Government urges retirees to downsize

The federal government has introduced new legislation in Parliament to reduce the financial impact on retirees looking to downsize their homes.

In an effort to ‘minimize the burden’ of downsizing for older Australians and free up housing stock for young families, the government has introduced the Social Services and Other Laws Amendment Bill 2022 (prompting retirees to downsize)which grants retirees an additional 12-month exemption on the examination of assets as part of the process of selling their home.

The aim is to give older Australians more time to “buy, build, rebuild, repair or renovate” a new main home before their pensions are affected.

The amendments will reduce the presumptive rate (a presumptive rate of return on financial assets used to determine the amount of pensions) from 2.25% to 0.25% per annum on proceeds from the sale of a principal home intended to buy a new house.

Currently, where a retiree or other eligible welfare recipient intends to use the proceeds from the sale of their home to buy or build another home, the proceeds are exempt from the asset review of social security for a period of up to 12 months.

Extensions of up to 12 months are available in the event of construction delays, natural disasters or other extenuating circumstances.

The new legislation aims to extend the asset test exemption to 24 months for primary home sales, in addition to the 12-month extension for extenuating circumstances.

The lower deemed rate of 0.25 percent per annum will be applied to the sale proceeds in the income test during the exemption period.

During the exemption period, pensioners will continue to be treated as landlords for means-tested purposes and will meet the eligibility criteria for Commonwealth Rent Assistance if they are paying private rent for their other accommodation .

According to the government, more than 8,000 pensioners downsized last year – but with premium housing stock the government hopes more pensioners would be incentivized to downsize as a result of the changes.

Social Services Minister Amanda Rishworth said the new change would “benefit thousands of pensioners and other beneficiaries every year”.

“We don’t want people postponing downsizing to a more suitable home because they’re worried about the impact it might have on their payout rate and overall income,” she said. .

“These changes will give retirees more flexibility to find suitable new housing and hopefully free up a larger housing stock for young families who need it.”

This measure builds on previous government commitments to freeze deemed rates at their current levels for two years, until June 30, 2024.

The move follows previous attempts to incentivize older Australians to downsize.

Before the 2022 elections, Coalition had decided to reduce the age of eligibility for reduction contributions from 65 to 60 years. Under this program, eligible candidates could contribute up to $300,000 of the proceeds from the sale of their property to their superannuation.

According to the Treasury, the move to downsizing contributions aims to entice more older Australians to sell, “increasing the supply of larger homes for young families”.

The former Morrison government planned to bring the scheme into effect in the event of re-election, with former Prime Minister Scott Morrison suggesting the move would “remove financial barriers for people wishing to downsize”.

“By removing barriers for Australians who want to move into residences that better suit their needs and lifestyle, we are helping to free up bigger homes for young families,” Mr Morrison said at the time. .

Government urges retirees to downsize



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Last update: September 08, 2022

Posted: September 09, 2022