CA ANZ superannuation leader Tony Negline said that for most people earning 1.2 times average weekly earnings or below, superannuation doesn’t make that much sense, especially since the family home is excluded from the asset test for the age pension.
“Interestingly enough, I can be a home owner and live in a house that is worth any amount of money, anywhere from zero dollars to an unlimited amount of money and receive $34,500 [from the age pension] over a year, or I can be someone who has never earned much money and always lived in rented housing for whatever reason, and I can also receive $34,500 a year,” Mr Negline said.
“It’s one of the non sequiturs of the system that I’ve never understood.”
Speaking at an event hosted by Townsends Business & Corporate Lawyers, Mr Negline said if someone has $800,000, it could make more sense for them to buy a more expensive home since they’ll still be able to get a guaranteed income stream through the age pension.
“You can either have the money in a full tax-free environment both now and after death in the family home or you can put it into super. If you’ve gone above $1.6 million, it’ll then be taxed at 15 per cent, the capital [might] come out tax free [for any beneficiaries], but then any earnings will be taxable at 15 per cent in the event that they’re non-dependent adults and when they go to sell the assets, the fund is obviously going to pay capital gains tax on that,” he said.
For the vast majority of people who are moderately paid, to generate a lot of money in the super system is not easy, as it involves sacrifice for many individuals who have relatively simple means, he said.
“For moderate income earners, why wouldn’t they concentrate on their home? It’s got all the concessions,” Mr Negline said.
SMSF practitioners, Mr Negline said, should be considering all these issues as well as the Commonwealth Seniors Health Card when advising their clients on whether to take up the government’s proposed $300,000 housing downsizing scheme.
Silliest thing I have heard about Super this week .If my clients need $20,000 for an emergency , they take it out of Super , you can’t sell off a bedroom !
While it is true for now, I can see a cap on value of owner occupied property coming. Thus could force those living in our capitals to leave to free up capital for retirement and to gain the age pension. Which I’m fine with, as the age pension isn’t meant to be covering retirement costs so a major asset can be transferred to their estate. Yes even those that lived in the same house for 40 years – if they want the age pension. Might even make housing more affordable for the current generation of tax payers.
An owner occupied cap for CGT and age pension means testing is long overdue. The current uncapped system is totally inequitable, and a major driver of the property bubble. BTW the Pension Loans Scheme allows older people to stay in their home if they really want to, and still receive a full pension. It just means that their children will get a slightly smaller inheritance.