New research which shows that nearly 255,000 pensioners across Australia live in homes worth more than $1 million has sparked a new debate about whether pension rules should be changed for wealthy homeowners.
On November 4, The Australian newspaper published research by the Australian National University which linked pension payments to home value.
The research found that 226,540 pensioners across Australia live in homes valued between $1-2 million, with a further 29,903 living in homes worth more than $2 million. The vast majority of high-value homeowner pensioners live in Sydney in Melbourne.
The newspaper reported that retirees living in $1m plus homes are collecting $6.3 billion in age pension payments.
The newspaper stated that, if these people were no longer able to access the pension, then the reduction in government expenditure would allow tax rates to be cut.
For instance, it said that the existing 34.5 per cent tax rate - paid by 6.2 million taxpayers - could be reduced to 32 per cent and by doing so stimulate economic activity.
In the story, Ian Yates - chief executive of the older Australian advocacy organisation Council of the Ageing - was quoted as saying: “Should we really be paying the pension to people in homes worth more than $2m?”.
The story appeared to suggest that wealthy homeowners should be required to downsize or enter into a reverse mortgage scheme to fund their retirement, rather than being able to claim the pension.
Separately, The Australian’s economics editor Adam Creighton has recently claimed that some Australians were deliberately taking their money out of savings and buying a more expensive home to be able to claim the pension.
The focus on this issue by The Australian newspaper is interesting, given that the publication is considered to be closely aligned to the current Coalition Government. This means that the promotion of this new research could be influential in government circles.
Research continues commentary on pension home exemption
In August, left-wing leaning think tank the Grattan Institute argued that removing the exemption should be a plank of the government’s upcoming retirement incomes review.
In mid-July, prominent economist Chris Richardson, a partner of Deloitte Access Economics, also said including the family home in the assets test was the “right thing to do”. “You have some people who have incredibly valuable homes and yet qualify for the pension,” Mr Richardson said.
Separately, on 23 July, Sydney-based Federal Liberal MP Craig Kelly blundered into the debate, by making some comments that were interpreted as meaning that he thought the family home should be included in the pension assets test, to encourage people to downsize.
In return, Treasurer Josh Frydenberg denied any change to include the family home in the assets test was being considered. "It’s not our policy and it never will be,” he said.