Australian Assets and Pension Cuts
The Australian pensioners are losing money
Today pensioners and the assets test
Welcome to our article (65) Australian assets and pension cuts
Dear readers, in our last article, Australian pensioners alarmed, we talked about the disastrous budget that the treasurer Joe Hockey delivered on the 13th of May 2014, in this article we are continuing to talk about the pensions cut, and the effect it will have on 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. Because Joe Hockey is an idiot, when we consider that any politician in his position, must consider first the effect of the budget it will have on the people.
Anyhow, now let us discuss an 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, and what some pensioner might think doing, because for every action there is a reaction, so, also the pension changes may bring some other changes.
Mr. and Mrs. Day, and what they are going to lose, because of the 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 complain about living a modest decent life.
Anyhow, let us talk about owning and renting a house, because Joe Hockey budget, seems to be a budget aimed at ruining the small property investor. So, these small investors must decide now, 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 other pensioners. So, now let us look, how owning and renting a house affects the pensioners, if they can receive a government pension.
Some house for rent signs
People 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 we must ask ourselves if it is profitable all the time, or are there times, when it does not work out in your favor, or the way you want it work out, therefore, owning a second 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 owners 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 considers 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 can 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 their house has been vacant for months.
After going over all this rental stuff, we must start to think whether there is something wrong, with the way’s things have been set up for Mr. and Mrs. Day. So, we should ask. Did Mr. and Mrs. Day make a mistake when they invested in this rental property? Because they were thinking that by having a property for rent, they could be better off when they retied, so, they would have had extra money to enjoy in their old age.
But now that the assets-test is changed they are shocked, because their second house investment is more a disaster than a benefit. 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. So, they could have more time for themselves, instead of trying to run their property for rent.
Today we can only ask, what sort of government is this? They tell the people to save their money for their old age, so that they can live a better life. But when the people reach their old age, they turn around, change the laws and take away that money from you. But this is not all that we need to say; you see, they make laws that takes away money from the people on the government pensions, but they don’t make laws to cut their own pensions that are huge compared to the rest of us. You see, the means test, and the assets-test does not apply to their politician pensions, so, they can own huge properties or anything else, they can earn anything, and they still will receive their full government pensions and other benefits. So, there is a law for the public and a different law for the politicians.
What some people could do?
When the laws change, and those properties that you have worked hard for, they don’t earn what you expected them to earn, and you are ending up in a financial disaster, since you are losing money that should have been yours. You must 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 money that they must start thinking 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, 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 to their pension, 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 will be forced to divorce, because, if they are divorced, they will receive a single pension each. But that is not all, they will own a house each, and live in their own houses, so, they have no more assets, they will not earn any money, so, they don’t have a mean-test or assets-test to go through to receive their pension. therefore, they will receive the full pension each. Now let us see what difference it will make.
Today they receive about $350.00 per fortnight each.
If they are divorced and live in their own houses, 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. If the assets-test had not changed, this would not happen.
Now, before we finish talking about owning properties that affect the pensioners, let me say my other point of view here-under.
Pensioners owning properties are hurt
The pensioners that own a rental property today are in a lot of trouble, because everything seems to have turned against them. The government changes the assets-test and cuts the pensions down. Then the properties cannot be rented unless they rent cheap, and, they cannot sell their properties easily, because there are too many rental properties up for sale; and when a business makes not enough money, it is hard to sell.
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 personal 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, they work on the difference of the price when you bought it the first time.
Now let us look at some other real-estate problems. Some of you may 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 that happen to own some properties.
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 one 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.
See you soon.
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