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.

 

[Beattie]

You sell your $2 million home and down size. You have all that extra money and you loose your pension. Good job government. It doesn’t matter how much your home is worth- leave it alone.

 

[Southmelbswans]

Also with the housing market as it is, why would anyone sell with nothing tovreplacw it?????

 

[Suzanne rose]

I believe everyone should receive an age pension regardless of how much they have saved and invested in their own home. In Germany and other European countries the age pension is a given to all.
I feel that those of us who have saved, worked and bought a home, and in most cases paid the majority of tax should not then be penalised.

Well said

 

[kiwidi29]

Sounds reasonable to me. I’m sure some would be horrified at leaving their home, but with the current shortage of homes it makes sense.

 

[neilw59]

A growth of 4 percent per annum is too low as the cost of living increases show. Therefore rather than putting a low threshold in place, realise the portion over a threshold that represents the home value in a suburb in Sydney in which more than 75% of home owners do not need to draw upon the pension. Leaving the battles out of the equation. THEN and ONLY THEN apply it with the removal of negative gearing and increased taxation of family trusts. If you don't include family trusts and negative gearing then those who can afford it place the home in a trust and pay a small rent to the trust. Negative gearing allows for air bnb properties plus real estate barons such as many of our politicians. Get serious about this or leave it to market for e's.

 

[tumoulin]

The assets and income tests need to be abolished and everyone paid the same pension as happens in some other countries. The pension is taxable so those with high incomes would pay half of it straight back to the government.
And when I say the same pension the current highly discriminatory practice of paying members of a couple much less than the single rate of pension also needs to be scrapped. Everyone should be paid the same amount and that includes removing extra payments like rent assistance which mainly facilitates landlords charging higher rents. Home owners don't get rates and insurance assistance so non homeowners should not get rent assistance which inflates rents.
Simplify the whole system and make if fair to all.

 

[Gort55]

So releasing homes over $2.1million will free up the housing market? Yeh for those who can afford $2.1 million! That would not be many people in the current environment except those wealthy enough already and to whom it would be just another asset, or maybe a bunch of overseas investors. Housing has to be removed from the entire investment/profit making scenario.

 

[caring one]

Has any study been done on the side affect to Cost of entry, ongoing weekly cost, and availability of future nursing homes.

Re the graph.... Divorce and property settlements greatly affect the age v housing ownership figures especially for older women with no superannuation.

A good move by The Labor Party...about time the rich paid their own way.

 

[rehandra]

Are you talking about our politicians?

As full self funded retirees (living in a retirement village) I totally agree that the family house should be assessed over a certain value. This would free up homes where two people are rattling around (hanging in there to pass on huge inheritance to their children tax free at the expense of other taxpayers). Some would end up with a part pension and would have to live on their own money as many others do.

 

[nifty8753]

The problem is if you downsize the profit from selling your original home and your downsize home then becomes included in your assets. If this was not the case then proposal sounds like a good idea.

 

[Zulici]

I am absolutely furious with the Actuaries Institute's proposal to include the value of family homes exceeding $2.1 million in the age pension asset test. This is a slap in the face to hardworking Australians who have spent their lives building and maintaining their homes. Our homes are not just assets; they are our sanctuaries, built with blood, sweat, and tears. For the government to now turn around and penalize us for our diligence and sacrifice is utterly unacceptable.
Encouraging retirees to downsize under the guise of freeing up $1.3 trillion in housing equity is nothing more than a money grab. It ignores the emotional and practical significance of these homes and the stability they provide. Moreover, the additional recommendations to abolish stamp duty for downsizers and allow contributions into superannuation are mere band-aids on a much larger wound.
We need to respect and protect the financial security of our senior citizens, not destabilize it with punitive measures. I stand with National Seniors Australia and the Combined Pensioners and Superannuants Association in vehemently rejecting this proposal. It's time to find fair and equitable solutions that do not rob retirees of their well-earned peace of mind.

 

[Ittybitty]

So now they are trying to push elderly people out of their family home? $2.1 Million does not depict the size of the house. We normal humans know it is usually the area in which the house is situated. All I can say is that they will be pleased when we are all dead. How on earth did they come up with that figure anyway? A politicians parents' house is only worth $2 Million so their pension is not affected? Get real & get rid of all of the politicians in office & we start with a new crew. They seem to forget that we pay their wage & they should be working for us not against us or only for their own benefit.

 

[Ittybitty]

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!

Hi Rob44. Scrooge McDuck to Australians but can fork out millions & millions to other countries

 

[Jgerm]

If a limit is to be put on the value of a home in order to encourage downsizing there needs to be another criteria about the size of the home as well! If one has already downsized, forcing a shift in value alone will not improve housing opportunities!

 

[Ebby]

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.

Keating sure was the worst and don't they still get a pension after they leave? l think that should be stopped.Why should ministers be paid for doing nothing?

 

[Nana Zorak]

It's about time that public housing got rid of single persons living in family homes just because they brought up their kids there. That would free up some more houses to allow more families to have space to expand. we are failing in producing more babes because of the housing crises. No one wants to have babies when it is only one pay week away from homelessness. I know as I have rented most of my life & we need to make divorce easier for domestic violence victims of which I am also one. I had 2 marriages that turned out to be coercive ones & both times I missed out getting my share of the cost of the family home. I never did find the love of my life. Butat86 I really don;t care anymore.

 

[Nana Zorak]

It is about time that people in public housing were moved out so young people can raise their kids in homes that have only 1 person living there just because they brought up their kids there it has no real connection with ownership although some seem to think that way. It is also time divorce was made easier & fairer in Domestic violence cases .' I have spent most of my life renting, even though I married twice , both times my husbands turned out to be Coercive & cheated me out of my fair share of the houses I helped pay for.

 

[Veggiepatch]

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

Do you have the same information for Malcolm Turnbull, Peter Dutton or Scott Morrison? Ummm....

 

[Squizzy1]

I doubt this would impact anyone's age pension if UR living in a +$2.1m home or have +$3m in Super. It is rumoured Gina has $100m in Super, now that would be handy when she goes on the aged pension.

 

[Squizzy1]

Do you have the same information for Malcolm Turnbull, Peter Dutton or Scott Morrison? Ummm....

Dutton has 3 and Turnbull has numerous investment properties with a personal fortune of $186m