Government plans to make it easier for you to downsize your home

With the Federal Budget just months away, the government is considering a range of measures to encourage retirees to downsize their homes.
Retirees looking to downsize could be in for some good news, with the government planning to make it easier by allowing one of exemptions to the age pension assets test and superannuation caps.

If you’re a retired pensioner and you want to downsize your home, then chances are you would be a bit hesitant given the impact it could have on your superannuation and age pension.

The age pension assets test and the $1.6 million cap on superannuation has proved challenging for some retirees who want to sell up, and when combined with other costs such as stamp duty, there are many retirees choosing to stay in the larger family home.

But the Federal Government is reportedly planning to make it easier for you to downsize as a retiree, and they’re considering implementing a number of reforms in the upcoming Federal Budget. 

The Australian has reported that the Federal Government is planning reforms including changes to the age pension assets test and superannuation caps to encourage older Australians to downsize their homes.

For a lot of Australians on the pension, selling the family home can be a disincentive because they could find themselves over the age pension assets test or superannuation caps – and it could cost them their pension.

The Australian reports government ministers are favouring allowing the proceeds of selling the family home to be put into super for a period of time, as well as leaving some of the proceeds of the sale of the family home exempted from the pension assets test.

Other budget measures reportedly being discussed could reportedly boost the supply of housing for older Australians – including retirement or lifestyle villages for over-55s.

It’s also been reported that Treasurer Scott Morrison has called on Treasury to analyse the number of properties in Australia’s biggest cities occupied by retirees in a bid to see what property could be available if it’s made easier for people to downsize.

The proposed measures have been welcomed by The Property Council of Australia, who said the age pension assets test “penalises” people for downsizing.

“Our suggested policy is to quarantine an amount of the proceeds of the sale of a full age pensioner’s home from the assets test, so they can downsize without having their pension reduced,” Executive Director of Retirement Living Ben Myers told Starts at 60.

Statistics commissioned by The PCA found that 17000 more homes would be sold each year in Australia if $100,000 of the proceeds of the sale of a pensioner’s home was exempted from the pension assets test.

Bump that up to $200,000 and 50,000 extra homes would be sold each year in Australia, the PCA’s figures show.

“Changes can be made at a state and local level to assist downsizing too,” Mr Myers said.

“Planning systems need to strongly consider provisions for retirement living to ensure there is enough housing to meet the needs of the growing number of retirees over the next couple of decades. These moves will also make a positive impact on housing affordability for retirees.”

So, what are the benefits of making it easier for older Australians to downsize?

Well, according to Property Council of Australia it has positive affects your health, and would reduce pressure on the aged care system.

“Our research indicates that senior Australians are likely to remain independent for longer if they downsize to a smaller house which is newer and easier to maintain,” Mr Myers said.

“This has numerous benefits – it delays people’s need to access formal care and has positive effects on physical and mental health. From a government perspective, it also reduces pressure on the health and aged care systems too.”

While there is no indication of whether the reforms will be passed, they’re sure to cause some debate.

What do you think? Are these reforms a good idea?

Does the government need to do more to make it easier for retirees to downsize?

  1. Pamela  

    Does ‘downsize’ refer to the size of the building or the financial value of it?

    I would like to get a larger house in a cheaper area!

    • Ria Young  

      I did that 2 years ago. Built a bigger house on a smaller block to downsize the garden. New house with some changes insisted on by me makes it more suitable as I age, and doesn’t need the maintenance and renovations for the old house.

  2. Sarah  

    Same question. Still need a 3 bedroom house but to move in a cheaper area. If I sold the house eg $1m and bought another for $5k, rest put into retirement plan.

  3. David Anderson  

    On the other hand many of the young upstarts have been commenting us old people still living in our big homes should be tossed out into a unit to make way for them. We worked for our houses and many love them and want to die in them of old age. Don’t blame us for the increase in house prices, blame foreigners and the absolute greed of auctions for most of your plight.

    • You didn’t mention the fact that the young ones want a home with all the bells and whistles. 4 bedrooms, ensuites etc. (even though they only plan on 1 or 2 kids). Of course, it must have the latest appliances and furnishings etc. No putting up with sheets at the windows like we did until we could afford curtains. They also wouldn’t dream of buying a 2 bedroom home to start with then upgrade when they were in a better financial position. No, they want it all – now. And we seniors should have the decency to die or downsize, so they get it.

  4. Jean_Sievers  

    Firstly, if a retiree sells their $1mill property and is allowed to buy a cheaper house and deposits left over $ and it’s asset free what about retirees already in cheaper houses with smaller amounts of money not asset free? Secondly, it is ridiculous to suggest selking expensive homes will Free up the housing market because no one would be able to afford them except overseas investors. Ine way to genuinely free up housing market is to get rid of negative gearing and Stamp Duty. The system is biased towards the wealthy and this is why these measures are not going to be implemented. It’s time stop trying to steal irdinary retirees houses and income.

  5. Loz  

    I am looking to downsize and move back to NSW but the stamp duty is the obstacle. House prices have gone up in NSW and down in regional QLD. Therefore the gap between what I have and what I can afford is greater, add stamp duty and I need a loan.

    • John Herrett  

      We are downsizing and going into a “Gateway” community. No stamp duty, no rates. You pay for the lease of the land at roughly $145 per week. House costs around $300,000. You could be eligeable for rent assistance….

  6. Ivan  

    Is this all just hot air while older Australians wait with bated breath for some of these ideas being “tossed around” to actually come to fruition without being penalised for having more money and losing the pension. because it was a good idea to downsize and lose all that we have worked all our lives for and even at seventy plus still paying taxes for working part time in order to live in this family home. We older Australians get screwed whichever you look at it and will always be targeted.

  7. Truth13  

    Statistics commissioned by The PCA must have been picked from a dust bin, to say if the homes would be sold, in Australia & if $100,000 of the proceeds of the sale of a pensioner’s home was exempted from the pension assets test, it will encourage them to sell their houses. It looks, PCA is from another world, not to know, that any house 40 kms away to Sydney, 30 kms away to Melbourne, 20 kms away to Brisbane, Adelaide & Perth are selling well over $600,000 to $ 800,000. What is $100,000 for them, to encourage the retirees to sell their expensive houses. That is a beggars belief. To release such houses to the market, what the government should do is, not to asset test the proceeds of such sale, at least for 10 years. The days, the retired people can be conned with a “poison sweet” are gone. In fact, all those who paid taxes for more than 10 or 20 years should get a pension, based on the total income tax they paid, in their working life. Those who paid medicare levy should not pay anything to see a GP, as they have already made an advance payment, when they were younger. If the Fed. Govt. is trying to raise funds, by taxing or denying a pension to those who deserve it, they will not succeed. They will only vote against the party that is “Robbing” from them. At the next election, LNP will be rolled out, for a long time to come, only because, they attacked the older people, by cutting off the pension, full or part. People who studied hard, educated themselves, did good jobs, saved & bought a place to live, and helped the economy, should deserve a better treatment, instead they are penalised, for doing the right things.

    • Saucyakl  

      That’s so true, we bought the home when interest rates were 18% and 25% for a second mortgage. Now old and grey and being penalised for having a home by the young

  8. Jill Jackson  

    I hope that if this is passed it will be retrospective. We downsized and have now lost all bar a few dollars of the aged pension. I feel this is very unfair

    • Kylie  

      My mother in law has sold her home and we are looking for something smaller and more.managable for her. Our calculations are that keeping approx $270,000 in assets maximises a pensioners total income from a combination of the pension and interest earned.

      It is only if you have a lot more cash i think more than 600k that your income will be more than if you have $270k.

      So we are probably going to spend more on a house and buy a bigger house than really necessary to maximise retirement income. Otherwise cash assets will be depleted. So financially it makes more sense to buy a home that a family could live in than a smaller property which is crazy.

      I say get rid of negative gearing. Also MySchools is inflating house prices in school zones of well performing schools even though it is really the socioeconomic status of the kids rather than the school which is resp for the schools performance.

  9. Elizabeth Ayres  

    Wish we had enough left after “downsizing” to just buy something debt free . .after we pay out the remaining mortgage there won’t be! Not everyone lives in metropolitan areas with great capital gains.. what about those of us in regional areas that have lost value thro ongoing economic downturn . .? I’d be happy just to have enough to buy into the simplest retirement village.. but don’t even have that!

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