A new home downsize incentive could reduce your age pension
A NEW incentive to tempt senior Australians to downsize their home could cost them their entire age pension. The dressed-up superannuation tax break, promoted by the Federal Government as helping housing affordability, risks leaving many retirees worse off financially and will mostly benefit wealthy people.
From July this year, people aged over 65 can pump up to $300,000 of the proceeds of selling their home into super without affecting other super contribution limits. However, the proceeds get counted in their pension assets test — while the family home is exempt — and could dramatically reduce their pension.
Single Pensioner Example
For example, a single pensioner homeowner currently receives the full $906.70 a fortnight if their assets are below $253,750. Assets above that reduce pension payments until it is cancelled when assets reach $552,000.
Financial strategist Theo Marinis said the super downsizing rules were “like a lot of changes they make — they sound good in principle but when you look at the devil in the detail in practice, it’s not as good”.
“Quite often they’re foolish changes, and this is one. It’s like everything they’ve done in the last 10 years — half-cocked,” he said.
80% retirees receive part or full pension
Australian Bureau of Statistics data shows almost 80 percent of retirees receive a full or part age pension. National Seniors chief advocate Ian Henschke said pensioners looking to downsize should seek professional advice or at least speak with a Centrelink Financial Information Service officer.
He said the changes would mostly benefit those with enough wealth to make them ineligible for a pension.
“A full pensioner or part pensioner, depending on their Super-tax break could cost retirees circumstance, could have their age pension reduced or cut completely.”
National Seniors is calling for up to $250,000 of downsizing proceeds to be exempt from Centrelink means testing.
Others have made similar calls, but seniors group COTA Australia’s chief executive officer, Ian Yates, said this could distort the market. He said the downsizing rules would “add another option” for retirees. “It’s going to suit some people but will be irrelevant to other people’s decisions, and
some people will downsize anyway,” he said.
Planning for Prosperity senior adviser Bob Budreika said transaction costs such as stamp duties and real estate agent fees could often make switching homes not worth the money or effort. “And I don’t know anyone moving home who says ‘I can’t believe it — all the furniture fits perfectly’,” he said.
Read the original article by Anthony Keane