Experts propose including home in the pension assets test

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Despite its unpopularity, including the family home in the assets test for the Age Pension is the idea that just won’t go away.

The Certified Practising Accountants of Australia (CPA) conducted a policy think tank last November, asking seven teams to formulate changes in the retirement system to address issues around the ageing population. The winning team put forward a proposal to include the family home in the Age Pension assets test.

YourLifeChoices has polled members on this topic and an overwhelming 85 per cent of the 2481 respondents said the family home should not be part of the assets test.

Most responses were highly critical of the concept of including the family home in the assets test for an Age Pension – and many were critical of the assets test generally.

Yet this is an idea that regularly comes up in policy debates.

Read more: Calls to include house in means test

The CPA policy think tank included seven teams given one week to formulate policy proposals that would allow the retirement system to be restructured to ensure that the standard of living for retirees was maintained, while allowing for appropriate aged care and healthcare support to be available for all Australians in retirement.

The winning team focused its proposals on ensuring that more Australians owned their own home at retirement, but then advocated including the home in the assets test and redistributing those funds more equitably to those renting in retirement, as well as paying for aged care and healthcare services.

Read more: Merge Age Pension income and asset tests: Actuaries Institute

Khatiza Brown, a member of the winning team of CPAs, said that if more people owned their home at retirement, including it in the Age Pension assets test could reduce the number of people accessing the Age Pension.

She explained that this would increase the Age Pension funds that were available to renters or those in need and would lead to a more equitable system.

“Our approach was to increase home ownership as a means to improve people’s retirement income, which is not going to capture everyone. This is why we also looked at the Age Pension and proposed including the principal home of homeowners in the means test,” Ms Brown said.

Read more: Could family home exemption be a victim of stimulus package debt?

“At the moment, a homeowner can actually get the same amount of Age Pension as a non-homeowner, because the principal home is not included in the means test.

“If we reduce the number of people reliant on the Age Pension then we can redirect those savings to aged care and healthcare services,” Ms Brown added.

The winning team suggested that declining home ownership rates would present a financial timebomb, so they focused on this as one of the key issues they would need to look at when formulating their plans to change the retirement system.

Liam Smith, another member of the winning team, explained that their proposal included the ability for workers to draw on their superannuation for home deposits.

“By 2056 just two-thirds of retirees will own their homes, down from nearly 80 per cent today,” Mr Smith explained.

“Our angle is that it is a bit absurd for someone to miss out on the compounding benefits of home ownership and have all their money in a superannuation account attracting fees. 

“We proposed people under the age of 40 being able to withdraw 50 per cent of the balance specifically for a home fund,” said Mr Smith.

The team also argued that increased home ownership could open doors for retirees to access, create and maintain savings through equity release options (reverse mortgages and home reversion) and by downsizing to a smaller home. 

Do you think the family home should be included in the means tests for the Age Pension? Are you frustrated at how often this solution is raised by policy experts?

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Written by Ben


Total Comments: 90
  1. 20

    Here we go again. Home ownership should NOT be included in either the pension asset Test NOR as any sort of “De-Facto” death duty” (you watch, this mob of accountants will promote that next!!). These idiots cannot see that the vast majority of home owners paid for their homes out of money they had already been taxed on, yes, their weekly wages. Thanks to Mr. Keating, many of us at rates of up to 17+% thanks to the recession we had to have. We have also paid huge interest on mortgages, huge amounts of Rate payments to inefficient councils and stamp duty etc to State Governments, ALL paid out from money that had already been taxed!! We did this to leave us in a position where we would not have to pay rent in our retirement. Also, the VAST majority of us do not have access to huge superannuation amounts (unlike some of these accountants and our politicians). If our politicians had set up a decent superannuation scheme in the first place, pension payments would have been fully covered for all the population (look at the English system). My Husband and I worked our buts off to pay our house off in the hope that we could at least have a few relaxing years in retirement now this privileged mob want to force us to sell up (and be taxed AGAIN on the profits no doubt).

    • 2

      The English (actually the British system to include the other three countries that make up the U.K.) involves additional payments from wages/salaries to fund aged pensions, among other things. That was introduced in Australia way back but after a couple of years and the Liberals got into power Bob Menzies took all the accumulated funds in that scheme and announced that aged pension would be funded through income tax.
      In fact Paul Keating did not jack up interests rates as that was the level around the whole world.
      Much of the other payments mentioned council rates etc were, and still are, required to provide services such as garbage collection etc in that area.
      While there is merit in much that has been written above it is confused over some of the issues raised and ranted about.

    • 2

      Tanker- It wasn’t Menzies that took the accumulated pension funds, it was Malcolm Fraser !!!

    • 4

      Couldn’t have said better Christine!
      We spent our lifetime working hard to pay our mortgage in the process sacrificing entertainment, trips, holidays and other things and as a result they want to penalise us for it.

    • 1

      If we have to sell our home, we don’t want to go into a retirement home. We would then have to look for rentals and there is already a lack of them. How is that going to help? Then we would have to apply for rental assistance, how is that helping?

    • 0

      If your argument is you worked hard and deserve an age pension then they should make the age pension universal. No need for any asset or income test. This idea is not as silly as it sounds as the additional costs could be offset by making those with large super balances above the $1.7m withdraw these from the super system and pay marginal tax not 15%. In some cases the extra tax will be greater than the age pension they get. May also look to apply the 15% tax to the pension accounts. This should be accompanied by some increase to the age pension so those with smaller balances are not disadvantaged.

    • 0

      Any government that brings that into pension testing will not be the government much longer. I remember the 17% interest rates, oh yes. The family home is not to be included in any asset teasting for retired pensioners EVER! ONLY A LOSER BRINGS THAT IN.

  2. 4

    I agree with all said by christine-harrison, BUT it still conflicts me that someone with a home worth 4 or 5 million dollars can qualify for a full aged pension, while others are excluded for being a few dollars over an arbitrarily (politically?) set limit.

    • 11

      yes, so maybe if the home is over a certain dollar value then it can became an asset, but for the majority of low paid workers who worked hard to buy and pay off their modest homes then NO it should NOT be part of the asset. I do understand that some might be inclined to upsize and not downsize to get more but I do think this would be a very small percentage. If our home became an asset then how would we live a decent lifestyle that we worked hard to achieve ?

    • 8

      I don’t see one single problem with people living in multi million dollar homes and being on the pension. Their home has increased over the years – that is not their fault. It is THEIR home – let them do what THEY want, not what any government tells them to.

    • 4

      They don’t get any pension if they have a house with that much. Many of them live off there super. Lucky them for buying at right time in an area that increased. Definitely homes should not be an asset.

    • 0

      Buggsie-That’s why there should be a a threshold on the value of the residential home, for example $1.5 million (adjusted annually) but those below the threshold should not be affected.

    • 1

      Must be a slow news day to bring this up again!

      One way to prevent super being used to upsize on the ‘family’ home is to exempt a home from the asset test that has been owned and lived in as the primary residence for say 5-10 years before applying for an aged pension. This would prevent the withdrawal of funds and spending on larger property to secure an aged pension.

      An alternative, would be to implement a more expedient and cost effective way of encouraging those in bigger property to downsize and using the surplus for retirement funds instead.

      I fail to see why homeowners who in the vast majority of cases scrimped and saved to put a roof over their heads, should later be penalised for looking after themselves and their families in favour of those who didn’t.

    • 0

      rina1213, but the issue with that idea is that what threshold would you use? Someone living in Sydney may well have a high value home (because of the increase in value over decades) even if it is a modest property whilst someone living in county or regional NSW will have a far lower value home. It would be unfair to both to have a single threshold. And that does not even take account of the differences between states either.

    • 0

      Guess what you don’t. And I agree with Christine’s above comments. Many of us struggle as it is and if our home is being included in the assets test our income is reduced again. The asset test now has reduced my income since my wife passed on from $800+ a fortnight to 300+ Hence I work casually to make up part of the shortfall. Now these dipshits want to reduce my pension again. Fat chance, I’ll sell my home give the proceeds to charity and go on the full pension in spite. Then maybe get caught robbing a bank and live a full life incarcerated. At least then I won’t have to worry about shopping and cooking and looking after myself. What’s more free medical and dental. These ideas that keep popping up are not helping retirees live a decent life they are trying to kill us off.

    • 0

      I am a self funded retiree with a zero age pension. If I sold my house and moved into a McMansion I would become asset rich and cash flow poor and qualify for an age pension.

      Given the purpose of pensions I am strongly opposed to those who become asset rich and cash flow poor either by design (my case if I went down that path) or by accident. There needs to be a way of unlocking the capital in houses so that all can receive a reasonable pension.

      Cash flow poor but asset rich is seen as a way of passing capital as an inheritance to one’s children. I have no problems with parents deciding to pass an inheritance to their children but not when the parents are receiving social security in order to do so.

    • 0

      It doesn’t matter if one is slightly over the limit. What part of the “limit” meaning one doesn’t understand?
      “Oh…I’m $1 over the limit…give me a break”
      “Nah, you exceeded the limit…Deal with that !”
      Some people just want to keep pushing the envelope to suit themselves.

  3. 13

    Who are these so-called experts? Obviously not someone on an Age Pension. Including the family home in the Assets test would leave many pensioners without any income. This is the generation who skimped and saved to pay off their home so they could enjoy a modest retirement in their own home. They did hot have access to a superannuation scheme to fund their retirement. The government has already hit the older generation hard by reducing the cut-off for the Assets test, thus depriving many older Australians of any pension at all. This means many older Australians are no longer eligible for the discounts which come with an age pension. I am aged 74 and still working to fund my retirement. I will not qualify for any age pension due to the reduced Assets test cut-off. Please do not hit the most vulnerable people who worked hard all their lives so they could enjoy a modest retirement in their own home.

    • 0

      It is pure conjecture that “Including the family home in the Assets test would leave many pensioners without any income”. If the retirement system was changed to include the home in the means test then there would be changes to compensate.

    • 5

      Just because a claim is made by an expert or authority, does not mean the claim is trustworthy. However, even experts with many years of experience are bad at assessing the harms and benefits of an intervention.

    • 0

      what a load of, censored. any compensation which would have all the right-wing media saying how great it is, would be minuscule compared, look how the government treats the aged looking for work, well treats anybody looking for work, when there are 10 people for each job except for toilet cleaners. Then that is used to say nobody wants to work!!!

  4. 8

    “Do you think the family home should be included in the means tests for the Age Pension? Are you frustrated at how often this solution is raised by policy experts?”

    Absolutely not and it’s not because any inclusion would affect us, it’s because to try and include the family home would be an almost impossible task. If our home was moved a few suburbs east of where we are, it would be worth about 5 times the current value so it boils down to where someone lives that will dictate the value of the family home. Throw into the mix, as well as different suburbs, the disparity between city and country, large regional towns against smaller towns and state by state and you have an almost impossible task to create legislation that will be fair to all home owners. It’s also fair to say that any political party that proposed this would suffer at the ballot box.

    I’m not frustrated by “policy experts” raising this topic as it is done every year by Treasury when the Budget is being prepared to show how to make savings and, every year, the proposal is ignored regardless of which party has formed government. No, what annoys me is how often this topic is raised in this forum and the regularity can almost be predicted. If the administrators looked at the figures quoted above, 85% of respondents don’t agree with this topic so perhaps 85% of respondents don’t want this topic raised time after time.

    • 1

      The real solution to this vexed issue would be an equitable inheritance tax that includes things such as family trusts and other taxation schemes. It would mean that those who are in receipt of income they have not earned themselves would be paying a tax. The person who had worked to build that wealth, be it high or otherwise, would not be penalised.

    • 6

      Why not give your suggested “equitable inheritance tax” its proper name; a death tax. This insidious tax was dropped years ago after a Queensland government led the way. Part of the problem with a death tax is that a family business, including agriculture, may need to be broken up to pay the death tax which can have the result of destroying the business and putting people out of work. This was what happened when death duties were the law.

  5. 3

    Ms Brown and her cohorts probably earn so much money that she can afford to have this point of view. So much so that she would never qualify for an Age Pension. I would NEVER vote for any Party who may introduce this. Why should people who have worked hard enough through their working life be hit with this, to help “support” renters who may have earned just as much, but frittered it away on possibly excessive gambling and or drinking excessively. I believe they may well receive “Rent Assistance” plus Pension. Including people who have elected to go into a retirement village. Bryan.

    • 1

      Here we have the old chestnut that is people are poor it was their own fault through gambling etc. This may be true of some but not of the majority. The biggest issue facing people trying to buy a house is in raising the deposit. It is fairly common for the rental cost to be in excess of mortgage payments.

    • 3

      A recent survey by the NRMA regarding home ownership was that 64% of renters preferred to rent rather than own a home, reasons given were they preferred to spend their money in other ways, or they didn’t want to be tied to a particular area, they wanted to spend their money the they wanted to eg travel or accessing things that interested them, non indicated high deposits as a reason, depending where you choose to live and the size of the house you want, is more of a factor than the size of the deposit, unless you are unemployed or in a particularly low paid job, that situation hasn’t changed that much, just my opinion of course.

  6. 0

    If the family home is considered an asset for the assessment of an aged pension.Will the owner be able to claim a rebate on all upkeep and expenses related to the home Has this been considered by all those so called “experts”

  7. 4

    “experts”? the govt should have kept their hands off the pension fund decades ago instead of rolling it into consolidated revenue.

  8. 6

    None of the people proposing all this stuff is ever likely to be in the position of an age pensioner living long enough to have a house with value pushed up by gentrification, and next to no superannuation – the position of an awful lot of elderly women. What a privilege to be able to dispose of people’s assets and incomes at a safe distance without ever having to take responsibility for the consequences.

    If this sort of proposal is to be adopted by those wonderfully detached professions and persons who just want to prevent tax increases for the very rich, then all those living under the old conditions must be grandfathered until their death.

    I have paid tax on every penny that bought my home, paid interest on loans through 17% interest rates as a single parent, and pay annual and increasing rates. Is it also that all those middle class professionals now want easier access to my home without a thought to whom they displace? Would they rather I die slowly but surely in a home that consumes any capital left from their purchase of my former home? How do they plan to deal with my mental and physical health needs when I am uprooted from my community? Do they intend for my children to fund me? The fact is they neither know nor care.

    I receive the age pension because I do not have enough superannuation to live on, and only get a miniscule top up to the pension from super gained at the end of my work life after abt. 50 years in the workforce. That was structural discrimination against women workers, and this proposal is just more of the same. I have had enough of it.

    If ever there was an opportunity to apply a ‘citizens’ jury’ to understand and work through a major socio-economic issue, this is one. The days of middle class professionals deciding what’s best for working class battlers must surely be over. The days of the young and ignorant deciding what’s best for seniors must surely be over by now. The days of privileged white males deciding how to dispose of the lives, incomes and assets of women must surely be over by now!
    A properly composed citizens jury should be set to this task before any of the uninformed and uncaring proposals put about by middle class professionals with lifetime superannuation who will never have to bear any of the consequences, are set in legislation.

    There is a bedrock of aged Australians getting full age pension because they have no or minimum other resources to live on. They are not people with hundreds of thousands, even millions in superannuation gifted the age pension no strings attached, by Howard and successive Liberal governments. They are people for whom the loss of their home and/or the full pension has dire consequences.

    There are several ways this issue could be dealt with that don’t pitch people, mainly aged women, at the bottom of the pension pile, into disaster if only anyone had the character, capacity, or even sufficient understanding of the issues, to do it. Pensioners are not an undifferentiated mass and should not be treated as if they are – and dog help the ailing and disabled old women barely paying rates and hanging onto their home because the alternatives are unbearable to think about.

    I am filled with disgust every time one of these ‘solutions’ to a ‘problem’ ie I am old, I receive the age pension, I own my home (not a house), I don’t have enough income to secure an independent future. Sorry people, I and my peers are not the problem.

  9. 4

    As the saying goes, you cannot eat your house!! People need somewhere to live, and most people are very comfortable in their own home. Being forced to sell up to fund retirement, would mean they have to find somewhere to live – more cost in rent, transport etc. Most people live in a modest home, which is sustainable. Also, people who live in regional areas would not be able to sell their homes for an amount which would sustain them in retirement. It is not fair to make people sell their home in order to live. Some people have lived in the same house since being married, and want to stay there. They have looked after the house, saved their money and expect to live the rest of their lives in their own home, not some retirement village, or rented accommodation. They should not be penalised for having saved their money and bought a home, so they should be able to expect to live there for as long as they want.

  10. 2

    Here we go again. Firstly, the family home should n

    • 3

      Obviously a young accountant with her peers as other members of the group. This group would have been on a compulsory superannuation scheme since they started work. I, like many others, have worked since I left school at 16 in the days when you were not eligible for superannuation until you were 21 years old. Unlike some of those that I grew up with I did not have new cars, expensive holidays and smoked and drank excessively but worked 2 and 3 jobs so that I could raise my children and support my late wife. I am now in the situation where, at nearly 74 years of age, I am still working but when I do retire will not be eligible to draw a pension because I scrimped and saved to have the money, which I paid of a loan for, to buy land so that I could build a holiday shack for my family. No expensive holidays for me or my family and only second hand cars into the bargain. My belief is that all should be eligible for the age pension and that there should be no assets test, as has been quoted previously, those that put their money into a home in the then outer suburbs in large city’s are now in the so called inner suburbs and this is not through any fault of their own. Treasury “experts” and others do not have any idea of what it is to be an elder person. Any politician that considered that this would be a good idea to have the family home in the assets test would be committing sudden death at the ballot box.

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