What Life is Really Like on the Pension

@sanj I am actually not being defensive, just trying to clarify a misconception you seem to have that they will be "earning" $50k tax free and expecting a part pension.

The figure I quoted is gross, which you know means before investment property expenses. After expenses they will be lucky to clear $39k. I don't have a problem with a couple earning $39k being eligible for a part pension even if it only a very small amount. The most important aspect the this is accessing pensioner discounts such as for rates which will, of course make it more affordable to live on a low income.

At what income level do you think a couple with a PPoR should no longer be eligible for a part pension? And by income I mean after investment expenses.

Out of interest, the government says they can earn over $76k and still be eligible for the part pension, which I agree is far too high. However, I do not agree that less than $40k is too much.

 

As I posted above, the $50k figure is before IP expenses such as rates, insurance, property management fees etc. So they aren't trying to live on $50k. In a good year they will be lucky to get 75% of $50k if there are no vacancies, no tenant defaults, no repairs and no maintenance. Do you really want to roll that dice?

 

My issue isn't the income level, it's the asset base.

IMO it sounds like they would have around d $1m in net assets outside PPOR, IMO regardless of income that should render them disqualified from any pension payments

 

Yes it is. It always has been.

BUT for those people, and those people only, who lose their part pension in the January1 asset changes and therefore lose their pension card, they will automatically be given a lifetime Seniors Health Card irregardless of income changes in the future. Win lotto, inherit etc, keep the card.

Anyone else has to apply and are subject to income cut offs to remain eligible.
Marg

 

If their their nett income is max $12.5K (75% of $50K in a good year) then it would probably be better to liquidate their IP(s) and invest the proceeds. $12K a year nett hardly seems worth the hassle and a very poor return. One major repair would wipe out their income for the year.
Marg

 

You might want to redo your math.... ie. Use the reciprocal as you've used 25%

 

I personally have no issues with tightening up the means tests.

Given that in most of Australia a regular family home is well under $1m and more like $600k, I would like to see all pensions asset tested to include the value of the family home above some reasonable amount, say $700K. My parents and their friends were having this debate 30-40 years ago about pensioners living alone in highly desirable heritage homes in the inner ring suburbs and how these people wouldn't sell their family home because then they would lose their pensions or the kids would miss out on some of the inheritance.

I'm over reading about the "poor" pensioners in Sydney and Melbourne's classiest suburbs who might, if this proposal is implemented, have to move out of their family home. Sorry, my dog died earlier this week and my tongue is sore from holding it back and biting it. My life is not as rosy as those whos only difference to mine is the city they were lucky enough to live in 40 or 50 years ago.
There are several million Australians who are poorer than I am and they dont get to own million $ plus homes either. Move on Australia. The times have changed and they have had at least 30 years to get used to the idea that the country cant keep funding asset-rich pensioners indefinitely. The people I am referring to are retired, they dont have to live in the inner suburbs of Sydney and Melbourne to be close to their jobs.

And before anyone pipes up about being forced to move away from their children, I have a list of reasons why that emotive excuse wont cut it.

 

Agree. And so sorry about your dog.

It can be sad for the old people to move out of their homes, so they could reverse mortgage it. So much money tied up in realestate and often it's the old folk who own the homes in the best, most well located suburbs. They get the pension and then hand the home onto their kids when they die. But I reckon the pension money should be clawed back from the sale of the home!

My grandmother lives in a freestanding home in a beachside suburb of Sydney, only 10km from the city centre. (That's close by Sydney's standards). Suppose if the government clawed back even half that money, everybody would still be fine....

 

I would be happy if they did. After reinvesting in Adelaide it be be under $700,000. I would not guess that they may be eligible for a part pension if they had a million dollars in assets. I am fairly sure they will be well under the asset cap.

 

You've hit the nail on the head. Time for me to upgrade my ppor to the penthouse in the Toaster using all of my super and other assets (keep a little aside under the asset test). Claim the pension.

I'd only have the exempt ppor, no super and only minor income (which would be tax free up to $18k) si I could qualify for the pension.

If I pass, the ppor is tax free unlike my super which would be taxed in the hands of my heirs.

I haven't given away any money so haven't affected my eligibility for the pension.

I'm from Sinny (median $1m) so don't care what the median price across the country is & why should I be penalised if I don't choose to live in Dalby, Sale, Tarcutta or Whyalla?

What about those who don't have a house? How could you recoup the pension from them? Or those who are beneficiaries of trusts?

@Marg4000 - if nett income was only $12k from those assets, dump the assets and buy bonds, IBD or shares for a certain or better return.

 

Badly worded. Should have said as the quoted expenses were 75% of the $50K, nett income is $12.5K.

Marg

 

Sounds as if they are well under both the asset and income caps so should get some pension.
Marg

 

75% of $50k will be their max income for a good year.

 

Wondering, in this situation, would my grandmother start gifting her house away (is that possible?)

 

I am guessing they will be. They will reapply and will be found to be eligible or not. I will be glad if they get a small amount.

 

@Gockie - If she's getting a pension ahebis subject to the gifting rules which are capped at around $10k/yr before it affects the pension.

 

@Scott, those who dont have a house aren't affected by a house being included or not in their assets.

@Gockie The gifting rules were introduced to restrict people from gifting away their assets in order to meet eligibility but still keep the "asset" in the family.

 

Ditto...it gets my goat also....agree the world of entitlement is gone...

 

You've got a goat?

 

Sure she can.

But for five years it will be treated by Centrelink as a deprived asset and she will get no pension as it seems the value would be quite high.
Marg