Should a big home mean a smaller pension?

Should the full value of your family home be included in the age-pension asset test?

That’s one of the options being considered by a Senate committee investigating cost-savings in the federal budget.

The Business Council of Australia’s president, Tony Shepherd (pictured), who also chairs the committee established by the Abbott Government, submitted the proposal to scrap the long-standing exemption to the pension means test.

“[There] may be a need to question whether it remains appropriate for the family home where it is of considerable value to continue to be included in the age pension assets test only at a low notional value,” the submission stated.

NSW Labor Senator Sam Dastyari last week called on the government to rule out the proposal, claiming Sydney families would be hit hardest because of high property prices.

“The government needs to start taking into consideration that cost of living pressures and housing prices in Sydney are greater than anywhere else around the country,” Mr Dastyari told The Daily Telegraph.

“It needs to rule out any means testing of the family home for the pension or any other benefit.”

Under the current rules, the amount of your pension depends on the value of your assets. The family home isn’t counted in the test but if you sell your home and buy a cheaper one, money leftover will be included in the asset test.

It’s not the first time the idea of scrapping the long-standing policy has been canvassed.

In 2009, the then head of Treasury, Ken Henry, proposed capping the value of homes that qualified for the exemption. The Rudd government dismissed the idea.

A year later, a government working paper suggested revisiting the family-home exemption. This, too, was ruled out.

How would changing the asset test affect you? Have you resisted selling the family home because it would affect your pension? If you have downsized, how did it affect your lifestyle – and your finances?

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