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.

 

[Penny4]

LOL. No, not really a sweeping question and I was asking IAmMal given the "Karen" and "jealous" rhetoric. Was not expecting a good answer though.

There's never any good answers ... the Government deals that for us.

 

[Abbie70]

Helping with stamp duty costs to downsize would be a tremendous help. QLd can do it, so surely NSW can too.

 

[Jan Purcell]

Makes you wonder what they are going to do next, Why don't we do what they do in the UK and New Zealand a retired people can still work and get the FULL age pension, you don't have to ring Centrelink every fortnight to let them know exactly how much you are earning.

 

[relljube]

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

The politicians and "advisers" are to stupid to understand that if stamp duty was waived for over say 55/60yo who want to downsize they would achieve much greater success in moving the housing market. Stupid is as stupid does!

 

[GREX]

Once again cost accountants stealing from the elderly

 

[Suzanne rose]

How long will it be before the day you retire the government post you a little white pill? instead of paying you an age pension. Once posted via snail you have a maximum fortnight so phuckin enjoy yourself, it's coming sooner than you think?

That sounds like a true horror story but in reality it could happen.
On the news tonight it was saying how many age care centres are closing.
What happens if the government runs out of money and pensions stop !

Pensions haven't been around that long

 

[Gsr]

My question would be, who in this cost of living crisis would have the deposit and or be able to afford the mortgage on a $2.1 million dollar house. Only the very wealthy or non Australians, both who would be buying the house for investment purposes. I doubt there would be many renters who could afford to rent such houses, so under both these scenarios there would be less available housing for people struggling with the cost of living because the pensioners who sold their high cost home would be cashed up and they would buy up houses that younger struggling people would likely maybe be able to afford, and the pensioners would live in them, not rent them out.end result, less affordable housing still, but empty high cost houses very few could afford to rent, let alone buy.