The Assets Test Problem
Australian properties are becoming deserts
How the assets test affects property owners
Welcome to our article (90), The assets test problem;
Dear readers, we started to write these articles about what is happening in Australia, when we saw that the farmers were having problems to survive, because of the drought, so, we thought that the Australian government should help. But they cannot help the farmers, because they own properties and the assets test exclude them from government help; it is like other property owners that are excluded also. This is what we are going to write in this article.
I believe that we have suggested that the farmers, with some government help, need to make something like a collective farming association, where all the farmers can pool a percentage of their farming products and money, which should be tax free from the government, then this pool can be used to help each other when they need help.
We hope that somebody high up reads our suggestion and then do something about it, we hope they do. We also noted that the farmers cannot ask help from the government, because they are self employed and because they have properties, so, their property are assets that stops them from receiving help from the government.
The assets test is a real problem and dilemma, because it is hard to know, at what level is the right level to apply it, as we will see as we continue to write about it; but that is only part of the farmers problem, because also they cannot ask any government assistance since they are self-employed. But when one cannot make money for a long time, and here in the case of the farmers we are talking about years, I think that it would be fair to help them. But the farmers are not the only people that are affected from these government rules of the assets test, because there are other groups of people that are affected adversely as well.
Anyhow, today in this article, beside talking about the farmers, we are going to talk about the assets test for other groups, and above all we are going to talk about the assets test, how it affects rental property owners in a more detailed way than we have done in our other articles, and then, about other unfair government taxes levied on properties.
One typical Brisbane house for rent
The assets test punishes property owners
The assets test is a problem and a dilemma for the pensioners, because it does not consider, if it is possible to earn the same amount of money that will be cut off the pension. The main problem here is that, when the treasurer makes the budget, he doesn’t even look at this possible outcome, he just wants to save money and cut the pensions. In fact, nobody is thinking about this negative issue, I would say that the entire population thinks that people that own rental properties are rich people, so, they don’t need the government pension, when rental houses are a real problem with pensioners that own one rental house only, because if they get a government pension, the pension will be cut off so drastically that they would have been better off, if they didn’t have the house at all. I believe that the assets test on rental properties, is set three time as much as it should be for the small property owner to break even, and this is what I am going to show you in this article, where I will make it clear with an example.
Anyhow, before I write about that, I am going to suggest that to fix this injustice about today assets test, which discriminate heavily against the small rental property owners, because it puts them in a disadvantaged position financially, the only thing that comes to my mind is that whoever makes these budget and laws, must keep in mind that he should give these properties owner a fair go, if he wants to keep the Australian economy going the best way possible, or I should say, at least as good as it was a few years ago, before the assets was changed.
The aim is to achieve the most benefit for the country, I believe that to achieve you need people that are self-starter and work hard, like the small property owners that have worked hard during their lives and have paid their taxes on what they have earned. They saved some money and invested it on a second house, hoping that when they would retire they could be better off financially, but it did not work the way they wanted, because of the unfair assets test changes that the Australian government has made recently. You see, these self-starter people need to believe that if they work hard, they will be better off in the future.
Here I can only say; what is wrong with the people in Canberra? Don’t they see that they are killing the will of the people that want to progress by working hard? This is the second most important group of people that work physically hard; the first group is the workers that work for a wage. This first group of people politically belongs to the Labour Party, these people are happy to work for a fair wage, and if they own their house they live in, so, they are not self-starters.
The second group of people, the small property owners that are usually hard-working people and self-starters can belong to both parties; so, if the coalition wants more votes from this group and stay in government, they need to fix the mistakes they have made, when they changed the assets test in a way that punishes severally anyone that gets a government pension. I say punishes them severally, as I am going to show you, how the assets test and other things discriminate against the pensioners, so, it makes life very hard for them. Anyhow, read my views about the assets test that discriminate against the small property owners, in the example I am writing hereunder.
Assets test punishes small property owners
Now let us talk about how today assets test discriminate and punishes financially the small property owners. To show you that, hereunder we have written an example. So, we have chosen a couple that we call Mr. and Mrs Smith, they are both pensioner and receive a government pension. The figure that appear in this example are all rounded figures, but they are close to the real figures.
Now, let us write this example
Mr Don Smith and his wife are both on government pensions, but today they don’t get much pension, because of the assets test. The Smith couple thinks and I believe that, the only way one could describe today assets test is that whoever made these laws are cruel people, because the assets test discriminates against those small property owners that own a house for rent, since it is not possible to live on the money that their property can earn, so, let us see how it works. One of the problems exist because of the deeming setup, where the government calculate that people can earn $3.00 per fortnight per every thousand dollars you have in the bank, or anywhere else including properties. In fact, owning properties is the worst thing you can have, because it affects the owners in a disadvantaged way, like the Smiths that we are talking about here
The house they rent is valued at $650,000, plus a few more belongings their assets test are nearly 800,000 dollars so, they only get about $100 per fortnight each, because of the assets test.
Now, if they didn’t have their rental property, they would get the full pension, which would have been, $690 each per fortnight each.
Now, let us try to calculate how much the Smiths can earn from their rental property in Brisbane. This property is an old three-bedroom house, on a large block of land that is valued at $550,000, this house is rented at $450.00 PW, so, if they are lucky and the house is rented the entire year, they would collect $23400.00 this is before expenses.
Now, what are the average expenses for this house; The Brisbane City Council rates are $600.00 per quarter; the Urban Utilities average $450.00 per quarter; this will come to $4200.00 per year; the insurance is $1200.00 per year, the land tax (this may vary, but let us say that they have to pay it fully in this example) so, the tax is $6550.00; maintenance can vary, but let us say $1500.00, then there is the fee for the real estate agent say $1500.00 per year.
Let us add this numbers up. So, $4200 to Brisbane city Council rates and water +1200 insurance+6550 Queensland government land tax +1500 maintenance+ 1500 to real estate agent letting fee, it = $14,950
Calculate total net earnings for the year, is $23400 income-14950 expenses=8450
The Smiths have made $8450 net in one year. Do you think they can live on that? Here some people may say that not everybody pays the land-tax, but even without the land-tax, the Smiths will only earn $15,000.00 from their rental property.
This is a lot less than if they were on the government pension, which would have been nearly $36000.00 for both.
But now they only get 20,200.00 at the best, and all the trouble to rent their property.
I believe that these negative things must not happen, it is not right when you have worked hard to put yourself in a better financial position, then suddenly you find yourself worse off. Because some government idiots have made this huge mistake.
I believe that these mistakes must be fixed from the government, if they don't the people that have been hurt will vote them out of government.
Well, somehow, I have had my say, and I hope that it is clear enough what I have said. So, see you in my next article, which will be about, The Australian Social Security Must Be Equal.
See you soon.