Pensioners to be given greater financial incentives to downsize & free up housing
Published on November 24, 2022 by Josephine Heesh
The Labor Government has recently introduced a new bill to Federal Parliament aimed at incentivising pensioners to downsize their homes. The Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022 [1] seeks to reduce the financial impact on pensioners wishing to downsize their homes in an effort to free up housing stock for young families.
Currently, the proceeds that a pensioner makes from selling their principal home that they intend to use to build or purchase a new home are only exempt from the social security assets test for up to 12 months. Additionally, the majority of these proceeds are deemed to be earning a return to the pensioner at the upper deeming rate of 2.25%. Even though no interest is realised, the pensioner is deemed to have received income to the value of the deemed sum, and this can severely impact the amount of pension payable because it is subjected to the income test.
The proposed new legislation will extend the social security assets test exemption to 24 months. During this period, the lower deeming rate of 0.25% will apply to the proceeds from the sale: for example, a couple that sells their home for $1 million would see no reductions applied to their pension for at least 24 months which is a stark contrast to the current system which could see their pension reduced by $229 per fortnight.
Social Services Minister Amanda Rishworth says that the Labor Government “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. 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.” [2]
The proposed legislation is currently before the Senate.
Please contact Josephine Heesh, Partner on 02 9291 7170 or Benjamin Zmeshkal, Lawyer on 02 9291 7106 for assistance with your property matter.
