This article explains changes to the rules for pensioners looking to downsize.
Friday 16-September 2022 – The Federal Government is set to introduced new legislation which will give more support and financial incentive to those wanting to downsize. Under the Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022, Australian pensioners will receive an extra 12-month grace period before any windfall from the sale of their home affects pension payments.
Last year more than 8000 Australians sold their homes in favour of entering retirement communities or finding something smaller and more manageable. With the current housing crisis for young families becoming more prevalent, the Australian government has considered ways to support both our older Australians and young families also.
Minister for Social Services Amanda Rishworth said the Bill would be of great benefit to pensioners and young families across Australia.
“We don’t want people putting off downsizing to a more suitable home because they are concerned about the impact it could have on their payment rate and overall income,” Minister Rishworth said.
“These changes will give pensioners more flexibility to find a suitable new home and it will hopefully free up larger housing stock for younger families who need it.”
What does this mean?
The Federal Government is looking to reduce the financial burden on older Australians wanting to sell their homes in favour of something smaller. This new initiative benefits Australians in two ways:
- Pensioners will have an additional 12-month exemption on the asset test applied when selling their homes. This means that people will have more time to plan their next move or build without being financially penalised.
- A secondary benefit of this new program is the freeing up of larger properties for younger Australian families.
How will it work?
Currently, when a pensioner or eligible income support recipient sells their property, they are exempt from any asset testing to their fortnightly entitlements. Under the new scheme, this period will be extended by a further 12 months and in exceptional circumstances such as a natural disaster, a further 12-month extension is available on application.
Changes to the deeming rate
The deeming rate will also change. This rate is the assumed percentage of what is ‘deemed’ to be the rate of return applied to a property sold, which then informs the pension amount entitlement.
This scheme will reduce the deeming rate from 2.25 per cent per annum to 0.25 per cent per annum on the proceeds of home sales used to purchase a new home. In reducing this rate, the government is lowering the impact on a person’s pension or other payment type.
The scheme has extended the assets test exemption to 24 months for principal home sale proceeds which will apply the 0.25 deeming rate. During this time pensioners will continue to be homeowners for the purposes of means testing and will be eligible for rent assistance in the event they are paying for private rentals as a form of alternative accommodation.
This comes off the back of a range of incentives announced recently including an increase to pension and rent assistance payments, as well as the move to reduce the downsizer contribution eligibility age from 65 to 60 with the Downsizer Contributions Scheme.
What are you waiting for?
This is fantastic news for Australians receiving a pension and wanting to downsize. It provides an extended financial safety net that will allow people to take their time in planning their next move or build, without an impact on their fortnightly entitlements.
Thinking about downsizing into a lifestyle community? Learn more about the Hampshire Village difference.
Browse our range of homes for sale or get in touch today and speak with our friendly team about how we can help you make the most of your retirement. Opportunity awaits!
Telephone: 1300 730 869
