National Seniors’ Downsizing Calculator
Enter your details to estimate how much it costs to downsize and how much you could contribute to your superannuation from downsizing.
Over recent budgets, the federal government has made it more financially attractive for seniors to sell their family home and buy more suitable, usually smaller, accommodation.
The hope is that this will also leave them with additional funds to invest in their retirement.
The key government initiative is allowing people aged 55-plus to top up their super by $300,000 for individuals and $600,000 for couples.
National Seniors Australia supports this incentive but is telling government that more can, and should, be done to better support those seniors who want to make the move.
It is known as downsizing (or, arguably, rightsizing) and it seems the government incentives are luring more and more Baby Boomers to change addresses.
Over the past five years, nearly 60,000 downsizers have sold their homes, which has contributed $14.5 billion into superannuation. That’s according to analysis by the Australian Taxation Office provided to the Australian Financial Review (AFR).
Michael Blythe from Downsizer.com says given the average return super funds have generated over the past decade, downsizing could boost the income of a downsizer by $20,000 a year.
Pressures of selling the family home
When Australians move, 36% stay in the same postcode and another 24% move within a nine-kilometre radius – close to familiar shops and amenities.
Wanting to stay in the same neighbourhood you first moved into 50 years ago can be expensive. House and land prices have rocketed, especially in what may have been outer suburbs but are now listed as inner city.
One couple who were profiled in a media report paid more than $4 million for their new apartment, plus moving expenses, new furniture, and stamp duty of $200,000.
The total cost was more than their proceeds from the sale of their home. Despite that, the couple could use the downsizer super rule to top up their super using other savings.
This is because it is the sale of the family home that triggers eligibility to make the top-up. The contribution does not need to be from the sale proceeds of the property.
The AFR reports average downsizer contributions to superannuation reached a record high of just over $280,000 after the government dropped the age of eligibility to 55 from 1 January this year.
Downsizer contributions aren’t limited by regular concessional and non-concessional contribution caps, which means people can direct up to $300,000 beyond any funds already in their super.
However, the money will be counted toward a person’s total super balance amount and is subject to the transfer balance cap, so you should seek financial advice.
Also, the property sold must have been the primary place of residence at some point and have been owned by the claimant for at least 10 years.
People aged 70-plus made the most downsizer contributions (about 60%), and more women applied the super benefit than men.
The move to downsizing has been attributed to seniors cashing in on booming property prices, and the need for more cash to manage the rising cost of living in retirement.
More than one in 10 households are considering downsizing, according to analysis by consultancy Digital Finance Analytics, and 90% of people aged between 65 and 74 live in properties with only one or two residents despite having three or more bedrooms.
More older Australians might consider downsizing if alternatives were available. However, one of the biggest barriers is fear of the impact on a person’s pension.
So, National Seniors has recommended to government that home care recipients be supported to downsize into a smaller, age-friendly homes by exempting excess sale proceeds from the assets test.
The benefits of this include reducing the risk of prematurely entering residential care and with it, the cost of care.
More information about this and joining our Better Housing Campaign can be found here.