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10 reasons wealthy homeowners shouldn't receive welfare


“I've never seen a diamond in the flesh
I cut my teeth on wedding rings in the movies
And I'm not proud of my address
In a torn up town, no postcode envy …

And we'll never be royals
It don't run in our blood
That kind of luxe just ain't for us
We crave a different kind of buzz
Let me be your ruler
You can call me queen bee
And baby, I'll rule
Let me live that fantasy.”

Extract from 'Royals' by Lorde
(Royals lyrics © Peermusic Publishing, Sony/ATV Music Publishing LLC, Kobalt Music Publishing)


Thousands of age pensioners who never aspired to become ‘royals’ are now wealthy beyond their wildest dreams. Many toiled hard in working class jobs without extra money for luxuries and their superannuation balances are modest. Now in retirement, they qualify for full age pensions which for a couple is about $38,000 a year with supplements.

They did one brilliant thing that set them up for life and retirement. They bought a house 30 or 40 years ago. There was no ‘postcode envy’, as Lorde calls it, of wanting to buy in Sydney’s eastern suburbs or north shore. They bought where they could afford, in inner west industrial suburbs of Leichhardt, Marrickville, Camperdown, Redfern and Alexandria, and their equivalents in other cities.

Next time you fly into Sydney over these inner west suburbs, spare a thought for the house owners down there. Only this time, don’t sympathise about the flight path noise, the crowded streets or the unrenovated dwellings shared with light industry. The owners of many of those houses are living the Great Australian Dream of home ownership in places now worth $3 million to $4 million despite little being spent on them for decades.

Sydney prices have risen 19.3% in a year, Melbourne is up 15% and Canberra 19.1%, taking houses beyond affordability for many younger people. 

This week, the Reserve Bank Governor, Philip Lowe, said using interest rates to stop surging house prices was not on his agenda. Rather, among other factors, Australia should look at "the design of our taxation and social security system" as a structural cause.

Australia’s pension and taxation systems encourage people to buy homes, even more than putting money into superannuation. Australians love our homes, a sacred right. Jeremy Grantham, famous fund manager and the Founder of GMO, said:

“Tell a European you think there’s a housing bubble and you’ll have a reasonable discussion. Tell an Australian and you’ll have World War III. Been there, done that!”

Here are 10 reasons it’s finally time to include part of the value of expensive homes in the age pension assets test.

1. Welfare should go to poorer people who need support

Welfare and social security are essential to look after the disadvantaged but they are supposed to be a safety net for the relatively poor.

The full pension is paid when a homeowner couple’s combined assets are less than $405,000 excluding their home. The pension cuts out completely when non-home assets reach $884,000. These amounts are about $216,000 higher for non-homeowners. 

Pensioners are also entitled to free or discounted health services and medicines, amongst other things, through the Pensioner Concession Card and the Commonwealth Seniors Heath Card.

The recent dramatic rise in property prices has taken the inequity of this government support to another level, no longer confined to a few affluent locations but spread across hundreds of Australian suburbs.

I have inspected five houses in Sydney’s inner west recently and attended their online auctions. You must see it to believe it. The terrace in Rozelle with no parking, price guide $3.2 million, sold for $3.99 million. The Haberfield house on only 285 square metres, guide at $2.95 million, sold for $3.57 million. The unrenovated house on busy Marrickville Road for $3.5 million. An Alexandria home just topped the suburb record at $4.16 million within 24 hours of listing.

Some homes in these inner suburbs have increased in value by $500,000 to $1 million in a year. At the upper end, that’s 27 years of age pension payments which could be funded from one year of capital appreciation.

These are not prestige homes. The $3.5 to $4 million houses have only one bathroom and a 50-year-old kitchen, and it looks like the people living in them do not have much money. The houses need $1 million spent to bring to a high standard. There’s a decent chance they are owned by people on an age pension. Where a sale is a deceased estate, $4 million will pass to the children or estate tax-free.

Is it fair that a welfare safety net applies for a couple sitting on a $4 million asset? Or in more expensive suburbs of cash-poor, asset-rich people in houses now worth $10 million or $20 million? An agent told me last week his average sale price this year was over $7 million. Any age pensioners in there?

What about the "I've paid my taxes, I deserve a pension" argument? Well, lots of people pay taxes and never go on welfare. Noel Whittaker wrote an article in 2015 refuting the claim that a proportion of taxes was once paid to a personal welfare fund. He concluded social security benefits are paid from Consolidated Revenue and "no taxpayer had a separate balance in their own name, so there was no possibility that monies paid in would be allocated to a particular contributor."

2. A new policy should include a generous threshold

A policy change should protect people who live in ‘average’ homes, in recognition of the basic principle that it is wealthy people who should not need a social security net. The majority of pensioners would not be affected by the change. What might be an appropriate level, as 'expensive' and 'wealthy' are relative terms?

In 2015, the Productivity Commission issued a detailed 232-page report entitled ‘Housing Decisions of Older Australians’. It quotes the following survey results:

“A recent survey of 1,413 people by The Australia Institute (2015) found that two in three people consider a home worth $1 million or more to be ‘expensive’, with one in three also considering that a home worth $750,000 or more is ‘expensive’.

Three-quarters of people surveyed thought that retirees living in ‘expensive’ homes should still be able to access some form of age pension - 46% favoured access to a part age pension, and 29% thought that those living in ‘expensive’ homes should be able to receive a full age pension. Only 16% of those surveyed believed that those living in ‘expensive’ homes should not be able to access any form of age pension.”

The Productivity Commission looked at the impact of changing the pension asset test to include the amount above a threshold of $440,000 (the median house price using data from 2010). At the time, about 11% of current age pensioners would face some pension reduction, while about 3% would lose eligibility totally.

The current median house price in Australia is $956,000 (Sydney $1.41 million). While far more work would need to be done on a number, setting a threshold above $1 million to $1.5 million might be in the ballpark.

A couple with a house worth $1.5 million and other assets of $405,000 would retain full pension entitlement, and the pension would not cut out until other assets are over $884,000.

Is it too much to ask that someone with around $2 million or $2.4 million in assets should reduce their welfare payments?

As the following table using 2018 data from the Retirement Income Review shows, about 5% of age pensioners own a home worth over $1.5 million and about 15% over $1 million. It’s likely to be much higher now given home prices have risen 18% across Australia in 12 months.

3. Cash needs can be met by an equity access scheme

Nobody would be forced out of their home or required to live on less money, but what does an asset-rich, cash-poor person living in a $2 million house do for cash flow? They could access a programme similar to the Pension Loan Scheme (PLS) or similar offered by the private sector.

We will not go through all the details here but the current PLS allows anyone of age pension age to draw up to 150% of the current age pension. The $38,000 a year could be marked against the value of the house and taken from the estate. There would be additional protections such as no negative equity and perhaps a person would only be required to borrow to a maximum of 50% of their house value or until the residual value is say $500,000. There is no asset easier to borrow against than residential real estate.

The current PLS rate of 4.5% could be reduced to say 2.5% as part of the change. So after 10 years, drawing $1,458 each fortnight at 2.5% would create a debt of $430,000. And $982,000 after 20 years. The expectation is that the value of the house would rise even more, as Australian residential property has increased at 10.7% per annum over the long term.

The Grattan Institute writes in a paper called ‘Housing affordability: reimagining the Australian dream’:

“The impact on low-income retirees with high-value houses could be mitigated by encouraging them to continue to receive the pension, but reclaiming the over-payment when their house is eventually sold. If retirees responded rationally, the reform would have almost no effect on them – instead it would primarily reduce inheritances." 

Or perhaps when they learn more about a scheme that allows them to access 150% of the age pension, they might enjoy a higher standard of living in retirement rather than leaving more money to the kids. The Government could also facilitate private sector provision, although at least initially, acceptance of the scheme would be encouraged by government provision.

4. Pensioners have already benefitted from favourable policies

Since 1975, according to CoreLogic, the amount of time it takes an average Sydney homebuyer to save a deposit has increased from three to nine years. The average home cost has risen from four times annual household income to 13 times.

It has been a great run for homeowners, as shown in the chart below. Government policies on capital gains and means-test exemptions have encouraged Australians to buy houses.

When COVID-19 hit in February 2020, most economists expected house prices to fall, some by as much as 30%, due to the decline in immigration and rising unemployment. In fact, massive government stimulus packages, all-time low interest rates and $200 billion of funding injected into the banks under the Term Funding Facility created massive demand for homes accommodated by easy credit.

It was government and central bank policy which created the housing boom and owners have benefited big time. Giving a little back in the form of tighter age pension eligibility is sharing these gains as at some stage in the future, debt will need repaying. Should future generations not only face expensive homes but also the burden of paying off our debts?

Source: AMP Capital

5. The Retirement Income Review recommends accessing home equity

Both the Government and its Retirement Income Review have promoted access to home value as a pillar of retirement income policy.

Deborah Ralston of the Review wrote a detailed article in Firstlinks on accessing equity in the family home. Here are some extracts:

“This (baby boomer) generation has also had the benefit of rising property values over recent decades, with the consequence that a large proportion of their wealth resides in the family home.

In examining the three pillars of the Australian retirement system - the age pension, compulsory superannuation and private savings - the Review pointed out that:

As housing is exempt from the age pension assets test and capital gains tax, for many it is a preferred form of retirement savings. At present, around 15% of age pensioners live in homes valued at more than $1 million, although the vast majority of these are in Sydney or Melbourne where property prices have escalated over recent years.

For median homeowners at retirement, home equity represents around three to four times as much wealth as superannuation (median superannuation balances at retirement are around $200,000, while median home equity of retirees is $750,000). With the family home constituting such a large component of private saving, accessing equity in the family home is an attractive means of increasing retirement income and continuing to age at home.”

6. Pension asset test is unfair to some people who created businesses

Let’s say the couple who rent next to the pensioner’s house are migrants who disembarked from the same boat in the same year the house was bought. They didn't have much money but they also rented a factory and created jobs, and when they finally retire and sell the business, they will not be eligible for an age pension.

Both couples worked hard but one took business risk, employed people, struggled through recessions and market setbacks. The other enjoyed living in their own home, and now, their assets are worth exactly the same. But the government pays one couple an annuity of $38,000 indexed for life, while the other couple will need to self-fund their retirement.

The asset test exemption encourages Australians to invest in ‘unproductive’ assets when the capital could be directed towards income-producing assets or activities. This is an economic argument to modify the exemption.

Even someone with the same assets in superannuation rather than a home would not qualify for a pension.

7. House prices have risen far quicker than incomes

House prices have doubled in real terms over the last 20 years while wages have stagnated. A large proportion of a generation of Australians has less chance of buying a home.

House price growth has also far outstripped household disposable income. As shown below, the ratio of house prices to household income has risen from around 2.5 to the current level over 5.5.

8. Governments need to spend less to repay debt

A country facing the budget ravages of a pandemic and a trillion dollars of debt needs to find ways to raise money or spend less. While full-rate pensioners have fallen to about 45% of the eligible population, the proportion drawing part-rate age pension is expected to rise continuously until 2060.

Source: Retirement Income Review, Consultation Papers, November 2019

9. There is widespread expert support for a revised test

Here are the brief views of some leading commentators:

a) Chris Richardson from Deloitte Access Economics on 7.30

"You have some people who have incredibly valuable homes and yet qualify for the pension. The politics are horrendous, but it (including some home value in the assets test) is still the right thing to do."

b) Grattan Institute paper entitled, 'Money in retirement: more than enough".

“- Change the age pension assets test to include the value of a home above some threshold – such as $500,000.
- Extend the Pension Loans Scheme so that people disqualified from the age pension by their assets can borrow income up to the rate of the age pension against the security of their home.”

         John Daley from Grattan told the Lateline programme:

“We’re seeing an older generation [that has] benefited from a combination of quite generous tax and welfare treatment and has also been in the right place at the right time as interest rates came down. Therefore asset prices rose and we have a quite wealthy older generation, indeed an older generation that’s much more wealthy today than people of that age, say, 20 years ago.”

c) The Henry Review

The Henry Taxation Review in 2010 supported a cap on the exemption from the assets test of the principal residence. It argued there is a primary role of housing in providing shelter, but beyond this basic function, housing represents an asset that people purchase with an expectation of generating a future return. Henry estimated that a cap of $1.2 million would result in approximately 10,000 age pension recipients facing assessment.

d) National Commission of Audit

The National Commission of Audit proposed in 2014 that from 2027-28, the threshold for the inclusion of the principal residence in the age pension means test should be set at the indexed value of a residence valued at the time of writing at $750,000 for couples and $500,000 for a single pensioner.

e) Rice Warner

In 2015, Rice Warner recommended a threshold of $1.5 million for the principal residence and up to $500,000 for all other assets (including superannuation) to be eligible for the age pension. Those with more valuable homes would need to borrow against the property to reduce their net equity position to $1 million.

f) Centre for Independent Studies

Cowan and Taylor (2015) advocated including the entire value of the principal residence in the age pension assets test. This was part of a three-pronged approach which also included legislating for a default reverse mortgage product to be offered by banks but guaranteed by the Australian Government, as well as deeming income from the reverse mortgage product and including it in the age pension income test.

10. Senior Australians encouraged into more appropriate housing

Some older people stay in their houses because if they sold and moved to a cheaper place, their pension would decrease. The Decisions of Older Australians Report says:

“The exemption from the age pension test creates an incentive for over-investment in principal residences, discourages downsizing and generally reinforces the perception that the family home should not play a role in the retirement funding mix. In effect, by giving home ownership a special status, the means test distorts and constrains the range of accommodation and retirement income choices of older Australians. The exemption is also inequitable - it favours home owners over non-home owners, who are typically less wealthy and possibly in greater need of assistance.”

OECD Report on Australia

The OECD released a report on the Australian economy this week, saying:

"Tackling structural factors that might skew Australian household balance sheets towards residential property investment could reduce vulnerabilities and improve household wellbeing."

Specifically, the OECD suggested excluding inherited properties from the capital gains tax discount system in the absence on an inheritance tax.

But here is the OECD clincher (page 41 of the Survey):

“Age pension payments have risen more markedly than other social benefits, such as those for the unemployed. In addition, the prolonged boom in house prices have inflated the wealth of many pensioners without impacting their pension eligibility given that the value of the family home above a modest threshold (AUD210,500) remains outside the means test. Half of the government’s spending on the age pension goes to people with assets more than AUD500,000. Indeed, the recent Retirement Income Review highlighted that the distribution of age pension expenditures is much less skewed to lower wealth quintiles than other payments.”  

Take our short survey ...

There are clearly two sides to this argument, and we include a survey to allow everyone to put their case. All results and comments will be published (subject to avoiding abuse). There is a strong case for introducing the change gradually to allow people to plan and adjust their retirement decisions.

Regardless of personal views on this change, we all know that where a good policy runs into politics, it’s usually the latter that wins. But while a couple worth $2 million might not be 'royals', they do not need social welfare.

Please complete this short, two-question survey on age pension eligibility to gauge opinion on this topic.


Graham Hand is Managing Editor of Firstlinks. This article is general information and does not consider the circumstances of any individual.


November 02, 2021

After a marriage breakdown I was left with just enough from the sale of the family home to buy a small modest house, albeit with a small mortgage. I am now an age pensioner who cares for my severely disabled son at home ... and when I die it will be the only security that I am able to leave him ... a place to live that is suitable for his accessibility needs. I had no way of knowing that during a pandemic house prices will rise, and to think that any security we have could be taken away by government reducing my pension according to the asset value of our home. It is our home .. not an investment.

December 16, 2021

Debra. Your house will still be a security for your son regardless of it's value. A roof over his head. Taking a cut in your pension won't take your home ownership away.

February 27, 2023

Julie, unfortunately under the proposals in this article you are incorrect. Under this proposal Debra would have two choices. The first is to sell her current property and downsize. However it may not be possible to purchase a new property suitable for her child's disability, or require her to spend a substantial amount on top of the purchase price to adapt the new property (which she has likely already spent on the current family home). The other option would be a reverse mortgage. Under this option, the moment she dies the bank requires payment of the outstanding loan from her estate, which would require the home to be sold. Even if the bank was willing to 'allow' the inheritor to repay the mortgage on an ongoing basis, that would require the inheritor to be eligible for a mortgage under standard lending criteria. Her child is unlikely to be eligible due to as they will likely never have a high enough income to afford repayments.

October 13, 2021

Think of the ramifications if Super Funds were not allowed to borrow.

October 24, 2021

The age pension is far too generous. It rewards people who have not prepared for retirement at the expense of everyone else in the community, including people who have prepared who are regarded as soft targets by any government agency or service provider.

It’s also ridiculous to pay the same rate of pension to everyone regardless of where they live but that will not change. Similarly an arbitrary asset test won’t work because house prices vary wildly, depending on where you live and property standard. A person living in a modest house in Sydney is at a disadvantage to someone living in a luxury house on the banks of a sleepy river or beachfront town along the coast somewhere in some sleepy hollow. Use localised median house prices as a benchmark.

October 06, 2021

Re: "6. Pension asset test is unfair to some people who created businesses".

I'd like to use the same methodology for 2 people who took different paths in life.
Person A - Worked long hours plus more at home fixing the cheap house he bought. No social life and/or holidays because he was always working to repay the mortgage and improve his asset so that he would be ok in retirement.
Person B - This guy was not going to do without and rented as well as lived to 100% of his income. Did not save a razoo for his retirement.

Fast forward to age 65. Person A owns his own home and has managed to accumulate a few assets which he lives of, these being much less than the pension. Person B on a full pension and complaining about people like Person A because he does not have the assets Person A has.

Lets be a little bit fair Graham. Person A deserves better than a kick in the guts because of some perceived inequity and its not his fault we're in a housing bubble which may burst in a big way at some time or that some folk CHOSE to take a different path in life and enjoyed every minute of it until retirement day arrived....after which the government, all of us, picked up the tab.

My wife and I can relate to Person A as this was our chosen path. We watched friends live the high life whilst we worked, scrimped and saved. On top of what we achieved I received a sizeable inheritance. We ask for nothing and live of less than the pension equivalent. Happily. What does get in our craw is when we have to read articles claiming 'unfairness' to anyone who has succeeded despite the chips stacked against the working class from the day people are born.
You can do better than this Graham. And yes I get there has to be a point where those who do well get their hands out of the money tray but the value of the family home should never be the mechanism for throwing those who have tried so hard to the wolves. Rather ask those who did nothing for their own futures why they showed such a neglect.

Welcome to the human race. Its never easy.

Peter Care
October 09, 2021

I am also one of those people in category A, who will never qualify for the aged pension, I think your scenario is biased and unfair to person B. If you held it for 30 plus years, most of the wealth in your home was generated not from your hard work, but from luck. You bought at a time with high asset price inflation thanks to Govt policies, including a collapse in interest rates.

Many of the people in category B , did own mortgaged property, but lost it because of divorce, illness or disability, the failure of their small business or lost their work when their whole industry was exported or shut down (e.g manufacturing) and became too old @ 45 for employers to employer.
Many of these people worked hard when they had the opportunity. I know a few people in their 50’s and 60’s who lost their homes for one of these reasons. What do we do about these people tell they “you blew your chance no pension for you?”

October 10, 2021

"We ask for nothing and live of less than the pension equivalent. Happily.": Then any Age Pension assessable capital you have in excess of the SweetSpot of $405,000 is useless - except for later renting better age care or bequests. You could increase income by dissipating that useless capital - or stashing it in capital efficient home improvements which might continue to yield tax free capital gains. Government will guarantee a yield of 8% for life on assessable capital reduced from $891,500 to $405,000. "a housing bubble which may burst in a big way": Whereupon you would have a home rent and tax free and a government guaranteed income in excess of your expenditure. Abolishing the Age Pension asset test would allow rational retirees to invest their capital in other than their home.

September 26, 2021

The migrants who bring their relatives should support them for the rest of their life not to get social security benefits after few years. Working people who paid taxes and have money saved in superannuation or in the banks are penalised by receiving part pension or not pension at all and new comers who did not work one day in Australia eventually get full pension. No wonder so many people want to migrate to Australia.

September 27, 2021

You mean immigrant, I think. Why picking on immigrants? Most of us are immigrants or decedents of immigrants. So if an immigrant pays more tax than you, do you think their parents should be more supported than your parents? You either have a social welfare system that supports people in need or you don't have one.

October 03, 2021

That's because from my own personal experience, they work harder and longer hours than a lot of the 'home growns' here, plus they open their own businesses because a lot of Australian employers won't give them a chance. That's why you have migrant engineers and doctors driving taxis and cleaning office buildings, until someone finally does. I knew one guy who was an accountant and was having to work as a receptionist.

There's your problem.

Nicole Cameron
October 17, 2021

As a young immigrant 60 years ago, I agree. Arrived with 5 pounds, Never heard of welfare. Husband and I worked hard. Started saving and buying land in 1965, one at a time. Sadly, he passed on 25 years ago, too much self respect to be dependent on other people tax. Before pension is paid, these newcomers need to have worked and paid tax for 20 years minimum.

September 25, 2021

We worked all our young life and struggled to pay our mortgage for 25ys while others chose to rent and live it up so why now should we have our homes asset tested to help fund their retirement.....not fare.

Don't forget all the interesting we had to pay on the loan

September 21, 2021

Why are you trying to make innocent people who brought a house 30 years ago without them knowing it was going to skyrocket in value suffer! Leave pensioners alone and start attacking the real issue facing the social security system?

September 21, 2021

How would they be made to suffer? Passing on a smaller bequest doesn't equate to "innocent people suffering"! The ones that are suffering are those buying exorbitantly expensive houses or forced into a lifetime of renting and those taxpayers picking up the tab to fund asset rich pensioners.

September 21, 2021

"The ones that are suffering are those buying exorbitantly expensive houses or forced into a lifetime of renting and those taxpayers picking up the tab to fund asset rich pensioners":

RBA calculates it is better to have "renter homeless with jobs" than "affordable homes owned by jobless" and have set matched local interest rates with those globally accordingly.

So "a job and no home" or "own and no job"?

Age Pension for all can be delivered at the same total cost or less depending on the payment rate and tax rate.

September 26, 2021

It's their choice and like you said it's the taxpayer that picks up the tab and the rich people should pay through the nose when it comes to paying taxes

Jon Kalkman
September 19, 2021

Homeowners and non-homeowners are not on a level playing field. At present non-homeowners do not get more pension but they can have more assets before their pension is reduced and they may also receive rental assistance. It is widely acknowledged that these measures do not compensate for the cost of rent they face and so some of their rent payments need to come from the meagre pension they receive. The age pension is heavily skewed in favour of homeowners but home ownership is falling and this problem is growing.

Centrelink should apply deeming to the family home as it does to all other financial assets, including superannuation. After all, the family home IS a financial asset when it is used to release capital when down-sizing, when given as a gift in the estate and when used as collateral in a reverse mortgage.

Deeming would take account of the income that homeowners do not need to find from their own pocket to pay rent to themselves. The income calculated from deeming reduces the age pension above certain thresholds. The deeming rate is actually very similar to rental yield in Sydney. It could finally place homeowners and non-homeowners on a near level playing field, especially if the thresholds were adjusted accordingly.

September 19, 2021

It's unfair to allow people to have significant assets and obtain social welfare payments. Unless we move to universal pensions and possibly universal wage in general. If we work on the basis of limited resources to welfare payments then they need to be more equitably allocated. People can use reverse mortgages or other similar arrangements to access their wealth in their home if it's of substantial value. I am self funded as a retiree in a very modest home (probably 50 to 60% of median house value in Australia with most of my wealth in superannuation to pay for my retirement. I could buy a muchj better house and then claim a full or part pension.

September 19, 2021

"I could buy a muchj better house and then claim a full or part pension.":

When you do, government will pay you guaranteed risk free 8% return on the capital you convert from Age Pension Assessable to non-Assessable (home) and you keep your capital rent free, tax free and appreciating at about 6% per year.

September 19, 2021

When you do, be aware that your disposable income will be limited to about $60,000pa, depending on the return you get on your investments. For many that is more than adequate, but note that only the home is non-assessable. Everything else, including the cash you have in reserve for that holiday or new car is assessable and can reduce you pension. You too can be income poor and asset rich.

September 19, 2021

"disposable income will be limited to about $60,000pa":

Tax free for senior couple: 2 * $30,000.

No mortgage to pay, no children to support, no savings to accumulate.

Just food, health, utilities, rates, maintenance.

More unencumbered cash than most had before receiving Age Pension.

September 18, 2021

In light of all the comments made, please consider the below:
• Female – on her own- just hit 70 – worked full-time whole life apart from approx. 9 mths off for each of 3 children
• Hoping to retire finally next year at 71!
• Small nest egg built up in Super (since females included in Voluntary Super) – then had to cash in Super (when it was still allowed) for deposit on home – to give children security of a “roof over their heads”
• Have just in last month paid off my home – 1st time mortgage free in 47 years - Finally hopefully will be able to live in retirement knowing have roof over my head (only way achieved was by using all of the proceeds from sale of my own business – so none left over to boost my Super)
• Sacrificed lifestyle – worked 60-70 hours week most of the last 25 years - to enable security in retirement throughout my working life – still won’t make it BUT will be just over the threshold for any pension entitlement
• Live and have lived frugally all my life so children could have the best opportunity / education to give them a fair start in their adult lives
• Assets will preclude from pension BUT at the same time will be “Income Poor” -Super will last approximately 10 / maybe 12 years BUT life expectancy - that is the totally unknown factor!
• If have to sell / remortgage home and downsize to enable “to be able to live” will this leave sufficient backup if have to enter aged care? Cost for a reasonable environment can be anywhere from a very conservative $500k - $unknown at the age it may be required
• Never received government assistance for anything in life –definitely not for any child care – paid from own income for over 25 years (10 yr gap -oldest to youngest child)
• Goal to save and invest to have the means to live out the rest of life – not as “wealthy’ but comfortable – ie not having to worry to meet the necessary expenses & hopefully have a “buffer” for the contingencies
• Maintained private health insurance since age 20 –to cover if have to contend with serious / costly illness
My question to ALL – please consider those who are:
- on their own; female; worked hard and paid their taxes
- in the Super balance disparity cohort (eg female compared to male)
- never taken nor received ANY assistance from the government
- Have just entered or are about to enter retirement - knowing full well it will not be an easy road financially to fund themselves within the current Superannuation / Pension environment let alone making it tougher for cohorts such as this
There are a myriad of other stories similar to this one.
It is just one example that highlights the complexity of this discussion and in particular the difficulty in determining the best answer to:
At what point (or asset value) is it fair and reasonable to draw the line?

September 19, 2021

Sell your home and rent for the rest of your life... Because that is what we have to do.

September 19, 2021

*Why is noone talking about the real issue, INFLATION. I risked everything and have paid capital gains to escape what would be a poverty based lifestyle. (I had to take financial risks, due to disability). But even though I own my home I can't get a LOAN because disabled so the DSP is my only income! Quite literally I've been knocked back for trying to get 100k (10%lvr out of my home I own on full). So it's very easy to sit there and say these things if you have not grown up with these laws in place. Want to change them sure, but grandfather them in so people like me don't get squeezed back in poverty just because we have taken risks with money to live a better life. The REAL ISSUE HERE OS INFLATION! All of this is inflation, not the pension laws, not some radical new policy that's changed things, not Chinese or Japanese buyers (it was hate the Japanese home buyers in the 90s). But inflation is the issue here it rolls onto everything else. So let's discuss going to a non inflationary currency like we had up until the mid 70s??? If you look at history everything worked well when there was a non inflationary currency. Today with the fiat MMT standard, they print more and this simply makes prices go up!?? It's not rocket science!

September 20, 2021

U are absolutely right those people with black money pays higher price for property as they knew in future ordinary middle class children will have only hope on parents house other wise they have to pay rent and never achieve dram of their own home so as per me home should never count as equity it is non living stuff what ever price increase or decrease it is their dream house where they make their life they paid tax higher than anywhere in world life passed in dreaming affordable life but if they go out they want get loan now government wants to take away pensioners own resistance and wast money behind migration and few corporate culture I have seen how much waste of money is happening this is inflation causing paper value of property increase but why they need to sale where they will go and buy as today if they will sale for 293million than when they will buy they might have to pay 4mikkion who knows government policies are failour inflation has rise so high that people who were living comfortably on their normal sakery become difficult to survive this who kept aside their enjoyment to build their dream house will be punished those who don't care spend their income in drugs partying alcohols laziness not to work attitudes they get everything because they are poor I had seen many ubjustification in government agencies first ask government to bring down their expenses by reducing unnecessary expenses
There are lots of pitfalls are there and in another country pension is not given on income test but they get pension once they becomes old there is more expense when they are old rather than young they also have right to enjoy their retirement and go out for holiday but how many people afford and government give loan to them to do extra expenses every thing become expensive in this last 2years food no matter how much we economise but that is necessity and how they be able to live healthy life style with so much inflated prices plus there is no security of elder people corruption increase in society there is no body is there to here complain of older people even they can't afford to higher lawyer against corporate fraud they face every now and than due to mental and physical disability everyone try to rob them care agency are only looking for their own profit government officers are only looking for their own interest and politicians what they show are they in real they mean it ? Rich becomes more reacher and poor becomes pooer in our time our parent live more happy and secure life than we living and future is very glim if you don't have any inheritance to give to your children why government is not stopping people buying multi properties and kept void to bring prices down

September 19, 2021

An excellent article l am a male and totally agree as this article sums my life story!
Did you realise that if l spent 20yrs in jail and am currently incarcerated my partner would receive additional benefits!
Pension Rental Assistance Free Medical and the list goes on!

September 19, 2021

Unfortunately these people do not have empathy. Anything in the name of those capital gains. Australia does not have it right. Many other countries have good housing options with long term leases options if you are unable to buy. We literally purchased a house because were bullied into it. We could not afford rent anymore. It was cheaper to buy and as a result we have a mortgage which means we will have reduced disposable income and cannot be good consumerists. Also, we were going to have 3 kids, but looking unlikely now.
Wish you the best and hope you have a fantastic retirement. You are still 70 years young :)

September 20, 2021

You were bullied into buying a house?? How does that work---the bank took you by the throat & said take a mortgage or else? I hope you look back on this comment in 30yrs time when you have an enviable asset and thank the Lord you were in the right country to buy a home. Reduced disposable income is generally the way that people acquire something worth having.

September 26, 2021

I've got relatives in similar situations.
The biggest difference in their stories isn't gender, or even the recession we had to have. Its geography, and differing house price increases. All buying similar valued homes around 1970, all working hard, and all suffering setbacks, most working into their 70's.
The relatives living in Sydney get a par or full pension, and have home equity of around $2m. Those living in large regional centres get a part or full age pension but have homes worth in the $300k range.
The current system has the children of all these people paying more taxes (or we have less services or build up more debt for generations to come), to fund the age pension for the older generation. Obviously that's fine.
The problem is the children of the Sydney relatives have the system protecting their $2m inheritance (say $700k for each of 3 kids), while those with the same story except for where their parents live have a system protecting $100k each inheritance.
The goal of the policy proposal is to have the system so it just protects say $1.5m of inheritance per family.
So for your situation, if your home is worth $1m, a $1.5m threshold won't affect you. If your home is worth $2m, then $500k would count towards your age pension assets. Once you've borrowed $500k of this to support your retirement you're back to having none of your home value count.
The idea isn't about penalising people for working hard, hurting people with no asset value, and nothing to do with gender. Its about recognising that people with your exact same story except for where they live are treated as little less unequally.
If it helps, my parents are in the crowd of people getting a part age pension and living in a $2m house, so I'm benefiting from the current policy, and would lose by any change. My parents worked until age 72 and 75.
I can see the inequity very clearly though with relatives in regional centres.
Did I read you withdrew super to help your children buy a house? As a taxpayer I'm against me paying more taxes to pay benefits to people who would have been fine but gave their money away. Effectively I'm paying taxes to give a handout to people buying a house, but only to those with parents who have both the assets and make the choice to give their kids money. Amongst other things, my relatives in regional NSW don't have the assets to be able to do this.

September 18, 2021

As much as I sympatise with the autor and other respondents, it is a problem politiciansdo not want to solve. It is a sure fire way of scaring the population into voting a certain way. When politicians have this simple advantage, why would they want to solve it. After all they are only interested in winning elections not the long term well being of its citizens or the country.

September 18, 2021

We have rented for many years mainly because our child was born with a disability and my wife has been his carer so with only one wage put us off buying our own house but over those many years it would have been possible i just think it very important to have safeguards for people who have struggled through life with many obstacles to overcome like being moved from place to place but then have saved just enough to buy a home but would need some pension.I definitely think someone with plenty of money should not get a pension but everyone should be treated on their circumstances

September 18, 2021

And if they do make it so that your PPOR is included in the means test (with no Grandfather clauses), then watch all of a sudden as "My Name Pty Ltd" is the "owner" of a house that you live in and rent from yourself, or other such creativity, that "you'll own nothing, but you'll be happy"...because a company that you ultimately control holds all this stuff for you instead of you personally, meaning that on paper, you qualify for the poverty line pension.

The logic of people who want (not, "need") the pension because they feel entitled to it (because remember, we all paid taxes all our life, including Gen X, Y and Z) is the same as those who go to the cheap and nasty "all you can eat" buffet and think that they are getting their money's worth if they pig out on it...if they sat down and did the numbers and the hoops that you have to jump through, it's not worth your time or effort.

September 18, 2021

Spot on. I've spent a significant amount of time and effort organising my financial life so I don't need the pension, and so I can stay out of all the drama and discussions that being a pension recipient will bring. I also wouldn't like to be rolling the dice on whether the pension as we know it today will be at the same level in 10, 15 or 20 years, but people seem to have faith. Madness.

Geoff D
September 18, 2021

Not so creative Chris because a residence owned by a company is subject to CGT and potentially Land Tax as well! In any event it would be simple to include the renters interests in the company as an asset anyway.

September 30, 2021

Geoff D - never doubt the things that people will do or the ends to which they will go, to get something "for free".

September 18, 2021

The NZ system works the best. Everyone qualifying retiree receives a basic pension, with no asset or income test. However all income is assessable in retirement (at a lower threshold). It's so simple, it actually works. No more buying expensive houses, simply to qualify for the age pension.

September 21, 2021

I think, that’s social justice. That’s how it should be.

September 27, 2021

I think that's how the UK works. No tax on way in to super but treated as income along with anything else in the way out. And everyone gets a basic pension.
Australia has it completely back to front

September 18, 2021

How do the asset rich cash poor aged pensioners pay for aged care? The RAD in regional areas for a modest small room can easily cost $500,000. Most need to sell their home to pay for the cost of aged care. Problem solved no more house as it's gobbled up covering the staggering cost of aged care that most of us end up requiring.

September 18, 2021

Why not include the option of unwinding negative gearing which is a main cause of residential property scarcity due to deductibility of mortgage interest from investment and other income taxes.
Is it possible that the fact that many present MPs have multiple houses for the purpose of (legally) reducing "moral" tax contributions to Consolidated revenues, is mitigating the likelihood of this discriminating tax treatment being abolished or confined to only one property.

September 18, 2021

People will spend all the equity in their house requiring the government to fund more aged care places as people won't be able to afford the cost of aged care. Then there will be outrage at the amount governments are spending on aged care. Oh that's right people are complaining now.

September 18, 2021

"People will spend all the equity in their house requiring the government to fund more aged care places as people won't be able to afford the cost of aged care.":

And variations on that.

Currently the capital costs of entering age care is about equivalent to the value of 1 house per admittee. Houseless admitted free - government pays.

September 20, 2021

Here's a horror story to bear out Geoff's comment. I recently assisted a relative in Brisbane( supposedly cheaper area) re their affairs 20yrs into retirement where they paid $1.3 mill for an apartment in a retirement complex about 4 yrs ago for independent living for one (but with Govt assistance to stay at home) with almost $200p.w. maintenance fees & if sold for any reason per the lease, will be lucky to recover $900,000, and for the partner in nursing home at same complex so they could be 'Together' in old age they paid 5 years ago $550,000 for nursing home place in the complex, with almost $5000/mth ongoing nursing home fees for care which they fund from super. I was horrified at costs and this was for a professional couple now in 80's and 90's of past very good means. It is only the sale of their house which enables these costs to be borne without Govt help. So all those people who think 'selling the farm' is good, forget it, as otherwise our Govt will bear the costs for all old aged care. The partner in nursing home receives $90/wk pension for having served in a war zone so even with a "Gold Card' still needs to fund almost $5000/mth for nursing home fees. How many people can fund nursing home fees such as this unless they have a home which has appreciated over 40-50yrs? That's the untold story of leaving the home out of assets test. Heaven knows what such care would cost in Sydney.

September 18, 2021

Really interesting discussion points thanks for a great article

September 18, 2021

#8. You frame this point suggesting having more part pensioner is a bad thing. When in fact converting the number of full pensioners to part pensioners and reducing the number of pensioners overall is a great result.

September 18, 2021

I believe that there should be an exemption cap placed on the value of the home that is not assessed under the Asset Test applied by Centrelink (possibly $900,000). Any value in excess of the Cap should be counted towards the Asset Test cut off limit. It would also be warranted to have a Reverse Mortgage or Pension Loan Scheme in place that would provide an equivalent or increase to a persons standard of living through, the value of the home asset and the outstanding loan amount payable on the settlement of the Estate after a persons passing.

The Government of the day should be considering this as a means of saving Social Security cost obligations and re-directing this to assist in repayment of our historically high debt obligations.

September 24, 2021

This is exactly what I was coming to this comment to say.
I don't know the figure, $900K doesn't seem unreasonable - but surely there are avenues to investigate, similar to other thresholds!

September 26, 2021

Here’s a thought, how about a sliding scale on an exemption cap depending on your age, postcode & how many direct offsprings who would benefit once you pass.

September 17, 2021

Great article and have been saying the same thing for years. The current system is not sustainable and if we start implementing some changes there will be real issues in the future. I'm fortunate enough to pay quite a bit in tax and am setting myself up to be self funded in retirement. I have no problem contributing to the support of people who need it. Paying to support someone so they can leave a large inheritance behind does not pass the pub test for me.

James cornwell
September 17, 2021

I agree

September 17, 2021

"Paying to support someone so they can leave a large inheritance behind does not pass the pub test for me.":

The cost of the Age Pension without Asset Test, 'age pension of all', can be less costly. Depends on payment rate and taxation.

A single minimum wage earner paying 10% super guarantee:
= FV((1+(1-15%)*2%)/(1+1%)-1,(67-25),-(1-15%)*10%*52*40*20,0,0)
= $171,701
could drawdown:
= PMT((1+1%)/(1+1%)-1,(87-67),-174720,0,0)
= $8,736 / y.

to 67 from 25 most conservatively invested

September 17, 2021

This is long overdue - recent increases in Sydney house prices have only served to exacerbate the inequity and unfairness of the current system. Where I live in Sydney's Inner West, there are many aged pensioners living very comfortably in houses bought decades ago who will not downsize as they will lose access to their full pensions. Meanwhile, their children and grandchildren stand to inherit millions, while the less fortunate will never be able to rely on generous inheritances to fund their future retirements.

September 17, 2021

Since when, did the age pension become "welfare"? The sale value of a persons home is no business of government. There should be no means test for people over pension age, simply pay every one the same amount and benefits of a full pensioner. If some cannot manage on that, they should then apply for welfare. What's next?..............a crackdown on the unemployed. How about the $13b free money given away recently to company's that didn't need it or $200b offered to banks that don't need it? Please do detailed reports and surveys on that and keep the pressure up.

September 17, 2021

The sale value of a person's assets is no business of Government either, but there they are as the ATO with their hand in your pockets, making money off of anyone who takes a risk investing through capital gains tax, as a silent partner that no one asked for. Yes, you can write off a capital loss, but only when you actually make a profit (which, unless you are a really bad investor, is actually quite easy to make something of a profit sometimes from somewhere).

December 16, 2021

Spot on it seems the government is using pensioners as scapegoats for their misuse of taxpayers monie

December 16, 2021

Spot on it seems the government is using pensioners as scapegoats for their misuse of taxpayers monies

September 17, 2021

I am appalled.. What is next, mandated euthanasia at 75? Where have values and ethics gone? Someone that has endured taking hefty responsibilities for others, and has self-denied through thier entire life deserves to have some quality of life in thier senior most years. Shame on you. Mark these words - when it is your time, regardless how stringent you thought you planned - you will experience 10 times worse. Karma is a wonderful thing.

September 18, 2021

Geez, are we meant to be sympathetic for the pensioner with a $2million dollar house that instead of receiving a full tax-payer funded pension has to use a portion of their equity to enjoy their retirement? Unfortunately their kids will inherit only maybe $1.5 million after repaying the pension loan scheme used to make up the difference. What a terrible situation to be in to help pay off the trillion dollars of government debt used to help protect our older citizens from covid.

September 18, 2021

"sympathetic for the pensioner with a $2million dollar house": How did Age Pensioner gain possession of $xM home? * Inherited. * Bought (cash or mortgage) - likely paid large amount of tax on income. * Home value appreciation relative to wages - due to decreasing interest rate. Adding all or part of estimated home value simply shifts the Age Pension Asset Test taper rate problem to another set of numbers. Instead of stuffing capital in excess of Asset Test into home, Age Pensioner wannabes could spend their way to an increased Age Pension payment. Most relevant for those with < ~$1,500,000. Currently spending $1 capital results in $0.08 increase in payment - a government guaranteed return of 8%. Abolishing the Age Pension Asset Test would eliminate such government mandated incentives.

January 03, 2022

do you see the politicians taking a pension cut, plus their other benefits after retiring to pay off the debt that their actions have caused over the years. When I leave work, nothing extra for me except for stress of being treated unfairly

September 17, 2021

This has become an urgent issue for Australia. Government must fix it. I see people living a waterfront house worth 10 million+ with home equity 2 million+ are getting full pension and other benefits. I see full-time hard working couples with young children pay heaps of income tax every year are struggling with their lifestyle and living standard. Those families are very worried about house affordability for the next generation.

September 17, 2021

This was a great article from Graham Hand, but where do we go from here ? We have to organize someone or some group to at least make a start and put some suggestions to Parliament.

September 17, 2021

What a great article, and yes, 100% correct. The PPR ( Principal Place of Residence ) should be included in the Asset Test with a threshold of say $760,000, so anyone with a house worth more than that shouldn't get any age pension benefits, but can draw their own pension from that asset, at an amount of $38,000 PA ( same as the age pension ), and even if they have a house worth say $2.0 million, they would still get the same. This can be a reverse mortgage or the Pension Loan Scheme. With a house worth less than $760,000, they would be eligible for a part pension, based on the percentage value of the house compared to the $760,000 figure. So if for example, they owned a house worth say $380,000 ( 50% of the $760,000 ), they would be entitled to 50% of the age pension benefit ( about $19,000 ), and if they wanted to, they could draw an extra $19,000 from the pension loan scheme. So if they had a tiny old house out in the bush somewhere, they would get most of the pension benefit, but could still draw extra pension up to the $38,000 limit under the pension loan scheme. So in simple terms, anyone with a house worth either $100,000 or even $3.0 million, could still get $38,000 PA pension, with part of that drawn from the pension loan scheme. We bought our PPR 35 years ago for $168,000, and it is now worth at least $1.6 million ( but I get no pension benefits because of my superannuation assets ), but if I had no money, I would currently qualify for the full age pension. ( Ridiculous ). We are contemplating downsizing, but if we were on full pension benefits, we would probably stay in the house, so as to preserve the fullpension benefit. Look at 3 actual cases and reasons why the government hasn't done anything about this absurd situation: 1. I know a couple who live in a $3.0 million house, but still get a part pension. 2. I know a fellow who is age 75, still working as the age pension isn't satisfactory, and naturally he still pays taxes, which is helping the couple in Point 1 ( with the $3.0 M house )to get a part pension benefit. 3. The age pension system needs to be completely reviewed, but the Government won't do it for one simple reason: it will cost the government dearly at the next election, because a huge portion of our population rely on pension benefits, and would almost certainly vote against the current government. The only way to bring a change about, is for the 2 major parties to agree on necessary reforms, and post the election, whoever wins the election will proceed with those reforms.

September 18, 2021

What about doing away with multiple negative geared properties.

September 17, 2021

I don't understand this argument in the article stating for how much some houses were sold in certain areas. You will not be getting pension when you sell the house, will you?
It's every Australian dream to have a house and it was mine too. I see it as a place to live and not as investment and I don't accept this Communist talk of lowering down. I am the migrant myself and I worked hard all my life here so, why others couldn't do the same? Do you know why? Because they didn't have to thanks to the welfare system. So, let's punish now the ambitious ones who worked two jobs or overtime to get were they are now.
Honestly guys, you need communism then go to China. Wouldn't you prefer all of us to reside in commission houses instead?
I receive an overseas age pension which was given to me automatically once I reached the age of 65. It's from much less lucky country and not assets tested. It's based on how much you contributed to the government run fund during your working life. Do we have a similar system here? No, unless you're a politician. Yours or mine fund can be a bad performer and you end up with nothing. It seems that your house is the only thing (if you have one) you have left then. I experienced it when I lost my job once due to recession.
Someone said it already here that we are making our own choices. Pensioners deserve stability and constancy. You can't keep changimg the rules all the time just to fix some other unrelated problems. You do it and then you create one more and even a bigger problem. One thing is for sure, you can't eat your own house. Take it from me and you find out yourself. I bet, you will not be a pensioner but a rich second home buyer.

les weidenhofer
September 17, 2021

I notice a lot of comments saying "tax the property at sale/death" etc but,
that might be fine for those who recieved welfare....what about those who owned their home, and didnt EVER recieve any welfare?? do you still want an inheritance tax to pay for someone elses welfare stream?? when they didnt bother investing or saving, and drank,smoked, or travelled the world living it up?? that would be totally unfair , especially to their children, who now cant afford a home, and will need it to buy their own later. that would be just greed wanting to take from someone else, who did all the hard work.

Richard Jackson
September 16, 2021

I’d like to propose a new Commonwealth level Property Tax as an alternative to modifying the Age Pension means test. If structured well it might help resolve some of the inequities in the current age pension system while also combating tax evasion.

My proposal has three legs:

1. A Property Tax on residential property value over a relatively generous threshold. What that threshold should be is a discussion for another time, but my gut feeling is about $1.25m. Calculating the threshold by reference to average incomes appeals to me. We can’t rule out material residential property price falls at some stage ( it’s perfectly possible that ‘stagflation’ could occur again one day ) and the threshold needs to be adjustable both up and down if the tax to retain support over the long term.

2. The Property Tax paid on a person’s home be tax deductible.
• Home owners paying income tax would pay no extra tax overall.
• But tax evaders would be caught out. If the Property Tax is not paid it would accumulate as a debt to be repaid when the property is next sold.
• There would be an incentive for property investors to invest in properties below the threshold, which may boost housing supply.

3. Age Pensioners would not be required to pay the Property Tax, rather it would be added to their PELS balance. Age pensioners would continue to receive their full entitlement as assessed under the current means test. Self funded retirees could elect to pay the Property Tax as they go, or it could be added to their PELS balance.

I have some sympathy for the "I've paid my taxes, I deserve a pension" argument, as the age pension was thought of as a type of Government facilitated retirement income scheme in the 50’s and 60’s. My proposal would not cut anyone’s pension.

But the children of today’s age pensioners have done nothing to warrant the property driven testamentary jackpots now common across middle-class suburbs. Age Pensioner’s children are massive beneficiaries from the current system.

The current system taxes working families and young Australians to subsidise the inheritances of the middle class. I don't think that's fair now and if left unchecked will build ever increasing inequality.

September 17, 2021

"build ever increasing inequality": Interest rates. Lowest in all of time. Due in part to government repression and subsidy. Deprives lower incomers of a secure means of building capital. Guarantees high incomers gambles on capital growth. Home values = Incomes / Interest rate. Decrease interest rate, increase home values. Increase equality by increasing interest rates.

September 16, 2021

I've always said that the last 5 years of your working life should be taxed at such a low rate you can top up your savings to the max..sign a piece of paper saying you won't ask for a pension and sail off into a comfortable old age...the trouble these days is the piece of paper, likewise your word or declaration, is worthless thanks to the legal system being able to overturn almost anything including your will !!!!!

September 16, 2021

Take this example. My wife an I understood the problem Boomers presented in retirement. We invested in superannuation to be self-reliant in our old age. We have a modest house worth $400,000 (obviously not in Sydney) and $1.6 million (together) in super. We do not get the age pension but we have a very comfortable income. Bill Shorten wanted to demonise us as the “top end of town”.

My sister and her husband invested instead in the family home. They have a family home of $1.6 million and super of $400,000. They are the classic asset rich but income poor, pensioners. As the family home is not an assessable asset, they are regarded as so needy that they deserve the “welfare” of the full age pension at a cost to the taxpayer of $38,000 per year or about $800,000 over their lifetime, which is what my wife and I are saving the taxpayer by taking responsibility for our own retirement.

At death, both estates are worth $2 million. My children pay tax on my super death benefit, my niece pays no tax because the family home is also capital gains tax free. How is this equitable?

September 16, 2021

"How is this equitable?":

You can immediately make your situation equitable by taking advice from your sister's situation:

* Withdraw all super immediately.
* Invest $405,000 as individuals.
* Spend $1,200,000 on capital efficient home improvement: Renovate, Extend, Detonate Rebuild, Move.
* Claim full Age Pension.

September 16, 2021

Thank you Dudley for highlighting the absurdity of our present retirement system. Clearly we don’t want to encourage self reliance in retirement at all. Instead, we want to encourage over investment in housing.

September 16, 2021

ONE QUESTION. How does someone with an illiquid, lumpy "asset" that produces zero income who also meets the standard asset test for a pension actually convert this into income to supplement their limited investment income?
Reverse mortgage? Rip off of the highest order. Sell down? What if you have strong attachment to the area/property etc (cheaper properties may be a fair distance away, if at all). No easy answers.

Given you state the national median price is close to $1MM and in Sydney $1.4MM (median being the price 50% of properties are higher or lower than, not the average) you have half of eligible voters sitting above the median about to be told they are "too rich". Didn't work out well for Shorten & Bowen aiming for the top end of town when in reality they were aiming at the bulk of the middle class..........

September 15, 2021

1 key reason Age Pension Asset Test must be abolished:

To eliminate incentive for Age Pensioners increase their Age Pension payments by stuffing all but $405,000 assessable assets into their home.

Keeping a large home, improving it, moving to a better home. For increased pension income.

Need ~$1,500,000 to exceed the income from the capital and tax free Age Pension.

Hardly the fault of home owners that the 'lowest in all of history' nominal interest rates are causing home values to rapidly increase and pensioners to stay in consequentially rapidly appreciating homes and to stuff otherwise penalised capital and taxed income into their homes.

Include part of home value in Age Pension Asset Test will see homes less valuable homes increase and more valuable homes decrease in value.

September 15, 2021

Great piece on wealthy homeowners and welfare! Bonus points for quoting Lorde! Love it!

September 15, 2021

All I have heard for the whole of my life is

Nobody can afford to buy a house.
Investing is too risky,you will lose all of your money.
I am overcharged for everything ,and companies make huge profits and pay no tax .
The cure for everything is make somebody else pay more tax,my tax should be reduced.
Anybody that has more than me obviously cheats and doesn't pay tax.
The whole of the welfare system is depending on my tax,why don't they get a job,then I can pay less tax.

Nothing changes.
Perhaps time to play My Generation,or Young man blues from Live at Leeds.

September 23, 2021

Yes Kevin I agree

September 15, 2021

I thought I was doing ok as far as my income was concerned (I'm 77) then I read about the shenanigans going on at the Energy Industry Superannuation Scheme. 

Peter S
September 15, 2021

Top Mark A+ for your article, Graham, a pure array of FACTS!!

September 15, 2021

Quite frankly there is too much greed in Australia. We need a royal commission into housing. How many politicians hold investment properties or highly valued PPOR's that will help them in retirement? Why would they advocate against their own interest? The problem is we have too many old people in politics who do not represent a large demographic of our nation ie. young people 35 and under. That age number will only increase as more and more young people are unable to save for their house deposit. It is a sad reality we live in not to mention housing does nothing for innovation. Will Australia ever have a google, NVIDIA, Tesla and so on? No because either 1) why work when your house makes you rich 2) huge debt and unable to make chances on a business 3) unable to commit to further study due to stressful work loads and cost burden associated with home 4) unable to enjoy life as your disposable income is all going into housing ...

It is simply poor economics that isn't good for Australia in the long term.

September 15, 2021

Everyone can make their own choices. If they want to be bums then they can. If they want to give life a good go, then they can. So why should bums get all the welfare?

Geoff D
September 15, 2021

To describe people on welfare as bums is highly insulting. Not everyone has a choice, for a multitude of reasons. It is totally illogical to have welfare paid to recipients who upon death then pass on the asset wealth as an inheritance which is neither subject to CGT or an inheritance tax of some sort. Australia’s generosity to older people, of which I am one, is simply unsustainable.

September 15, 2021

It's not the value of a residence but the value of the land that goes up. And the land is not owned by the occupiers of the residence. So, someone who owns a home in Bronte, should not be entitled to a full pension but those in Campbelltown should? Or should they sell up Bronte and move to Campbelltown to become entitled? How about the government instead of encouraging the widespread construction of houses start promoting the construction of high quality apartments but taking into consideration proper distancing between buildings, creating park grounds, recreation centers, etc..

Reader comment
September 15, 2021

Presumably, this exercise is to get people to live off the equity in their home using reverse mortgages etc. In principle, that is good if one is actuarially successful at estimating life expectancy. Since that generally is not the case, the full value of a residence may diminish government pensions to sub poverty levels. Excluding the value of the residence entirely is, frankly, a racket to pass on wealth to children (who probably can't afford to buy a new home until you die). So a significant value threshold seems a good compromise. Possibly, $500,000, indexed to house prices?

Reader comment
September 15, 2021

A threshold is difficult but maybe something like 50% above the median value in a suburb. However, I think that pensions should be paid to all retirees without a means test and all income should be subject to taxation. Maybe the tax would be at a lower rate. It would be interesting to know if the total cost of running the Centrelink compliance system for eligibility actually costs more than allowing pensions to all with taxation on all.

September 15, 2021

A better idea is to treat all pension payments like a HECS loan, but repayable on death. This could even be expanded to include ALL welfare payments incl, family tax benefit, disability pensions, unemployment, etc as many government payments are not subject to assets tests. A much fairer system, does not discriminate in the way you accumulate assets and you are then not able to 'work' the system.

September 17, 2021

Reader Comment,
For me, this wins the "Comment of the Year" re cost of running Centrelink/compliance. I get a British pension and only once in 14 years have I received a letter from their Pensions Dept and that was to inform that a pension was about to be paid monthly and where would I like it deposited.

Reader comment
September 15, 2021

House prices vary greatly across Australia. Some pensioners may not be able to sustain their income as they get older yet have a house worth relatively little to fall back on (eg. in the inland regions). Therefore we must have a threshold. There are certainly cases of people living in valuable houses in Sydney yet getting full pension. In one particular case, on the couple's death the harbourside house was sold for $5+m and the beneficiaries of their estate received the money. A threshold would force them to downsize and access the CGT free value of their house rather than the taxpayer for their living expenses. Such behaviour is clearly bad for the economy. People invest into their principal place of residence (which is essentially dead money for the economy) rather than save and invest. It also takes a given house off the market for an extended period, pushes house prices up and acts against first home buyers getting into the market.

September 18, 2021

What nonesense. People should not be forced to down size. That may mean having to move out of the area they know and love and moving away from friends and family. PPR should remain CGT free, allowing those that want to, to down size. However, death duties should be brought in to stop the kids getting the benefits of their parents valuable homes.

Reader comment
September 15, 2021

The increased home valuations over the years only barely compensate for the forgone earning opportunities of money spent in interest payments on the mortgage. Leave my bloody home out of this. If you want to rent and blow your money on lifestyle be my guest, I sought an alternative choice for peace of mind in my retirement years.

September 15, 2021

"It was government and central bank policy which created the housing boom and owners have benefited big time. Giving a little back in the form of tighter age pension eligibility is sharing these gains as at some stage in the future, debt will need repaying. Should future generations not only face expensive homes but also the burden of paying off our debts?" - couldn't agree more!

I like the idea of an universal pension which would allow those in need some dignity and reward those who have worked hard to achieve an independent retirement.

With the current system, I believe there should be a ceiling above which the age pension should be gradually reduced. Setting the ceiling is going to be complicated because house prices vary through out the country. I would suggest something like a multiple of median house price in a particular capital city say 30 years ago. For example, for Sydney, the ceiling would be approx. $2.5m, being 30 times of the price in 1981 ($78900). For Brisbane the ceiling would be approx. $1.5m.

September 16, 2021

"there should be a ceiling above which the age pension should be gradually reduced. Setting the ceiling is going to be complicated because house prices vary through out the country.":

Home values are proportional to expected income allocatable to home ownership divided by expected real mortgage interest rates.

The 'problem' of Age Pensioners living in high value homes is a 'problem' caused by 'lowest in history' real mortgage interest rates.

Fix interest rates, fix Age Pensioner 'problem'.

Treat cause, fix problem. Treat symptom, cause problem.

Reader comment
September 15, 2021

Rather than point at this supposed solution, ideal outcomes need to be developed, across the spectrum of society, and worked backwards to policies to support those outcomes

Survey comment
September 15, 2021

This would exclude us from even a part pension but we would accept it - welfare should go to those in financial need of assistance and not the asset rich.

Survey comment
September 15, 2021

I would suggest the threshold be aligned to the market price in the area vs. Sydney and Melbourne prices and that one’s residential home and beach house (which is never rented) be included as one for pension purposes.

Survey comment
September 15, 2021

Fairness - should those homeowners who have arranged their finances (capital gains , family trusts and super benefits etc) as a wealth transfer be eligible on the same basis as others?

Survey comment
September 15, 2021

I believe income from all sources including super, divs. etc should be part of an income test and then look towards pension benefits

Survey comment
September 15, 2021

I am okay with forcing people to take money from the value of the home asset but I am not sure we can work out all the safeguards needed to cover a range of circumstances at sale time

Survey comment
September 15, 2021

Means testing is an excellent idea rather than universal access (as argued by many). One has to control for encouraging poor behaviour e.g. spending large sums to come under a threshold.

Survey comment
September 15, 2021

If we are talking about housing affordability, we also need to wean ourselves (slowly) from negative gearing - or make sure the tax treatment is the same across all asset classes eg shares, business etc

September 15, 2021

check your facts!

If you borrow for shares, and the interest on those borrowings exceed the dividends, then you can offset the loss against my other income - exactly the same as you can if you borrow for buying a house and the interest exceeds the rent

Survey comment
September 15, 2021

It's time to overhaul the whole tax system. With an ageing population and huge govt debt, we just can't continue as we are now. We need a govt with balls to make significant changes to the tax and the welfare system. Sadly, that seems highly unlikely.

September 15, 2021

People are under the impression that Australia has a HUGE public debt. But check out the facts. Australia's public debt is 47.1% of GDP (source:

but to see if this is HUGE, we need to do some comparisons - consider some extremely STRONG economies and their public debt to GDP ratio:
Germany - 64.1%
USA - 82.3%
UK - 87.0%
Japan - 223.8%

But if you want to move to a country that has a low public debt to GDP, consider moving to:
Libya - who has a ratio of 5.1% or
Afghanistan - with 8.3% or maybe
DR of Congo - 14.6%

But for me I think I will stick where I am even with our HUGE government debt!!!

Perhaps we would be much better off if we all looked at the facts rather than believing what we hear

Survey comment
September 15, 2021

A universal aged pension would be best and it would remove a layer of bureaucracy. After becoming universal, over time the age for the pension could be reduced (at say a rate of 1 year every year) until it eventually became a UBI for all adults. Obviously as part of wider tax reform. Unfortunately this is most unlikely to happen though, so for now should restrict the pension to people who have no (or at least few) remaining assets.

Survey comment
September 15, 2021

Within a decade or so, compulsory super balances for new retirees will likely ensure very few get the full aged pension. Compulsory annuities will stop retirees disposing of super to get the aged pension. Problem solved.

September 18, 2021

Terrible idea. You should not force people to have compulsory annuities. What if I have a huge super fund and only have 5 years left to live. I should be able to spend MY MONEY how I want to and not have it dictated to me by the government.

September 15, 2021

Hmmm ... if I can be bold enough to summarise the 'early doors' responses: most folk seem to think it is a reasonable idea to include a principal residence / family home in the Age pension asset test above a certain $ threshold, but then reckon neither side of politics would be brave enough to include this vote loser in their policy.

So ... how about both major parties getting together and introducing this 'threshold' as 'joint policy / uncontested policy' given either one of them benefits from Age pension qualification tightening down the track ? It might also then drive some of the 'beneficial' behaviours referenced by Graeme and might also address Jason's inheritance tax comment ?

BTW Jason - in my humble opinion GST is inheritance tax by stealth... it's gonna get yer sooner (i.e. post Sept 1985 asset sale) or later (an eventual sale of any pre 1985 asset by those who inherited it one generation on) !

Snow Flake
September 15, 2021

I am 15 years pre-pension and own a large house. I agree with the points in this article and believe that the debate must be started now. I realise that such a change in welfare policy would have massive far reaching impacts on many different aspects of our society. If the family home was included in a revised asset test, what would change for pensioners living in high value houses? They either sell and move to a lower value house or retirement living option or they stay and access a PLS or reverse mortgage in lieu of the pension. They would not be "forced out" of their home. The "losers" would be those family members waiting in the wings for their inheritance.
There should also be more provision for adding lump sums to a Superannuation account after retiring, perhaps if the account balance is low or not able to provide a decent retirement income.

Russell (a veteran adviser)
September 15, 2021

I'm sorry, but until there is reasonable consensus as to what are better outcomes across different spectra of society, the tail is wagging the dog in these discussions.

September 23, 2021

Yes I agree

Lewis Waters
September 15, 2021

It's absolutely ridiculous for value of a home to be excluded from assets test and is extremely unfair to younger taxpayers who cannot afford to buy a home

September 17, 2021

How is it unfair? You've been working hard all your life, you've been paying taxes, you bought a house and paid off the mortgage.
You earned to enjoy your home and retirement. It's not fair to once again tax you or to limit your entitlements and to deny you your pension and benefits.

At the same time if someone was spending all their money on travel, restaurants, cars and didn't build any assets or some lazy person didn't bother to work or was wasting money on grog and gambling, they will be entitled to get full pension and all associated benefits.
How is it fair?

September 19, 2021

You are spot on, BM. At present, it seems younger generations who until recently lived it up (smashed avo's., sports cars, frequent overseas holidays, etc, but still living rent free with their parents), have now taken to "baby boomer bashing", whereas perhaps they should have instead emulated their parents' hard work ethics and lifestyle deprivations.

November 30, 2023

well said BM

September 15, 2021

A highly contentious issue which I think only the Greens might consider but it will never make it.

Michael Moran
September 15, 2021

Finland pay everyone over 18 a pension..saves a fortune in compliance policing of the numerous schemes most Western countries run. It makes the arguments in this article irrelevant

September 15, 2021

Graham you are spot on. Unfortunately it’s political suicide for whichever party is brave enough to introduce this reform. We can’t attack the ‘battler’. I’d also add the issue highlighted in previous articles where as a nation we may struggle to support the pension as we see more retirees and less workers as a ratio. I look forward to reading the comments on this article as I’m sure it will generate a lot of debate.

September 15, 2021

Contentious subject! Define fair! This should get interesting! I’ll make the popcorn!

Plenty of inequities everywhere, this is in my view is a minor one. By the way you lost me when you cited the very left leaning Grattan Institute!
Governments waste money hand over fist with very little accountability. Too many layers of government, with too many overpaid bureaucrats and politicians without sufficient ROI!
I unfortunately know and know of people that have pretty much spend their whole lives on welfare, not because they had to but because they couldn’t be bothered working hard.

How is it that in NZ everyone gets the pension regardless yet we can’t here?

September 15, 2021

there should also be a universal taxed pension based upon age! When the property is sold it is taxed! no exemptions.

September 15, 2021

Agree with you James.
There should be a universal aged pension.
I also think that the home should be assessed as an asset if it is valued at $2M or above, and that income over $100,000 should be taxed.
ps:- and I will add to the welfare comment. How many of these people could afford to smoke, drink, gamble, have Austar etc, and drive the new holden or 4WD.

September 15, 2021

The theory is brilliant Graham but "the dog won't hunt"!

In Australia, there are two things that are tax free:

1] Super in Pension mode which has already been capped in 2017 by Morrison and O'dwyer
2] The Family home

Forcing Aussies to "eat their home" or "disinherit their kids" would be political suicide on either side of the House, so it ain't going to happen, no matter how much you wax lyrical about the need and the theory!

September 15, 2021

It makes absolute sense, but I agree no Govt would be brave enough, imagine the outcry!

Greg Hollands
September 15, 2021

Interesting article Graham but I don’t think you are going to get too many “likes” from the demographic that you are aiming for. It does however create an impression that you are advocating ( certainly indirectly) that older people need to relocate downwards to more appropriate residential accommodations ( ie cheaper). I would have thought that such a decision ought to be driven by other factors- not just an economists view of the world. I am also thinking that you cast aside some of the historical issues by saying that these people have had it so good that they should simply step aside. Quite frankly, as a person who worked full time and studied part time to obtain my two degrees- for which I paid full freight- 8 years in all. Then saved up a deposit 30+ % - for a bare bones house - and then took several years to furnish it to our requirements- would look too kindly to your proposals. BTW - we don’t enjoy any age pension benefits at all - being a self funded semi retiree. Interesting thoughts but a bit shy of the mark from my viewpoint.

R Bull
September 15, 2021

I recently sold my home because I no longer need a place to live or maintain. However now I get taxed on all the income from my home savings. So I am buying a new place to live in. It is just simple a financial decision. Get a free pension, or be forced to do a tax return, pay tax and also lose the pension.

September 15, 2021

That is the problem. I know old people who rattle around in huge family homes (that should be sold or rented to a family) because they know it is the most welfare and tax effective decision. The kids may even chip in $20K a year to their parents because they know that the house value is inflating at least $60K a year tax free.

The easy solution is to reinstate an inheritance tax to stop these perverse incentives. It may even get these rich pensioners incentive to spend their kids inheritance before they die and help employ more of our hapless youth.

September 15, 2021

Jason, there is more to life than finances. We spent 2 years designing and building our new family home, followed by 15 years of hard work landscaping and building our gardens and outdoor entertainment areas from scratch on an empty paddock. So it makes sense that many people get very emotionally attached to their homes. We will not be selling it when our kids move out just to help the housing affordability crisis.
Nor will I be getting the Aged Pension when I retire.
Far fairer solutions to hosuing affordability include scrapping negative gearing and CGT discounts which have created a massive culture in Australia of using housing, often multiple properties, as investments. In the USA, arguably the largest bastion of Capitalism, home owners are allowed to claim tax deduction on home mortgage interest payments, but not in Australia where the tax system is designed only to support investors. It is a national disgrace. Of course our politicians have their snouts firmly in the trough also so I doubt anything much will change.

September 16, 2021

"now I get taxed on all the income from my home savings. So I am buying a new place to live in.":

An Age Pension Asset Test 'victim'.

"the house value is inflating at least $60K a year tax free"

Due to 'lowest in history' nominal interest rates. Not home stake-holders doing.

"tax deduction on home mortgage interest payments":

Making interest rates cheaper through increased interest rate subsidies would increase home values faster causing Age Pensioners to allocate more capital to their homes to capture more home value appreciation. (Age Pensioners in high value homes being said to be a 'problem'.)


Leave a Comment:



Survey responses on pension eligibility for wealthy homeowners

Should I maximise my pension by investing in the family home?

Is it better to rent or own a home under the age pension?


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