In the 2013 Budget released last night, the Government announced it will trail a new program to support Age pensioners who want to downsize their home.
Under the trial program, eligible pensioners who have lived in their own home for at least 25 years and want to downsize will be able to sell their home and put a minimum of 80 per cent (or a maximum of $200,000) of the excess sale proceeds into a special account. The Government will work with financial institutions to establish these accounts.
It is expected around 30,000 pensioners could benefit from the exemption throughout the trial period which will go over four years and begin on 1 July 2014. The funds in this account will not be counted under the pension income and assets test for up to ten years or until a withdrawal is made from the account.
In the current pension means testing rules, the value of the family home is not assessed and does not affect a person’s pension. This exemption means that many senior Australians stay in their family home, even though it may no longer be appropriate for them. Many pensioners want to move into housing that is more suited to their needs as they age, but are concerned that they will lose some, or all, of their pension. This can also put pressure on the housing market.
The trial will help the Government determine the extent to which the pension means test is a factor in pensioners downsizing their homes, and whether mean test exemptions help reduce some of the pressure on the housing market.
The Government is also putting pressure on State Governments to introduce or improve concessions on stamp duty, therefore removing a further impediment to downsizing.