Older Australians hoping for some incentives to downsize from the family home and into housing better suited to a retirement lifestyle received a small dose of good news on Australian Budget night.
Australian Treasurer Scott Morrison used the budget to announce that the government will make it easier for over 65s to contribute up to $300,000 from selling the family home into their personal superannuation fund.
This $300,000 contribution will be exempt from the existing age and work tests for people aged over 65.
This would mean, for instance, that someone who is aged over 75 who is currently not allowed to make voluntary superannuation contributions will now be able to do this when selling the family home.
Similarly, currently if you are aged 65 to 74, you must have worked for at least 40 hours over 30 consecutive days in the financial year to be allowed to make a voluntary contribution. That rule will also not apply for contributions from the proceeds of the family home.
Importantly, both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to superannuation.
In announcing the changes, the government said the initiative would “encourage some people to downsize into housing that is more suitable to their needs, freeing up larger family homes.”
“It will assist people aged 65 and over who are currently unable to contribute all or any proceeds of the sale of their home into superannuation because of the existing restrictions and caps,” according to a government fact sheet.
However, while the changes to superannuation contribution tests are welcome, a close examination of the announcement reveals several significant gaps.
So what’s the bad news?
Well, for starters, the initiative will not begin until 1 July 2018. That’s a full 14 months away.
Secondly, you need to have owned the home as a principal place of residence for ten years, which seems like a very long time.
Thirdly, there are many dreaded checks and balances and oodles of red tape.
For instance, superannuation balance changes as a result of a family home sale contribution will still affect a person’s age pension asset test.
It is likely that this will discourage many people from using this incentive, given 25.1% of people who responded to a recent survey we undertook nominated the removal of this aged pension assets test as the one factor which would help them downsize.
The rules and regulations around the impact of the contribution on the $1.6 million balance test are even murkier and perhaps it is best to look directly at the fact sheet for this.
Finally, and perhaps most importantly, there doesn’t appear to be anything else in the budget which specifically seeks to help senior Australians to downsize.
There are of course a wide range of housing affordability measures, including working with State and Territory governments to set housing supply targets and facilitate planning and zoning reform under a new National Housing and Homelessness Agreement.
But there is nothing to reduce the biggest financial disincentive to sell the family home – and that is State stamp duty. Just under one in three of our survey respondents nominated stamp duty as the one factor stopping them from downsizing.
We can only hope this issue may be addressed in upcoming State budgets.
We'll keep you posted as more information emerges, and the important thing is to make sure that the needs of older Australians are well recognised and can't be ignored. We'll continue to promote your interests, and lobby for change.
Again, thanks to all those who participated in our recent downsizing survey - you'll be hearing more about the results very soon.