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?

[lakeland27]

this is another thought bubble going nowhere as it's political suicide. i doubt that even a government as daft as the current one would actually adopt it.

[cherry*135]

ACA - There's talk of the government slashing payments for pensioners who own their own homes but not everyone if thrilled with the plan.

Not a lot of detail there to be able to comment on. Of course ACA is going to pick up something like this (that may never be brought in) as they know it will stir up people and create fear and panic.

[fourandsixpants]

Ramifications for the younger generation is a shocker in many respects.

What incentive would there be for the young to work hard, buy a home, pay the banks THEN look forward to sharing any asset growth with the future govt?!

[fourandsixpants]

replying to catmad : who said..."..The pension is not that much money...."

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 ...and I would like to add: is it unfair to credit people who are entitled WITH a pension due to all their hard work and taxes paid during their work life?

....and you are then suggesting that it would be fair for govt to double dip (probate+this suggested 'hit' fee on transfer/death) on those pensioners who had chosen to pay off their own home rather than spend their money else where during their working life?

.....may as well spend, spend, spend now!!

[monman12]

I  have no answer WW, but would refer you to this discussion paper Treasury paper.

Australia is well known for its retirees being asset rich but income poor. OK,  so how about having a inheritance tax. This could allow an overall increase in the Aged Pension rates from the State  based upon what the State would receive overall from estates, a form of reverse mortgage.

Currently in the UK the threshold to be taxed (inheritance) is around $500K, (at 40%) and civil partners/spouses are exempt. If you wish you can "gift" your assets,  but 7 years must pass before they are tax exempt.

Very rough example. You have $1 million in assets  which could equate to $200K in IHT.  Life expectancy M/F 80/85 say 25 years , on aged pension  that could be about $10k a year more going into a pension.

The best way to consider the scheme would be that of a pool of accumulated money from buckets of estate taxes constantly being tipped in, out of which  there will be a steady outflow  adding to pensioners weekly pension.

Rough I know, but a seed perhaps?

nɥºɾ

[witches*wol]

We are not near retirement age yet but it really tells us we need to ensure we are fully self funded retirees when we do plan to retire unless we plan on sharing our hard earnt assets with the govt.

[grandmoon]

Kevin Andrews said that the Government are not going to review the Age Pension.

[lakeland27]

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@grandmoon wrote:

Kevin Andrews said that the Government are not going to review the Age Pension.

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 too many coalition voters there .

[freshwater-2]

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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Indian givers.

[catsnknots]

You do know that the term Indian Givers is incredibly offensive don't you?