There are a few surprises in the Australian Government’s draft legislation which outlines how people will be able to take advantage of the government’s proposed downsizing incentive, announced in May as part of the 2017-18 budget.
The legislation provides more detail about how people aged over 65 will be able to make a special contribution of up to $300,000 to their superannuation from the proceeds of the sale of their existing family home. For more detail on this incentive, see our blog written at the time of the budget announcement.
The big surprise in the draft legislation is the fact that there is no requirement for a person to actually “downsize” – in the traditional sense of the word – to claim the incentive. Downsizing is usually regarded as an event where a person or couple sell-up the existing family home and move to a home with less bedrooms.
The legislation, for instance, doesn’t require the senior to buy a home with a smaller number of bedrooms, or indeed even buy an alternate home at all.
As the government’s fact sheet makes clear, the draft legislation actually allows seniors to move into any alternative living situation, including into a retirement community, aged care home, a child’s home or indeed into a larger but less expensive home, and still claim the incentive.
The main thing that the government wants seniors to do is to leave the current family home, so this home is freed up for larger and younger families which will use all the bedrooms.
By doing this, it hopes to bring more housing stock and bedroom capacity on to the market in expensive metropolitan areas, and therefore help deal with housing affordability issues.
Based on the draft legislation, it would appear that the incentive could be a boon for rural and regional areas, which could be the beneficiaries of city seniors making a tidy profit on their home in the big smoke, putting some of the loot into super and then buying a lower-priced property in the sticks.
There’s a few other eye-openers in the draft legislation, namely that:
- You won’t be able to sell your caravan, houseboat or mobile home to take advantage of the downsizing incentive (which is probably fair enough)
- You will be able to open up a superannuation account for the first time to take advantage of the incentive
- Both yourself and your spouse can take advantage of the concession, even if only one member of the couple is listed on the title
- It will be largely up to superannuation funds to determine whether your contribution meets the rules to qualify as a legitimate downsizer contribution.
- Once you claim the incentive once, you can’t do it again.
More details are available at http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2017/Housing-related-superannuation-measures