We know the Government announced leeway in the budget to those who want to sell their home and downsize, so we asked financial adviser Wally David to give us the details and the impacts.

The Government will pilot a program from 1 July 2014 to assist older Australians down-sizing their family home and moving to more suitable housing without affecting their Age Pension.

In a nutshell, what it means is if you have owned your family home for at least 25 years and decide to down-size, you will have the option of depositing up to $200,000 into a special account that will be exempt from pension means testing for up to 10 years. The catch is you can’t make withdrawals during the life of the account. You also must place at least 80 per cent of excess sale proceeds into this account, up to a limit of $200,000..

Eg. Jack and June sell family home for $800,000 and purchase a unit for $600,000.

They must deposit $160,000 (80% of $200,000) into this special account to be eligible for exemption.

The exemption will also be available to those who move into a retirement village or granny flat. However, it will not be available to those moving into residential aged care.

A good initiative in theory, however in practice few may actually take advantage of this due to the 25 year requirement and the inability to access your money from this special account .

photo: ljleavell