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Social Welfare

The inequity of the social welfare system

John Hewison
Founder and Director
10 Mar 2015

Recently there has been a lot of discussion around whether the family home should be included in the Centrelink means test for Australian Age Pension benefits.

Social Welfare is not a right of individual citizens. It is an obligation of governments to ensure that all citizens have access to sufficient financial resources, to sustain a reasonable level of dignity and standard of living. It is intended to assist people who are financially unable to fully support themselves.

Some Australians believe that they have a right to receive government benefits, regardless of need but in recognition of the tax they have paid throughout their working lives.

Of course, this is a completely unreasonable expectation.

As a matter of principle, I do not support the inclusion of the family home in the means test for various reasons. However, there are some serious anomalies and issues of fairness that should be reviewed by the Federal Government.

Looking at the current social security welfare in Australia, one has to wonder what the Federal Government is thinking in terms of entitlement and fairness.

The fact is, some Australians are asset rich and cash poor and do not have access to sufficient funds in order to support themselves. Their family home may be an extremely valuable asset, but it does not have the ability to pay the bills. On the other hand, some Australian individuals and families have both a valuable asset in their home, plus significant invested assets, yet still qualify for a part Age Pension.

Under the current legislation, if a pensioner chooses to gain access to part of the equity in their home for the purpose of supporting themselves, they not only lose the equity entitlement, the value of the equity raised is then included in the means test. Hence, they are further adversely affected.

The anomaly, and arguably the unfairness of the current legislation, is illustrated by the following two comparative case studies.


Case Study One

Jack and Jill have $250,000 invested and a home valued at $800,000.

They currently receive a combined Age Pension of $1,282 per fortnight or $33,332 per annum, plus benefits. With their investment income of $12,500 per annum, their total annual income is $45,832.

Jack and Jill need a combined income of $55,000 to achieve their income goal, so they decide to access $250,000 equity value from their home for investment purposes, to supplement their income. However, Centrelink includes the $250,000 they effectively gained through selling-down part of their home. As a result their Age Pension decreased by approximately $8,000 per annum. This is a case pf double jeopardy.

Case Study Two

Chris and Kate have $1,000,000 invested and own a home valued at $5,000,000. They receive a pension income of $432 per fortnight, or $5,616 per annum, plus benefits.

The combination of investment income and Centrelink benefits enables them to comfortably achieve their income goal, they do not need to access equity in their home to do this.


My point to the above is, how can it be reasonable that a couple with $1,000,000 of investable assets and $6,000,000 of assets overall is able to qualify for social security benefits?

And how is it reasonable that a couple who choose to “sell-down” part equity in their home, in order to supplement their Age Pension, be means-tested to their detriment?

I argue that the Federal Government must have a close look at these issues and provide some fair and realistic amendments to the social welfare system.

My view is that the Age Pension Assets Test needs to be tightened, so that those accessing equity value from their homes can have that equity exempt from the means test.   


The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.