You might be like many other older Australians who have much of your wealth locked up in the family home.
You might want to live in a more suitable home or use this wealth to generate income or pay for health and aged care services.
Supporting you and other older Australians to downsize can bring about a better retirement.
Benefits of supporting pensioners to downsize
A lot of people want to stay in their homes as they get older, but sometimes may need a more suitable home.
It might be because a big backyard is hard to look after.
A lot of older people live in homes that have become dangerous, for example it can be difficult climbing with stairs after you’ve had a stroke.
It’s easy to see how someone could risk of injury and hospitalisation or even early entry into aged care if they didn’t live in the right home.
Pensioners particularly struggle with the cost of retrofitting their homes to make the safer and more age friendly.
In many cases they would be better off in a new home that suits their needs.
The Age Pension means test is the problem.
The Age Pension Means Test discourages downsizing
Most pensioners are worried that is they downsize it will cut the size of the pension.
Research from National Seniors has shown that about third of people over 50 had already downsized. And another third plan to do so1.
What is interesting is the same research showed that almost 1 in 5 older Australians who don’t want to downsize would consider doing so if the extra money did not affect their pension.2
While a new policy allows a retiree to put up to $300,000 from the sale of their home into superannuation tax free, this will not be attractive if they lose their pension.
How would an Age Pension Means Test exemption work?
In the 2013-14 Budget, the Federal Government announced the Housing Help for Seniors pilot scheme3. This scheme was designed to provide retirees with an opportunity to downsize their family home while minimising the impact on the Age Pension.
Under the pilot, if you were a pensioner you could have put up to $200,000 from the sale of your home into a special account without it affecting your pension. The money would continue to be exempt for up to 10 years, or until a withdrawal was made from the account. The pilot also required the pensioner to have lived in the home for 25 years.
While National Seniors welcomed the pilot, we thought it had too many restrictions. Even so, we were disappointed the pilot was dropped in the 2014-15 Budget under a new government.
Our proposal doesn’t have the disadvantages of the pilot scheme. Its less restrictive and the maximum exemption would be $250,000.
It would mean:
1. older Australians could downsize to more appropriate housing
2. families would have more options for homes that suit their needs
3. money tied up in bricks and mortar would be freed up
4. the housing industry and whole economy would be stimulated.
How can you help?
If you want to support our efforts to exempt downsizing proceeds from the pension means test, sign up to the campaign to get regular updates.
You can also help by becoming a National Seniors member.
<sup>1</sup>Rees, K. and McCallum, J. 2017. Downsizing: Movers, planners, stayers. Brisbane: National Seniors.
<sup>2</sup>Rees, K. and McCallum, J. 2017. Downsizing: Movers, planners, stayers. Brisbane: National Seniors.