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July 29, 2026 — 5:01am
I recently read a report by the Policy Institute Australia titled Home Truths: Rebalancing to Better Means Testing. One of its recommendations is to include at least part of the family home in the assets test for the age pension. It made me wonder: if the family home is no longer sacrosanct for the pension, could capital gains tax on the family home be next? I suspect I’m not alone in finding this deeply unsettling. Many Australians have worked hard, paid tax all their lives, and sacrificed to own their home outright, believing it would provide security in retirement. Now it seems even that security is being questioned.
The report argues this is about “intergenerational equity”, but many older Australians will see it differently. They will feel that the goalposts are once again being shifted after decades of playing by the rules. Is this something retirees should genuinely be worried about, or is it simply another policy idea that is unlikely ever to become law?
This is a proposal that surfaces occasionally, but politics is the art of the possible. While think tanks are free to recommend bold reforms, governments have to persuade voters. I struggle to see any government winning support for including the family home in the age pension assets test.
The report proposes exempting the first $500,000 of the family home’s value and counting the balance under the assets test. On paper that may sound reasonable, but the practical consequences would be enormous.
The age pension cuts out completely for a homeowner couple with assessable assets of around $1.1 million. With Sydney’s median house price now around $1.75 million, hundreds of thousands of retirees could lose their pension despite having no greater spending power than people living in much cheaper parts of Australia.
The same problem applies to suggestions of imposing capital gains tax on the family home. Property values vary dramatically across the country, making a single national rule difficult to apply fairly.
A more realistic way for governments to reduce pension costs would be to tighten the assets test by lowering the thresholds or changing the taper rate. Even that would be politically contentious because it would directly affect retirees who have arranged their affairs under the existing rules.
For now, I think the proposal is best regarded as part of the policy debate rather than something likely to become law in the foreseeable future.
I bought shares for $1 each on January 1, 2024. By June 30, 2027 if they hypothetically were worth $2, I would have an unrealised capital gain of $1. My understanding is that this gain would still qualify for the 50 per cent CGT discount. If I then sold the shares on August 1, 2027 for $1.50, the shares would have fallen 50¢ from their June 30 value. Does that mean the 50-cent loss cancels the earlier discounted 50-cent gain so that I pay no tax?
Julia Hartman says that assuming you have no other capital gains or capital losses, the legislation requires the 50¢ loss after June 30, 2027 to be deducted from the $1 pre-June 30 capital gain before the 50 per cent discount is applied. That leaves a net pre-2027 gain of 50¢, and after the 50 per cent discount you would be taxed on a capital gain of 25¢.
One important point is still uncertain. The legislation also provides an alternative method that allows the capital gain to be calculated over the entire period of ownership. That approach may produce a better result in some situations, but the detailed rules have not yet been released, so we do not yet know exactly how that calculation will work in practice.
I am nearly 80 and my partner is 13 years younger. She has no superannuation and her only income is the age pension. She is both the executor of my will and the nominated beneficiary of my superannuation. She also knows how to access my super account online, and any lump sum withdrawals are normally paid into our joint bank account.
With all the recent publicity about delays in paying superannuation death benefits, I am concerned she could be left short of money after I die. If, immediately after my death, but before the fund has been notified, she logged into my account and withdrew money to cover her living expenses until the death benefit was paid, would there be any legal or tax consequences? I suspect we may be on thin legal ice and would appreciate your guidance.
I think there could be a problem if you try to withdraw money from the account of a deceased person. To me, a better option is for you to simply withdraw some money from your superannuation and open a new superannuation account for her. That keeps things legal and transparent while giving her the liquidity she needs.
You recently mentioned investment bonds as a good way to invest for grandchildren. Your article renewed my interest because our daughter and son have each given us grandchildren, with another on the way.
One example in your article involved grandparents investing for a grandchild, but having the investment bond owned by the child’s parent. Does that mean we should establish one bond in our daughter’s name for her children and another in our son’s name for his children? What are the advantages of doing that instead of owning the bonds ourselves? Also, going back to my original question, how safe are investment bonds?
There is no single right way to do it. The best ownership structure depends on what you are trying to achieve. If the bond is owned by your daughter or son, they have legal control of the investment and can use it for their children.
If you own the bond yourself, you keep control and can nominate who will receive the proceeds when you die. The better option depends on your family circumstances and estate planning goals.
Investment bonds are issued by life insurance companies regulated by the Australian Prudential Regulation Authority (APRA), so the providers operate under strict financial rules. However, the value of the bond depends on the investments you choose.
If you invest in shares, the value will rise and fall with the sharemarket, while more conservative investments are likely to fluctuate less. Like any investment, there are no guaranteed returns, which is why investment bonds are generally best suited to long-term investing.
Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: [email protected]
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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