Australian assets and pension cuts
Pensioners are losing money
Today pensioners assets test
Welcome to our hub (65) Australian assets and pension cuts
Dear readers, as we have said in our last article, Australian pensioners alarmed, in this article we are continuing to talk about the pensions cut, and the effect it will have on some pensioners. Depending on what sort of pensioner you are, these changes will affect you in different ways. So, there are some pensioners that their pension does not change at all, some pensioners that will be losing part of their pension, and some will lose it altogether. So, if the pensioners are upset about this change, they are right to be upset.
Anyhow, now let us discuss that example, which we have started in our last article, about Mr. and Mrs. Day, who own two houses, they live in one house and rent the other one. Then, we will talk about other cases, if we can, and what some pensioner think about doing, because for every action there is a reaction, so, also the pension changes may bring some other changes.
Mr. and Mrs. Day, case about pensions cut.
Let us talk about, how much pension they received before, then how much they receive now, and then compare this with other pensioner, whether they are being discriminated, meaning that they are losing more pension than the others. Anyhow, we are only setting this case, in a way that is easy to understand, so, all figures are well rounded figure, and therefore they have not been worked out mathematically.
So, Mr. and Mrs. Day have about $580,000 worth of assets beside their own residence.
Before the 1st January 2017 change they received about $450.00 per fortnight each.
After the 1st January change they will receive about $350.00 per fortnight each;
So, they will be losing about $100.00 per fortnight each, this is very upsetting because they have problems with renting the house. When the house is not rented, it is hard to live on $350.00 per fortnight. One should keep in mind, that a single pensioner that has no assets, receives $873.90 per fortnight, and even they sometimes complain about living a modest decent life. So, let us talk about owning and renting a house, whether it is worth to keep things as they are, or they need to change a few things, to live their life at the same level of everybody else. So, now let us look, how renting a house affects the pensioners.
Some house for rent signs
Owning and renting a house
People believe that owning and renting a house is the way to go. If you talk to any real-estate agent, they will tell you that it is profitable to own a rental house. But one should ask oneself, is it profitable all the time, or are there times, when it does not work out in your favor, or the way you want it would work out, therefore, owning another house is not the best thing to have, which is the case of Mr. and Mrs. Day.
As we have said in our last article, today most house owner find it hard to rent their houses, because there are too many vacancies here in Brisbane. So, Mr. and Mrs. Day, had to rent their house for $400.00 per week, which is a low rent if one consider the house value. Anyhow, they hope that the tenants will pay the rent on time, and will not damage the house while they are living there. They have worked out that as things are, after paying all the bills, they could average in a year over $200.00 a week net rent. They must estimate a conservative figure, because there are too many vacancies, and there have been times when their house has been vacant for months.
After going over all this stuff, one start to think that there is something wrong here, with the way things are set up. So, one would ask. Did Mr. and Mrs. Day make a mistake when they invested in this rental property? As they were thinking that by having a property for rent, they could be better off, when they retied and would have some extra money to enjoy in their old age. So, they are shocked, because as you can see, it did not work that way at all. In facts, they are worse off, because if they had only the house they are living in, they would have received a lot more pension, than what they are earning from their investment. They could have more good time for themselves, instead of trying to run their property for rent. One could almost feel sorry for them knowing what they are going through now.
One needs to ask, what sort of government is this, can they work out properly what they are doing? They tell the people to save their money for their old age, so that they can live a better life in their old age. But when the people reach their old age, they turn around and take that money away from you, by changing the laws. But that is not all, because they don’t take the money away from their own government pensions, if anything they increase it, because their pensions is not assets tested.
What some people could do?
When those things that you have worked hard for, they don’t earn what you expected them to earn, and for that reason, you are ending up in a financial disaster, since you are losing money. You may start thinking many things including about what you want to do, and what you could do with what you have.
In the case of Mr. and Mrs. Day, they are losing so much that they may have to think about a different set up, so that they can receive a lot more pension, than they are receiving now, and live an easier life.
As we have said in our previous article, Mr. and Mrs. Day, are not on the best terms, they are living together, because divorces and changes are costly, but because of what has happened now, they may have to divorce soon. Because, now that their pension has gone down more, they have lost that financial balance, which in a way kept them together. So, they could divorce, because, if they are divorced, they will receive a single pension each. But that is not all, they will own a house each, so, they have no more assets, therefore, they will receive the full pension. Now let us see what difference it will make.
Today they receive about $350.00 per fortnight each.
If they are divorced they will receive, $873.90 each per fortnight.
Which is a lot more than what they receive today, the only question left here is will they do it?
Anybody that is losing that much money will certainly do it, to make sure, let us look at those figures again, but this time let us see, how much money they are losing in a year, if we work both pensions together:
Now, they would receive about $700.00 per fortnight, in a year they are receiving $18,200.00.
If they divorce, they will receive 873.90 each per fortnight, which will be $22,721.4 each.
Or 45,442.8 per year. So, they are losing $27,242.8 government pension in a year.
Our own views on this is this.
If people start divorcing, or doing something that entitles them to a full single pension in the future, you cannot blame them, because they have been pushed from the government to do it.
Now, before we finish talking about owning properties that affect the pensioners, let me say my point of view here-under.
Pensioners owning properties
The pensioners that own a rental property today are in a lot of trouble, because everything seems to have turned against them. The government cuts the pensions down, because they have changed assets test, then, depending where they are, they cannot rent their properties unless they rent cheap, and, they cannot sell their properties easily, because there are too many properties up for sale.
But there is more, when their rental property is sold, it is subject to the gain tax, here again the government is robbing what is rightfully yours. They are robbing you, because if you want to buy another property of about the same value somewhere else, you must pay the gain tax, which is based on the difference in price, when you bought the property the first time. If you have bought the property a long time ago, for sure there will be a lot of gain tax. Now, I would like to point this out to you, if you need to buy another property of the same value, for some good reasons, why you must pay this gain tax, you really haven’t gained anything at all, because you still have a property of the same value. But the government does not accept this explanation.
Now let us look at some other real-estate problems. Some of you my readers think that I am exaggerating, because everybody things that the properties are always going up. But I tell you what, the boom on the property market for me is already ended, but people are not aware of it yet. When I drive around the street of Brisbane, there are too many signs of places for rent and for sale, when a few years ago, there were none. So, everybody that owns some real-estate should brace themselves now, for the rough ride ahead, this will also affect the pensioners.
Anyhow, we want to conclude this article now, by saying that the pensioners are having a hard time no matter where they turn they find problems.
Therefore, in the future, they better plan to own just a house, and then collect the full pension from the government.
I believe that I have said enough in this article. So, see you in our next article when I have something else to say. Which could be about some world politics.
See you soon.
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