Australia’s age pension system is again under the spotlight, with new revelations that wealthy homeowners are claiming pensions despite holding millions in property assets.
A Department of Social Services briefing, published in the Financial Review, to new social services minister Tanya Plibersek highlighted that seniors with homes worth $5 million or more can still receive the same pension as someone living in a modest $500,000 unit.
The reason: the family home is fully exempt from the Age Pension asset test.
Is this the first sign that the Government is considering applying a means test to the family home for access to the Age Pension?
The implied message from the Financial Review story is that it’s not equitable (or sustainable) for the government to continue paying full Age Pension to retirees who own valuable homes.
It should be noted that in the same story the minister’s spokesperson said the Government has “no plans” to add the family home to the Age Pension assets test.
But it begs the question: why was the Department’s advice provided to the media in the first place? At the very least it seems the Government is testing voter sentiment, and seeking to start a public discussion on the topic.
Keen observers of politics will know that these are typically the first tentative steps towards significant policy change.
[ RELATED POST: Record House Prices Drives Reverse Mortgage Popularity In Australia ]
The Hidden Struggle of Being “Asset-Rich, Cash-Poor”
While this has sparked debate about fairness and reform, it also shines a light on a growing reality for many older Australians: being asset-rich but cash-poor.
For retirees who have most of their wealth tied up in their homes, day-to-day living expenses can still be a struggle. Even those living in million-dollar properties often rely on the age pension because they lack sufficient superannuation or other income sources.
The report notes that under current rules, couples can have assets of up to $1.05 million—plus a home of unlimited value—and still receive a partial pension.
Brendan Coates of the Grattan Institute argues this creates “perverse incentives,” encouraging retirees to maximise pension eligibility rather than use their home equity.
Why the System Encourages This Behaviour
The family home has long been treated as sacrosanct in Australia’s tax and welfare system. Its value beyond a certain threshold doesn’t count toward the pension asset test, which effectively allows homeowners to remain eligible for benefits even with multimillion-dollar properties.
Coates estimates that including part of the home’s value in the asset test could save upwards of $4 billion annually and encourage retirees to downsize or release equity to fund their retirement.
While the government has ruled out any immediate changes, it’s clear that the current system often rewards homeowners for holding onto property wealth while still drawing on taxpayer-funded pensions.
The Cash Flow Gap in Retirement
This debate underscores a key issue: many retirees have wealth on paper but lack the liquid cash they need for a comfortable retirement.
With rising living costs, medical expenses, and the desire to maintain a decent standard of living, retirees can find themselves asset-rich but struggling to pay the bills.
Superannuation balances for many Australians, especially women and those with interrupted work histories, are still too low to support a long retirement.
Reverse Mortgages: Unlocking Home Equity Without Selling
For homeowners aged 60 and above, a Reverse Mortgage offers a practical solution. It allows you to tap into your home’s value to supplement your retirement income—without having to sell your home or move out.
Key features of a Reverse Mortgage:
✅ Access your home equity as a lump sum, regular income, or line of credit.
✅ No monthly repayments required. The loan plus interest is repaid when you sell your home, move into aged care, or pass away.
✅ Stay in your home as long as you like. You retain ownership and continue living in your property.
Instead of relying solely on the age pension—or being forced to downsize before you’re ready—a Reverse Mortgage gives you control over your financial future.
Why It Makes Sense for Asset-Rich, Cash-Poor Seniors
For retirees in million-dollar homes, the property value is effectively locked away unless they sell. But selling often means losing the family home, moving away from friends and community, or paying significant downsizing costs.
A Reverse Mortgage solves this problem by providing cash flow from the wealth you’ve already built—without the emotional or financial upheaval of selling.
Brendan Coates himself notes that seniors who may lose pension entitlements under a reformed asset test could always “use the home equity release scheme to borrow against their home to top up their income.”
[ RELATED POST: ‘I Love My Home’: Why over 55’s are reluctant downsizers ]
Why Get Expert Advice?
Reverse Mortgages are complex, with over 150 points of difference between lenders—such as interest rates, borrowing limits, and credit policies.
At Seniors First, we’ve specialised in helping Australians navigate Reverse Mortgages since 2006. Our experts can guide you to a solution that matches your needs, helping you unlock the equity in your home safely and responsibly.
The Bottom Line
Whether or not the government reforms the pension asset test, the reality remains: many retirees are sitting on property wealth they can’t easily access.
Want to learn more about Reverse Mortgage? Find out more about how to use a Reverse Mortgage or download your FREE REVERSE MORTGAGE GUIDE.
Ready to Apply? You can now check your eligibility online or call Seniors First on 1300 745 745.
Leave our principal place of residence ALONE. Most us have gone without to achieve home ownership. A lot of us have many memories tied up in our homes.
Imagine suggesting to a polly he/she take a pay cut
Just because my home is worth say $1.2 mil I only rely on Super after working until I was 72, for the upkeep of my home, plus a small pension. I have no other income. My super pay for rates, water, and general living = electricty gas, running a car food etc. If this wicked Labor Government brings the Home into a taxation benefit for their mismanagement of money I will protest everywhere. I am 87. Money grabbers no respect for the Aged who have worked hard all their lives to have an enjoyable retirement.
What a ridiculous concept. The family home must be exempt from the assets test. There is no other choice. Any Government considering that step will be quickly out of office.
This article is A CYNICAL ATTEMPT to scare people into taking this company’s REVERSE MORTGAGE. The article shows there is NO REAL THREAT OF THIS HAPPENNG.
Thanks for your comment Dav. We respectfully disagree with your characterisation. If you read the post closely, we have explained why article in the Fin Review was so noteable. Confidential briefing notes to a minister don’t find their way into the media unless there is an agenda. At no stage did we say the govt is changing the policy, we are merely asking the question if the govt has such a change under consideration. The evidence would suggest this is a strong possibility, and the high number of comments on this post would indicate most people are grateful for us bringing it to their attention. Thank you
It’s not the age pensioners fault that housing has become so expensive, prices are over inflated in Australia compared to most other countries in the world, there would have to be some type of indexation applied if the family home were to be subject to a asset test, due to ever increasing demand on housing and the rise in housing costs, any government would have to allow at least 10-15 percent increase per annum in housing prices if they were to asset test pensioners homes
Hi Michael, thanks for your comment. If the govt does go down this path, the indexation idea I think is a good one.
In many cases it doesn’t make sense for we empty-nesters to have so much of our funds tied up in an expensive asset like a house. I have friends who would like to downsize and maybe move somewhere else, but the cost of doing so (especially stamp duty) is prohibitive. At the same time, house prices are way too high, there is a shortage of properties, and anyone our grandchildren’s age is priced out of both renting and buying a house, possibly forever.
So I think the whole system needs an overhaul. Simply changing the family home from being included/excluded from asset testing is not workable on its own. I do think it’s inequitable that rich people can invest their funds in an expensive house, so they can pass their wealth onto their children while still claiming a pension. It also encourages investment in non-productive assets (a house) rather than productive (like business).
Thanks JSN for your very thoughtful comment. I think most would agree that Stamp Duty needs to go, or at least to be waived for downsizers. This would improve supply, and help prices at the margin. The intergenerational equity issue you allude to is also a key consideration, but very difficult to address without implementing a series of profound changes to the system. Does the current govt have the will?
I agree, a whole series of changes is needed. Over the past 50 years, we have gradually added more and more incentives to invest only in real estate, at the expense of everything else. We now have a lot of distortions in our tax system that are not sustainable in the long run. They have already caused our housing prices to skyrocket, completely out of sync with earnings.
The only way I can see forward for government of either side to make changes, given how entrenched these benefits are, is to plan for their implementation over many years, with gradual reductions in (for example) negative gearing incentives.
Stamp duty could also be reduced over time, while increasing whatever alternative tax/es are implemented to compensate. Some economists believe that CGT discounts also lead to distortions, so really, everything should be on the table. With the overall impact being more fair, and no extra costs for those in the lowest 80% for income and assets.
I think the current government *could* do that, would probably like to, but will they?
I wouldn’t want to be forced to downsize so our home is not counted in the asset test. It is hard enough to afford to put food on the table on the pension. Our home is not worth even a million yet but you can’t maintain even a modest home on the pension alone. I am still working at 70 because we can’t live on just the pension.
I recently “took out” a Reverse Mortgage on my property, assisted by Seniors First Consultant Adam Oakley, which doesn’t come close in value to the millions of dollars of other properties mentioned in this article.
Though I am grateful for all the help I received, I truly wish I hadn’t found myself in the position of having to do so in the first place
Nonetheless, it’s actually quite nice to no longer have to worry about how to find the money to pay the bills.
I’ve said it before but will repeat.
Thank you.
Hi Lyndon, thanks for your comment. It’s great to get your perspective in this conversation. I am so glad we were able to assist, that you are enjoying having access to your home equity. Done well, these loans can be life-changing.
Hi Lyndon, thanks for your comment. It’s great to get your perspective in this conversation. I am so glad we were able to assist, that you are enjoying having access to your home equity. Done well, these loans can be life-changing.
Of course Homes should be treated as an asset for tax and pension purposes. Super is being taxed at $3 million. People with a house worth more than $3 million should not get a pension and any capital gain above this should be taxed.
Thanks for your comment Garth. The point about super is a good one to raise. I guess if the govt already has that policy in place for one asset class, then it’s not that much of a leap for them to make to another asset class (housing).
I believe that the family home should always remain exempt. Yes, some likely asset-rich individuals are eligible for the age pension. From my work experience, I can say there are many asset-rich people who have little or no ready cash. Without the age pension, they would struggle to survive. Several groups in our society receive a healthy pension despite being asset-rich, e.g. retired public servants, politicians who have served a relatively short period in office and no doubt others I do not know about. I am in my eighties and I receive an aged pension. I self-funded my retirement for the first 20 years and then received a part pension, which, over time, has become a full pension. I also devoted 50 years mostly to the public health system, alongside 10 years in the not-for-profit system. I paid high-level tax for the majority of my working life and received no concessions apart from the tax concession on my superannuation. Would it be fair to tax my home bought and fully paid for with hard work over many years? I lease it to you to consider.
All homes (mostly, those properly maintained and looked after) improve in value over time. It would be unfair to add their value in assessing pensioners pensions. I would like to see senior public servants who retire on massive superannuation income and who have been on very high income over many years means tested in the same way as pensioners are.
Totally agree with you John.
I’m sick and tired with the “fat cat” senior public servants who’ve earned millions over their years, whilst building enormous superannuation accounts, making decisions about those of us who’ve struggled on lower incomes all whilst paying our taxes (which some “up the line” fraudsters manage to avoid) and then leaving us with no other alternative but to take out reverse mortgages just to get by.
I’m not sure I understand… public servants implement government policies, they don’t make policy.
The groups and individuals who punch above their weight in terms of influence over policies are the lobbyists.
Here here John , fully agree with you
Well said John
1. Its a great idea to have reverse mortgages BUT the interest rate is far too high. It should given the situation of most pensioners be interest free because even the amount owing compounds every MONTH and that is a huge amount. It assumes that property will increase 3% annually and that is not necessarily the case. At least ten years is needed to allow for an age pensioner – they may live longer depending on the age they are when they start. I think it is balanced on the side of the banks and lenders, as they say they have to take a bigger risk for an older person who is reliant on a low income. I am obliged to take one out and want to set my sights on repaying some of it to reduce the compounding effect but whether I can or not is another matter. There has to be a better way, than charging such high interest rates. The loan at 39% for my property means that I owe in ten years nearly a million and that is only on 39% of lending. Its the compounding factor. Sickening that the elderly are taken advantage of in such a manner by legitimate means. Incidentially even if the interest rate was only 2% higher than Centrelink it would still make a lot of money for the lenders but be much more manageable.
regards Linda Schmidt
Thanks for your comment Linda. I understand your concern about rates, but it’s not possible to have ‘interest-free’ money unfortunately. I’d encourage you to watch this video about Reverse Mortgage interest rates, it’s quite informative https://seniorsfirst.com.au/resources/reverse-mortgage-videos/ There is some good news: rates are coming down. The lenders have announced reductions of 0.75% this year so far, which is bringing the rate down closer to the Centrelink HEAS. Many economists are predicting this trend will continue, lowering rates further. Finally, reverse mortgage borrowers can save money by drawing funds gradually (where possible) instead of a lump sum, and servicing the monthly interest cost – this stops the compounding effect. Some of our lenders even offer lower interest rates for borrowers who can pay monthly interest. Please feel free to contaact us if you would like to speak to someone about your options.
Totally agree with what you are saying Linda , I to looked into reverse mortgage and was surprised by how much the compounding interest was, yes we are being taken advantage of and ripped off, plus it’s impacting on our adult children’s inheritance, I for one would like to leave my children with a nice inheritance when my wife and I are gone, why can’t we have an agreed price that the reverse mortgage lender and the homeowner agree to with a sliding scale ?
Michael I think it’s important to educate on reverse mortgages and how the compounding interest works. If a borrower draws a large lump sum at a relatively young age, and chooses to keep the loan for several decades without making any payments at all on the interest, then yes over time it can get expensive. However this is not the typical use case. For starters, the average loan term in Australia is appears to be about only 8 years – many people use reverse mortgages these days as a ‘stop gap’ measure until they sell and downsize later on. Any compounding interest effect over 8 years will be fairly limited. In addition, our data shows most borrowers only borrow a modest lump sum initially and draw most of the funds out gradually over time via a ‘cash reserve’ or monthly instalment plan. The interest savings by using a reverse mortgage like this are significant. Here’s a quick rule of thumb that might help: if you borrow $100k as a lump sum at 8% vs taking the same amount in regular monthly instalments over 10 years, the interest bill is almost 60% less (58% less to be precise). You can get more of this info in our FREE ebook https://seniorsfirst.com.au/reverse-mortgage/download-free-guide/ and this page also has a wealth of data, tips and insights freely available https://seniorsfirst.com.au/reverse-mortgage/
The house might be worth millions but they could be cash pour if they are receiving the full age pension , I do not think the family home should be means tested, they more than likely like myself worked hard to get a home back in the 60’s and some of these homes are now over in flatbed and worth over a million dollars
Absolutely not, I own my own home, I have certainly not ever been rich, and I struggled for years going without necessities to do so. The pension these days is hard enough to live on as it is without the Government making it harder trying to force people to Reverse Mortgage or make life harder by including their home as an asset.
Most houses are $million plus here in qld, I’ve struggled on newstart to age 64,lower than pension, maintain a house by myself, it should be 2mill and 3mill +..
The government won’t be happy until it beggars the lot of us while those greedy politicians receive their special pensions which far exceed what the working man gets when he retires
The aim of a democratic system is to do the most good for most people. The key question is where do you draw the line. To me, 200% of the median house price would be fair but that is for politicians to decide. By the way no one will be forced to sell their home.
Often hard working families have million dollar home after years of living in it. It doesnt mean they are wealthy by any means. Speaking from experience we are assets rich (family home) cash poor on retirement.
Most houses bought 30+ years ago are often worth 1 mill. dollars. It doesnt mean the occupants are wealthy. Often it is the value of the home after years of hard work. Again doent mean the occupants are cash rich. Often assets rich, due to home, but cash poor. Speaking from experience.
Most elderly have worked hard all their lives and paid taxes they should not be forced to sell their home. They deserve a pension no mater how much their home is worth.
Pensioners with homes worth 5 Million plus could easily downsize to a 2 Million dollar home and be as comfortable.
I’m sure there are homes in these high valued areas worth much less than 5 Million allowing the buyers to still retain their independence and still have their family and friends close by.
If someone retires, and worked hard to get the home, or inherited it, the government has no right to penalise them with this plan. Owning a millions-dollar home does not mean the person has wealth enough to live on. Forcing them to sell a home they worked for is a crime.
Asset testing the home is a horrible idea. I’ve struggled to get into a downsized home and can barely manage body corporate, rates, utilities etc as it is. I’ve had to take out a reverse mortgage for extras. If they asset test it, it should only affect those in the very high home-worth bracket – maybe $2 million plus. With just an average home around $1.5 million close to the cities, it would reduce many people’s pension.
Thanks for your comment Julia. Those that argue for some means testing generally agree there should be a fairly high home value before any means test starts to reduce the homeowner’s Age Pension entitlements. The question is: what is a fair minimum home value? You have suggested $2 million, but this is actually the median home value in many metro suburbs in Sydney and Melbourne.