Potential downsizers are worried about the impact on their Age Pension, which may limit the take-up of the Government’s proposed downsizer contribution, according to new research.
Legislation is currently before the Parliament to enact the ‘downsizer contribution’, which would allow some people aged 65 and older who downsize to contribute extra to superannuation without some of the existing restrictions.
Almost 90% of people planning to downsize their home are aware of the Government’s announced downsizer contribution, but only 24.1% said it would encourage them to downsize, according to research by National Seniors Australia. A survey of its members found, of those who owned their home, 33.9% were ‘movers’- they had already downsized – 24% planned to move at some point as they age and 42.1% were ‘stayers’ – they didn’t plan to move.
The research found that two key financial disincentives impacted the decision-making of those wanting to downsize – transaction costs, including stamp duty, and the Age Pension implications.
32.9% of ‘planners’ said they would be encouraged to downsize if the proceeds didn’t affect their age pension, with 18.9% of ‘stayers’ feeling the same. No special exemption applies to the downsizer contribution.
“So, it appears the government’s Budget initiative is not a strong incentive to downsize, and National Seniors’ ‘Rightsizing’ policy that would enable up to $250,000 of excess sale funds to be quarantined from the Age Pension means test is more on track,” said Dr Karen Rees, author of the research report.
The downsizer contribution is contained in the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017, which is currently before the Senate. Also included in the Bill is the First Home Super Saver Scheme, which is opposed by Labor and the Greens.