New South Wales Labor Senator, Sam Dastyari, has today slammed a proposal to include the family home in the pension assets test, claiming that it would result in “a new tax on Sydney”:
NSW Labor Senator Sam Dastyari has called for the government to rule out the proposal included in a submission from the Business Council of Australia to Tony Abbott’s Commission of Audit, claiming Sydney families would be hit the hardest because of higher property prices…
“It needs to rule out any means testing of the family home for the pension or any other benefit. We all know the family home in Sydney costs more than anywhere else in the country. We can’t risk a new tax on Sydney.”
The asset test proposal was submitted to the Commission of Audit by the Business Council of Australia. BCA president Tony Shepherd is also the head of the commission…
Mr Dastyari said he would demand Mr Shepherd rule out the proposal from his own organisation…
“The BCA makes a submission to this inquiry, being chaired by its own president, calling for the family home to be included in any means test to determine if someone is eligible for the pension.
As argued previously, a key concern with Australia’s retirement system is that the exclusion of the family home from the assets test for the aged pension, combined with the ability to withdraw one’s super as a lump-sum (instead of an annuity), has created an incentive for households to borrow to purchase an expensive home in the lead-up to retirement, retire at 60, withdraw their super tax-free as a lump sum, use the money to pay-off their mortgage or to fund consumption, and then go on the aged pension from 65 years of age.
In such instances, the taxpayer is left wearing the cost of superannuation concessions throughout the individual’s working life, and then again once that same individual goes on the aged pension.
Such a system also encourages an inefficient use of the housing stock by encouraging retirees to stay in their large family homes because the minute they sell it they will fail the assets test for the pension.
More broadly, it is is particularly unfair and absurd that the biggest asset most households retiree with – the family home – is excluded from their capacity to fund their retirement. It is then especially unfair to turn around and expect younger generations, who are already struggling under the weight of expensive housing and high mortgage debts (fostered onto them by their parents’ generation), to bare the full cost of their parents’ retirement.
That said, I agree that including the family home in the pension assets test could unfairly disadvantage Sydneysiders. For this reason, a fairer (compromise) approach could be to only tax the proportion of a retirees home valued above the city’s (or town’s) median value.
Regardless, with the proportion of aged set to escalate relative to the working-aged population, reforms of this nature will need to be undertaken sooner or later. Maintaining current arrangements is simply not sustainable.
