With an election looming, the Property Council of Australia (PCA) is stepping up its lobbying of the federal government to make changes to the age pension means test, to remove the current disincentive for older people to downsize from the family home.
In an announcement last week, the PCA pounced on new data from the Australian Bureau of Statistics (ABS) highlighting that nearly one-third of older Australians in low income households are ‘asset rich but income poor’, to call for some of the proceeds from the sale of the family home to be made exempt from the means test for full-rate age pensioners aged over 75.
As set out in its Re:think Tax Reform Discussion Paper, Unlocking home equity for senior Australians to free up extra retirement income last July, the PCA is proposing a highly targeted adjustment to the age pension means test, by increasing the asset free threshold by ‘somewhere between $100,000 and $200,000’ for age pensioners aged 75 or over who are home owners and purchase a cheaper home within 12 months.
The time frame aligns with the 12 month period that Centrelink currently allows for sale proceeds from a family home not to be assessed.
Asset rich, cash poor
The Property Council’s Executive Director – Retirement, Mary Wood says, “appropriate and affordable housing is a vital factor in maintaining the physical and mental well being of senior Australians.”
However, under its current structure, she says the age pension asset test is “a strong disincentive for seniors to downsize their home.”
Ms Wood says a typical older Australian will have $600,000 in property assets but will be living day-to day on a fixed income.
“Appropriate and affordable housing is a vital factor in maintaining the physical and mental well being of senior Australians.”
While many want to move to more age appropriate accommodation – such as a smaller house, apartment or a retirement village unit – without steps, or big backyards to maintain, and with lower rates and utility costs, she says they “will be hit with a reduction in their income, despite owning exactly the same amount of assets, if they make the move.”
“All too often,” says Ms Wood, “a pensioner considers downsizing only to reject it because it would mean a hit on their pension.”
Labor Party supports reform
Ms Wood says she is encouraged by the Labor Party’s recently released social policy report, Growing Together which recommends, among other initiatives, that future Labor governments “consider ways of incentivising older Australians to downsize their home without it significantly affecting their pension outcomes.”
However the PCA has foreshadowed that it would like to see further developments from all sides of politics in the coming months.
“We have held positive meetings with the Coalition to discuss our policy, and we look forward to further developments from both major parties ahead of the looming federal election,” Ms Wood said.
Supporting real choices
Ms Wood says there is currently no real framework for supporting older Australians to make appropriate housing choices.
“Our policy would help these Australians unlock equity in their home without being financially penalised through a reduction in their fortnightly pension.
“This is about helping pensioners to ‘rightsize’ their homes at very little cost to the government, removing pressure on the already-stretched aged care system, and supporting people who want to stay in their own homes for as long as possible.”
The coming months promise to be interesting indeed.
