I see this idea as bit of a double edge sword. On positive it would help the government because there won't be as much pressure on the budget to pay for as many pensions. On the negative it will increase the divide between the rich and poor.
Society/Culture The housing issue
- Thread starter Pessimistic
- Start date
- Tagged users None
Not at all Frank. Indeed it will reduce it.
The biggest issue with regards to the wealth divide is it's intransient nature. I have no issues with "self-made" millionaires, even those that got there only after an exclusive education and networking adolescence paid for by mum and dad. I do dislike those that start life as millionaires, and live off the work of their ancestors.
By introducing the family home into centrelink assets testing it reduces the "inheritance" passed on by (some of) the wealthy.
I have suggested elsewhere a significantly increased land-tax (ten-fold or more) on all properties, which as it is based on property values will help to "smooth" the market, reducing the unsustainable pressures on inner-city living. A simple exception to allow the family home to accrue land-tax debt (paid upon sale/inheritance), whilst all other taxes are collected annually (eg rates, income tax, etc).
The biggest issue with regards to the wealth divide is it's intransient nature. I have no issues with "self-made" millionaires, even those that got there only after an exclusive education and networking adolescence paid for by mum and dad. I do dislike those that start life as millionaires, and live off the work of their ancestors.
By introducing the family home into centrelink assets testing it reduces the "inheritance" passed on by (some of) the wealthy.
I have suggested elsewhere a significantly increased land-tax (ten-fold or more) on all properties, which as it is based on property values will help to "smooth" the market, reducing the unsustainable pressures on inner-city living. A simple exception to allow the family home to accrue land-tax debt (paid upon sale/inheritance), whilst all other taxes are collected annually (eg rates, income tax, etc).
- Oct 30, 2010
- 5,547
- 4,365
- AFL Club
- Hawthorn
how does this make sense? you buy a home and live in it for a couple of decades, then decide to move. you sell and the government takes a nice big, 20-year 10x land tax bite out of it, which makes everything you want to buy comparatively more expensive.
i'll use hobart prices as example (via easily googled figures, i accept the lack of specificity may cause minor assumption errors).
you buy the median house in hobart for $300K.
land tax per year currently on non-primary residences @ $300K = $1,562.50;
x10 $15,625;
x20 years $312,000.
so, if the market doesn't move a whisker, when you move house you're actually $12K in the red at sale time (not including selling fees). so, that's another $300k loan for a new house, plus a $12K debt to the ATO. if the market has moved, then that $312K land tax bill is likely far north of that, however we'll keep the $312k figure for simplicity.
so, your house has appreciated to $600K. you want to buy a comparable place closer to the kids or the hospital or blundstone arena. those houses are now also around the $600k mark. unfortunately, you only have $288K after stalin's land tax. so in order to buy the same kind of property you were already living in, you need to borrow another $312k.
nobody is moving anywhere under these conditions; you buy a house, you're gonna die in that mofo.
If you are using the family home in order to pay for the pension it would be making the middle class become poorer while the wealthy aren't affected at all. When a lot of people bought their family home say 30 years ago the house wasn't worth a million dollars back then. Even though they live in a million dollar house it doesn't mean they are wealthy.
I will use an example of why it will increase the divide between the rich and the poor. Say Rob has a house worth $600,000 and Mick also has a House worth $600,000 plus 5 investment properties. They both have a child and retire at age 65.
The Government says to Rob that they will pay him the pension but it will be coming out of his house. I'm not sure how much the pension is but in this example I will assume that it will be 1400 p/m (nearly $17k a year). Rob lives until he's 90 which brings the Pension bill to $425,000. When his child gets the inheritance it would be $175,000.
Mick rightfully doesn't qualify for the pension, but he has 5 investment properties that brings in income. Like Rob, Mick lives until he's 90. Mick's child inherits the full value of the house ($600,000) and the 5 investment properties (For this example 6 x $600,000 in total).
The generational wealth shift will see Rob's child get much less of a share from his fathers estate, while Mick's child would get the whole of his fathers estate. In short the middle class people would see their children become poorer while the children of the wealthy are not affected at all.
Last edited:
- Thread starter
- #180
People who move a lot get hit more for stamp duty - each time they move. so we are encouraged to move less
youd think a measured CG on sale would be fairer. but if they did that, people could claim losses if the market went backwards
youd think a measured CG on sale would be fairer. but if they did that, people could claim losses if the market went backwards
Sorry Frank, crossed purposes there. I was speaking of two different (though admittedly linked) concepts.
I believe the family home should be included in assets test to determine if someone is eligible for the pension - but the pension is then provided at no future cost as it is now.
I believe the all property should be subject to a massively increased land tax - due annually for Investment properties - due on sale/death for PPoR.
Thanks for running the numbers LL HFC. I admit that wasn't the figure I was working towards, as the comparable stamp duty would only be 25-30k. With properties sold every 5 years or so, perhaps Land tax should only increase by 2-3 times the current rate, not 10x. At this level of discussion it was more the concept than the actual numbers.
The post I originally responded to ( from kickazz) suggested to pay for the pension by taking it out of the persons estate. I assumed you were referring to the same concept when responding to my post.
I'm still 50/50 on the concept on simply including the family home on the assets test. I see it will still have a similar effect to taking the pension out of a persons estate but at different degrees. It will still increase the divide between rich and poor, but not as much. It will also help alleviate the federal budget.
It effectively makes a person who lives in a million dollar house have to choose between moving to a cheaper house in the outer and get the pension or staying and not getting a pension. (The option is pretty much move or starve so it's not really a choice in the end). In the end the person probably bought the house when it was much cheaper several decades ago and they are not really that wealthy despite living in a million dollar house. It would also seem a bit cruel for them to uproot themselves from friends, community and services they have been living with most of their lives.
Also keep in mind that not all cities are equal when it comes to house prices. A house within 5k of Melbournes CBD will be much more expensive than the same house 5k of Adelaides CBD. It would mean the person in Adelaide could get the pension but the person in Melbourne won't.
If a person sells their million dollar house in the inner/middle suburb and moving to a $350,000 would free up funds to support them. I will assume that there would be about $75,000 in costs of moving (agent fees, stamp duty etc). If the person puts the $575,000 in a 3% savings account that would be about nearly 18k a year. Though inflation will eat into that over time.
The fiscal side of me likes the idea of including the family home to the pension test, but the social side of me isn't a fan.
- Thread starter
- #184
That's the thing. Encourage retirees to move to help the housing situation. Eg free up a family house near schools. But then punish them with a stamp duty tax on the way through
That's just not right.
I certainly wont be downsizing in retirement until stamp duty relief comes in (which it surely must)
Unless I chose to move for other reasons.
But I have seen so many people prematurely downsize. Be actually worse off because of "costs" and have given up a great investment which will offset the extra medical and care costs if you live well into yor eighties
That's just not right.
I certainly wont be downsizing in retirement until stamp duty relief comes in (which it surely must)
Unless I chose to move for other reasons.
But I have seen so many people prematurely downsize. Be actually worse off because of "costs" and have given up a great investment which will offset the extra medical and care costs if you live well into yor eighties
- Thread starter
- #185
Yet again today we read Abbott is suggesting cutting govt spending 'to help our grand kids generation" I presume he includes cutting public education spending - so the only grand kids being helped will be the grandkids of rich people
The crazy thing is Abbott thinks this is a vote winner
The crazy thing is Abbott thinks this is a vote winner
- Oct 30, 2010
- 5,547
- 4,365
- AFL Club
- Hawthorn
igon value
Club Legend
- Oct 10, 2016
- 2,133
- 2,232
- AFL Club
- Fremantle
- Banned
- #188
Was tried in Canberra, didn't work. People don't want to downsize.
The solution is simple. No more heritage listing (unless it is seriously pre Federation or older), no more council control on land use in the interests of community character. Both are used by rent seekers to keep their property values high.
He tried to cut public education spending but Pyne couldn't convince anyone it was a good idea. It was a bad decision on Abbott's behalf to put Pyne in charge of that portfolio. Not sure it is a vote winner, I agree it would probably go the other way. Most parents understand the importance of education, and I think most taxpayers would be happier to fund education, as opposed to many other expenses.
iluvparis
Import Whisperer
- Apr 1, 2005
- 50,055
- 40,651
- AFL Club
- Carlton
- Other Teams
- Calgary Flames, Man Utd
Why do people say an asset test on the pension would mean people have to move or starve? Those with a house value > $1,000,000 can just draw down some of the equity in their house for consumption. 
Maggie5
Moderator
- Moderator
- #191
Centrelink offer a reverse mortgage plan but if they want to encourage pensioners to do this think they need to be a bit more competitive on the interest which is currently at 5.25%.Why do people say an asset test on the pension would mean people have to move or starve? Those with a house value > $1,000,000 can just draw down some of the equity in their house for consumption.
https://www.humanservices.gov.au/customer/services/centrelink/pension-loans-scheme
Is the cost of housing debate sidetracked by the fact a lot of people want to live in desirable suburbs? Reality is there are new house and land packages around $500k on city outskirts.
Not denying there is a lack of facilities in newer estates. However wonder if issue is purely supply and demand. Heaps of people want to live certain suburbs. Not much stock = price goes up.
Triple land taxes and get rid of stamp duty. That will make people downsize.
No it's not. Even some outer suburbs are ridiculously overvalued now.
Ofcourse it's supply and demand. it is always supply and demand. But Demand has been driven up by increasing the returns to investment properties through dubious tax incentives, opening up the market to foreign buyers and herding behaviour created by misinformation about prices always rising and all successful people must have property. Supply has been artificially constrained by dodgy councils and over regulation in th construction sector. And this has all occurred at the same time as record low interest rates creating the biggest bubble this country has ever seen.
- Thread starter
- #199
That's true for individuals but for an economy as a whole. It's not sustainable to have massive numbers of commuters
Which is why the lack of an inheritance tax in this country is so ridiculkous. If there is anything which fits the bill of "unearned income" inheritance is it.
Even the home of no social mobility, the United States, has an "estate tax" that kicks in at around USD5.5m.
