Including family home in assets test ‘the right thing to do’, says economist
As the Federal Government continues with its retirement income review, the family home has again come under the microscope.
This time from Deloitte Access Economics' Chris Richardson.
He told the ABC’s 7.30 that there is a case for including the family home in the asset test for the Age Pension.
However, Mr Richardson said there was no case for reducing the pension.
“Our pensions are not generous. You look at our wages and our pensions, and that rate in Australia is not terribly high compared to what’s paid elsewhere in the world,” he said.
“The politics are horrendous, but it [including the family home in the assets test] is still the right thing to do.
“You have some people who have incredibly valuable homes and yet qualify for the pension.”
Analysis by the Parliamentary Budget Office (PBO) predicts an ageing population will require an increase in government spending of $16 billion by 2029.
More than $9 billion of that will be on the Age Pension, the PBO says.
A Productivity Commission report claims that the Federal Government would save up to $6 billion a year by including the family home in the Age Pension assets test.
The report, Housing Decisions of Older Australians, states that around 360,000 pensioners would lose their entitlements if the family home was included in the assets test.
It says that the move could also make Australia’s tax system fairer, stating that asset-rich and cash-poor retirees could live a better quality of life in retirement if they were to draw on the equity of their assets instead of claiming a pension.
The commission believes “there is a strong case on equity grounds for setting limits on the value of the principal residence that is exempt from the Age Pension means test” but acknowledged that it couldn’t happen in the immediate future.
A YourLifeChoices Friday Flash Poll, Should the family home be part of the assets test?, drew a strong response, with an overwhelming 85 per cent of the 2481 respondents adamant that the family home should not be part of the Age Pension assets test. Ninety-six per cent of respondents either owned their home outright or with a mortgage.
However, when asked whether the home should be part of the assets test in future, 45 per cent were unsure, 26 per cent said yes and 29 per cent no.
To the question “If yes, when do you think this might occur?”, 37 per cent said “not in my lifetime”, 18 per cent between five and 10 years, 16 per cent within five years, and 11 per cent within three years.
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.
Member Trebor wrote: “In order to keep the government honest, given their proven history of moving goal posts – no home included in assets test! Furthermore, the assets test needs to be revised and countless items excluded, and only income-bearing assets included.”
Thommo took a different view on the family home, but also sought changes to the assets test. “Any government that includes the family home in the assets test will be removed from office pronto. However, any family home worth more than say $3 million should be included in the assets test … But for the assets test otherwise, only the income factor should be included in the assets test, not sundry other items like your car (unless it is worth a million), essential living items for the home (e.g. clothes, kitchenware etc) and house contents. At the moment, your toothbrush and toiletries even count in the assets test. What a joke.”
Gerry also believed the family home may be fair game, writing: “A house is money, same as the bit I have in term deposit. I have to use mine, a house owner doesn’t. They get to leave their house to their kids. I will have nothing to leave mine.”
Would you support any move to include the family home in the assets test above a certain value? Do you think such a move is inevitable?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
Join YOURLifeChoices, it’s free
- Receive our daily enewsletter
- Enter competitions
- Comment on articles