Raine & Horne Executive Chairman Angus Raine has welcomed the Federal Government’s announcement that pensioners will be given an additional 12-month asset test exemption on the proceeds of their home sale[i]. However, Angus wants all governments to consider breaks to encourage all downsizers to move on.
The tabling of the Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022 in Parliament is a move aimed at giving pensioners up to 24 months to purchase, build, rebuild, repair, or renovate a new principal home before the assets test impacts their pension.
Currently, pensioners have a 12-month exemption from the asset test after the sale of a home.
Angus, who for over a decade has championed policy change to encourage older homeowners to downsize regardless of their financial status, said the exemption would incentivise pensioners to move into more suitable homes for their stage of life and free up the supply of larger homes for families seeking to upsize.
“I have urged state and territory governments to consider stamp duty exemptions for older Australians as this tax is obstructing the plans of empty nesters as it eats away at their retirement nest eggs.
“By encouraging empty-nesters to move into more age-appropriate housing, we can address some of the long-term supply issues and create more housing options for expanding families.”
Angus added, “I’d like to see more done to unlock the vast store of wealth held by empty nesters with all homeowners over 70 exempted from any curbs to downsizing, whether it’s the asset test or the need to pay property taxes.
“In some parts of the country empty nesters have occupied their homes for 20 30 or even 50 years so they need an extra incentive to sell up.”
Deeming rates lowered too
The changes announced by the Federal Government will also impact the income test for the pension, with the “deeming rate” on principal home sale proceeds significantly lowered from 2.25% p.a. to 0.25% p.a.
The deeming rate is an assumed rate of return on financial assets, which also determines pension amounts. To receive the maximum Age Pension payment, your fortnightly income needs to be under $180 if you’re single. Or, under $320 a fortnight if you’re in a couple that lives together, or apart due to ill health[ii].
[i] https://ministers.dss.gov.au/media-releases/9016
[ii] https://www.australiansuper.com/retirement/retirement-articles/2019/06/what-is-the-income-test-for-age-pension#:~:text=How%20much%20income%20can%20you,%24180%20if%20you're%20single.
