The Age Pension assets test does not currently consider someone’s family home or principal place of residence when evaluating whether someone is eligible for the pension. But the Australian Chamber of Commerce and Industry (ACCI) has urged the Federal Government to consider changing the assets test.
The ACCI, a business lobby group, has recommended that “in situations where a primary residence was valued above a debt-free $450,000, workers retiring at the age of 65 should not be eligible for a full or part pension for the first five years”.
Family home should be in pension assets test says ACCI boss James Pearson @amworldtodaypm @abcnews24 https://t.co/W3XBtqQqLf
— Peter Ryan (@Peter_F_Ryan) February 3, 2017
Workers retiring at 65 years old would instead be allowed to take out an interest-free ‘pension loan’ against the value of their assets. The loan would be repaid in the event of the property being sold, or the borrower entering aged care or passing away, making it essentially a type of reverse mortgage.
The recommendation was one of several contained in the ACCI’s pre-budget submission, aimed at convincing the Federal Government to implement spending cuts that would cause “short-term pain” but result in long-term budget sustainability.
Our savings recommendations are designed to ensure that vital government programs are sustainable. #FutureproofAustralia pic.twitter.com/Vl3dnwJ3Wd
— Australian Chamber (@AusChamber) February 2, 2017
However, the government has indicated that changes to the Age Pension asset test are off the table, with Revenue and Financial Services Minister Kelly O’Dwyer saying such changes “would be very much against the principles of the Coalition government”.
“Never before have we included the family home [in the assets test] and I don’t see why that would change,” said the Minister.
The recommendation comes at a difficult time, with many displeased at the recent changes to tax benefits on superannuation, and recent cuts to the Age Pension.
But the ACCI is adamant that change is necessary, saying that 4 out of 5 retirees rely on a full- or part-pension, but that a similar proportion over 65 years owned a home, with the sum value of said homes at roughly $1 trillion.
They also recommended regular reviews of the retirement age, with an aim to eventually lift it to 70 years old by 2035.
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