The federal government will move within weeks to break down barriers that discourage older Australians from “downsizing” to smaller homes, in a bid to release more property to the market and help tackle housing affordability for younger families.
Retired Australians would gain new incentives to save the proceeds from selling their houses to move into more practical homes, with forecasts suggesting the measures could free up more than 50,000 properties a year.
The government is preparing to introduce more “lenient” rules to the Age Pension asset test and the caps on superannuation to ease the penalties on retirees who enjoy the once-in-a-lifetime windfall from selling their family homes.
A favoured option among cabinet ministers is to allow some house sale proceeds to be put into super so retirees do not suffer a big hit to pensions when they sell homes — a key factor that makes thousands of older Australians reluctant to downsize.
Scott Morrison has commissioned a Treasury analysis of the number of properties in major cities that are occupied by people in retirement, setting out the potential for land release close to urban centres.
The government is adamant there will be no move to force older Australians to move house, given the emotional and financial investment in family homes, and that the focus instead will be on removing disincentives.
As well, the budget package will include measures that help boost the supply of housing for older Australians — such as villages for the over-55s — so more people are able to downsize without being forced to move far from their home suburbs or towns.
The Weekend Australian understands Treasury is advising ministers on ways to amend super rules for older Australians to give them more flexibility than the standard $100,000 annual cap on non-concessional contributions that applies from July 1 this year.
Allowing people over a certain age to exceed that cap in a single limited situation — the sale of their homes — could remove an impediment to downsizing.
The government is also examining how this would work with the $1.6 million super balance cap, beyond which a fund loses favourable tax treatment. While super funds are counted when assessing eligibility for the Age Pension, the rules could be adjusted to allow some flexibility for those who downsized.
Average house prices now exceed $1.2m in Sydney, $940,000 in Melbourne, $550,000 in Brisbane, $490,000 in Adelaide, $580,000 in Perth, $375,000 in Hobart, $500,000 in Darwin and $720,000 in Canberra, according to CoreLogic data analysed by ANZ Bank economists.
The data shows older Australians can recoup significant amounts from selling their homes, even after funding downsized. homes. If the cash remaining is too great, they can lose some of their part-pensions under the asset test.
The government has advice from the Productivity Commission that backs reforms to free up property, estimating 15 per cent of older Australians want to move to homes that are easier and cheaper to maintain.
The commission and other advice, including the tax review led by former Treasury secretary Ken Henry in 2010, have warned of huge barriers including stamp duty on a new residence, sales commissions and moving costs.
Knowing that reforms to stamp duty are a matter for the states, the Canberra is focused on what can change in federal rules to lower barriers. Submissions from the Property Council of Australia suggest there are about 530,000 seniors who receive the full-rate Age Pension, are aged over 75 and own their homes. Those homes are exempt from the asset test. If they sell their homes, those seniors would lose $3 a fortnight for every $1000 of assets over the asset test threshold, which is $250,000 for singles and $375,000 for couples.
Work commissioned by the Property Council found that exempting $100,000 of the house sale proceeds from the asset test would remove a key barrier and encourage about 17,000 more house sales every year from this cohort. That would rise to 50,000 houses put on the market every year if the exemption were raised to $200,000. The exemption would operate with a time limit to allow a period for older Australians to buy their next residences, such as retirement village homes.
Original Article here
Comment: More solid proof Scott Morrison’s / The Greens / Grattan Institutes harsh Asset Test Changes on 1 Jan 2017 & new Pension Caps on 1 July 2017 were an absolute disaster. It’s high time to bring in the New Zealand system of a Universal Aged Pension system, where people who work & save aren’t penalised. Absolutely clueless – what happens when you have space cadets in your Ministerial Offices & you fail to consult with your Branch Membership, preferring to consult with left wing Lobby Groups instead.