Nailing Granny to the floor

'Nailing granny to the floor': call to unlock $1 trillion in housing wealth

White paper by Actuaries institute to assist elderly convert their assets to income.
http://actuaries.asn.au/Library/Miscellaneous/2016/AIHOUSINGGPwebLres.pdf

The impact these changes can have on the property market is significant and as stated in the paper ibid " Compared with almost $1 trillion of unencumbered retiree housing wealth at end 2014 the size of reverse mortgage debt was $3.7bn, there is clearly potential for housing wealth to play a greater role in retirement funding"

Elderly home ownership is a vexatious issue with two convincing counter arguments:

• Should tax payer pay (increasingly unsustainable) pension to retirees with million dollar plus residences.
• PPOR is a necessity earned by elderly over their lifetimes and not a speculative instrument. Hence it should be excluded from the assets test.

The government has started tightening the assets test for pension with increased taper rates (from $1.5 to $3 per $1000 above threshold) from 2017.

Social Security Assets Test – rebalance assets test thresholds and taper rate - Budget 2015-16 - Australian Government Department of Human Services

One more gloom and doom factor for property in 2017. Budget would be interesting with regard to consideration of PPoR in assets test.
Edit: Erroneously stated as Green Paper in the OP.

 

If any gummint knew what was good for them they would not touch the PPOR of pensioners or risk a rebellion.

 

Just seems like a different take on whether PPOR should be included in assets test which has been debated on these forums before. Was pretty obvious that it should be.

 

It's a discussion that needs to be had, but won't because it is too unpalatable.

No, taxpayers shouldn't have to pay increasingly unsustainable amounts to millionaire retirees. Nor should the PPOR be excluded from any form of asset testing.

 

There is zero reason to work hard and build wealth.

Spend everything, get on the pension and laugh while the rich get screwed

/sarcasm

 

Some retirees would downsize if it wasn't so expensive. Options are a stamp duty exemption for retirees who are downsizing or abolishing stamp duty and replacing it with a comprehensive land tax. If necessary, there could be pensioner discounts like there is with rates and other government services.

I'm sure such a move would enourage some pensioners out of their "million dollar homes" and into something more manageable.

Scrap stamp duty? Yes, then tax the family home

 

Actually that have been/are the issues:

• Wealth creation (through PPoR) has been a result of policy outcomes (population growth, mining wealth, perverse incentives to property assets, doubling of household incomes etc). Owners of PPoRs with inflated equity:
  • Did not actively seek to increase the value of their house.
  • Are ill-equipped to deal with this bonanza hence have low incomes in spite of high equity.
  • Do not want to be penalized for what they consider a basic necessity and a retrospect change of goal post.
• If indeed wealthy, why expect tax payer to pay pension ? The wealth is illliquid, and the current policies (stamp duty, assets test, state-federal responsibilities, inheritance, CGT exemption etc) penalize assess to this wealth

Does anyone on a pension really have it so easy ?

 

That's true. On the one hand we criticise the wealthy poor (asset rich, income poor) for sitting on a million dollar home but on the other hand they are penalised if they access the wealth locked up in a PPoR. To resolve this conflict, policies would have to be changed.

 

I'd like to see a ppor included in the test but have the bar high, $2mill plus. Then let bracket creep and government fiddling bring it down over the next decade when it will really matter. The funny thing is that the oldies would often live a better life liquidating the ppor and living off the proceeds anyway.

My mother in law is so "Rent money is dead money", doesn't seem as important to younger generations IMHO

 

No difference to us, we don't get a cent from the Govt anyway.
Marg

 

Me either Marg ... would far prefer to be in my situation that relying on a pension !!!!

 

Good on you both

 

all this talk of cutting pensions and our economy is supposed to be doing well? LOL Political suicide doing any of these "reforms" , govment just gonna pile on the debt. Happy days...

But do think that all assets and income should be included in assessment for eligibility for welfare.