Under legislation put forward by the Labor government, pensioners will be encouraged to downsize their homes in the hope that it will “free up larger housing stock for younger families who need it”.
Labor will introduce the Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022 to parliament on Wednesday, September 7 which will seek to reduce the financial impact on pensioners by providing an additional 12-month asset test exemption on the proceeds from the sale of a home, extending the assets test exemption to 24 months for principal home sale proceeds.
Under current legislation, proceeds from the sale of a home are exempt from the asset test for 12 months, the money from the sale of a home is usually deemed to earn income at the upper deeming rate, currently 2.25 per cent per annum, which can have a significant impact on a person’s pension payments.
The changes will also see the deeming rate on home sale proceeds where pensioners plan to purchase a new home lowered from 2.25 per cent per annum to 0.25 per cent per annum.
Minister for Social Services Amanda Rishworth said the legislation will provide pensioners with the opportunity to purchase, build, rebuild, repair or renovate a new home before their pension is impacted.
“We don’t want people putting off downsizing to a more suitable home because they are concerned about the impact it could have on their payment rate and overall income,” Rishworth said.
“These changes will give pensioners more flexibility to find a suitable new home and it will hopefully free up larger housing stock for younger families who need it.”
Over 8000 pensioners downsized their homes in 2021 and Labor is hopeful this number will increase if the changes are legislated.
The move has received a mixed reception from the Australian public, with some labelling it a “sensible policy” while others slammed the legislation and questioned its benefit.
As a pensioner in a 4 bedroom home, well insulated and that suits us, I’m not going to feel or be made responsible for the housing crisis. @AmandaRishworth try looking at the growth of gig housing like AirBnB. Unregulated growth causing a crisis all over the place. #gigHousing
— PragmaticLeftie????????????????MaskUp???????????????????? (@NigheanEilidh) September 6, 2022
Making it easier for Pensioners to downsize doesn’t help people get into first homes, it just increases the stock of houses for developers to buy & knock down unless you change negagearing & tax concessions for investors. Again it’s tinkering at the edges instead of proper reform
— Gee Tee (@GrayTtee) September 6, 2022
How about our politicians, down size,lead by example.
— Bev Wilson (@BevWils03322294) September 6, 2022
Who’s bright idea was this ? Move out of your family home of 50 years and you won’t lose your pension. WOW with that incentive everyone will be jumping at the opportunity. Plus where do expect these people to move to as the unit market is also in high demand
— Daniel L (@bigbaddanno) September 6, 2022
On the face of it this seems like sensible policy @AmandaRishworth
Labor to give pensioners greater financial incentives to downsize homes https://t.co/pTloO0uZdZ
— Ross Womersley (@RossWomersley) September 6, 2022
First the LNP and now Labor. Why do governments want pensioners to downsize their homes? Are they supposed to give up their memories? Make greedy landlords sell their rental homes first, especially those that have dozens of homes for rent.
— David Klement (@DavidKlement2) September 6, 2022
The legislation continues the Government’s commitment to freeze the deeming rates at their current levels for two years to June 30, 2024.
Following his election win in May, Alabense pledged to provide more certainty for older Australians who will be able to keep more of their earnings, as the cost of living rises.
Albanese said the “Labor Government will freeze deeming rates at their current levels for two years, helping protect pensioners from interest rate rises”.
“Around 900,000 aged pensioners and other pension recipients will be better off under Labor’s plan, which will mean pensioners can keep more income in their own pockets as interest rates rise,” Albanese said.
“The pension deeming rate will be frozen at 0.25 per cent and the upper rate will stay at 2.25 per cent for two years under Labor.”