for the rest that pay for health insurance.

 

[AEA]

I agree. If someone owns a property valued over $2.1 million it DEFINETLY should be included in the assests test. Why should someone with an expensive home get the pension. I have my pension adjusted (I lose $200 per fortnight) because I have a small defined pension. This is MY super. But as it is a defined benefit it can't be looked at in the assests test and is included in the income test. All my friends that have Super (a lot more than mine) get the full pension as their Super was included in the assests test. The government should reduce the pension paid to rich people and increase the payment to most of us pensioners struggling to live on our income.

 

[Penny4]

If you read the full article, it says just that ie to be assessed by postcode.

However i still think they have a nerve continually going for the soft targets, ie pensioners, instead if tackling everything in their too hard basket. They need to sort out the CFMEU to get housing costs down for a start.

I did read the article. There's a big discrepancy within my postcode where I live. There are builders who have bit the dust lately, which is terrible for people who bought units off the plan and have lost their hard earned money.

 

[Rob44]

In Sydney house prices are ridiculous. I have a friend who has lived in Watson Bay all her life.
Her house is modest 3 bedroom brick home , no mansion , average land size . Her house is valued at 5.5 million . She has a small ammount of money and pays very high land rates.
Should she be made move from an area she has been in all her life , that she feels safe in ?

She can sell for $5.5 million and buy my overpriced mansion for the proverbial $2.1 million. Only ten minutes walk to the frigid waters of Tasmania and you can watch the winter's icebergs float past in the distance. That is surely a win-win situation?

We both downsize and a young family with children (or a homeless person) can buy your friend's place for a mere $5.5 million......... (Irony alert!).

 

[Clancieblue]

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.

If you owned a home worth 10 million you would have been a hard worker and a taxpayer, probably going without other luxury to pay for it. Many people don't even try to get themselves a home, they holiday buy expensive cars and generally waste money. Then they expect rental assistance.
Will the PM give up his home to keep his PM's pension.?