Asset testing the family home... I don't get it!

[witches*wol]

Ok so some bright spark has suggested the Gov look at asset testing the family home.

So let's pretend that the fist $500K is exempt and anything over that is considered an asset.

So now pretend that my home is valued at $700K which is $200K over the exempt amount.

Now what the hell am I supossed to do about that $200K?  I can't just sell off $200K of my house can I?  (I can see the realestate ad now "For Sale 1 Back Yard and Garage along with half the letterbox $200K ")

What would happen, would the Gov perhaps halve my pension?   People struggle to live on the full pension now, there is no way they could live on half a pension.

Would people be expected to sell their home and then of course they'd have to live off the proceeds of the sale of their house.

Would they then be expected to rent (The house nextdoor to me is a tiny old house and it rents for $450 a week - wont take long to eat away at the money from the sale of the house with a rent of $23,400 per year.)  Or would people be expected to move to the country in order to buy another home under whatever the thresehold is?  (I'm in Vic and there is nothing around us that is less than $500K and I am a good 27kms from the city)

Like I said in the subject line "I don't get it!"   Am I being synical in thinking the Gov do expect the elderly to sell up the family home and rent or move bush or am I missing something?

[cherry*135]

Was this about assessing a persons main residence for capital gains tax when it was sold (currently that only applies to a person who has more than one property, as an investment)? That was mentioned a few months ago?

For people on pensions there are assets (including home) and income tests already.

[pct001wine]

Who's the bright spark you speak of ?  Was it just a thought-bubble by some psuedo-social engineer ?  Do we need to take it seriously ?

Mind you, with housing prices the way they are in Adelaide, wouldn't be a great issue lol

[cherry*135]

Ok this looks more like what you mean, witches

PC - Productivity Commission

Nov 2013

Retirees tend not to use the wealth in their family home,” the PC wrote, suggesting a government equity-release scheme. ”Policy measures that overcome the barriers that individuals and households face in accessing the equity in the home may play a future role in freeing up resources for greater contributions to age-related expenses.” The PC estimated if the government could access half the increase in home values, age-care funding needs would fall 30%.

At the moment the family home is excluded from the asset test used to calculate eligibility for the aged pension, and the Grattan Institute recommended removing this exclusion. People who failed the asset test due to the value of their dwelling would be allowed to receive the aged pension, but they would accumulate a debt to the government, to be paid when the home was transferred or sold — in effect, the government would provide a no-interest reverse mortgage. Grattan reckoned this would save $7 billion a year.

[fourandsixpants]

Re: Asset testing the family home... I don't get it!

in reply to pct001wine

3 minutes ago

Ok this looks more like what you mean, witches

PC - Productivity Commission

Nov 2013

Retirees tend not to use the wealth in their family home,” the PC wrote, suggesting a government equity-release scheme. ”Policy measures that overcome the barriers that individuals and households face in accessing the equity in the home may play a future role in freeing up resources for greater contributions to age-related expenses.” The PC estimated if the government could access half the increase in home values, age-care funding needs would fall 30%.

At the moment the family home is excluded from the asset test used to calculate eligibility for the aged pension, and the Grattan Institute recommended removing this exclusion. People who failed the asset test due to the value of their dwelling would be allowed to receive the aged pension, but they would accumulate a debt to the government, to be paid when the home was transferred or sold — in effect, the government would provide a no-interest reverse mortgage. Grattan reckoned this would save $7 billion a year.

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so.....this would mean that on death=probate+ PLUS EXTRA?!....for the govt.

[fourandsixpants]

Ok this looks more like what you mean, witches

PC - Productivity Commission

Nov 2013

Retirees tend not to use the wealth in their family home,” the PC wrote, suggesting a government equity-release scheme. ”Policy measures that overcome the barriers that individuals and households face in accessing the equity in the home may play a future role in freeing up resources for greater contributions to age-related expenses.” The PC estimated if the government could access half the increase in home values, age-care funding needs would fall 30%.

At the moment the family home is excluded from the asset test used to calculate eligibility for the aged pension, and the Grattan Institute recommended removing this exclusion. People who failed the asset test due to the value of their dwelling would be allowed to receive the aged pension, but they would accumulate a debt to the government, to be paid when the home was transferred or sold — in effect, the government would provide a no-interest reverse mortgage. Grattan reckoned this would save $7 billion a year.

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so.....this would mean that on death=probate+ PLUS EXTRA?!....for the govt.

[witches*wol]

http://aca.ninemsn.com.au/article/8808604/home-owning-seniors-could-lose-pension

It was on ACA in Melb last night and Neil Mitchell had been talking about it on 3AW yesterday.

Currently you can be living in a family home with 50 million dollars and still get the pension (providing you other assets came in under the limit whatever it may be for singles and couples)  But the Gov have been advised to look at including the family home in the assets test.  In which case many people would lose the pension because they have homes that are worth a lot of money.

[catsnknots]

Yep... I talked about this not that long  ago and had my head bitten off.... 

If you live in a multi million dollar home and get the pension should your kids then be able to sell that home off without paying anything back to the government? 

We have someone suggesting that we should have a free stress test to everyone over a certain age but how can we afford to keep paying for those sort of ideas without some give in other areas. 

I think this idea of letting the person stay in the home but then require the home to be sold and the debt to be paid back is a good idea. 

[witches*wol]

 paintsew007 ~ People who failed the asset test due to the value of their dwelling would be allowed to receive the aged pension, but they would accumulate a debt to the government, to be paid when the home was transferred or sold — in effect, the government would provide a no-interest reverse mortgage. Grattan reckoned this would save $7 billion a year.

But what about if the person needed to go into aged care where they usually have to sell the family home to come up with the bond? Would they have to sell the home, pay the Govt back for the pension they got and then discover they didn't have enough money to go into aged care?  Then what happens to them?

[catsnknots]

I would not imagine that the debt incurred during this time of ones life would have a great impact on a multi million dollar home. The pension is not that much money so if you need to calculate the percentage over on the value of a home it would probably still allow you to pay for the home care. 

Don't many need a bond or somehting?? maybe that could then go to pay the debt? 

[cherry*135]

A $50m home is not a very good (realistic) example.

If a retired couple live in a $2m home, and are cash poor, then is it so bad that they might have to sell it and buy a $1m home? Then they would not be cash poor.