Here at Downsizing.com.au, we think it is important to inform, and advocate on behalf of, our growing number of subscribers.
For this reason, we’ve prepared this report card, to explain and rate the downsizing initiatives announced during the 2017 Australian, State and Territory budget season.
Setting the scene
There’s little question that Australia is in the middle of a ‘silver tsunami’, due to Australia’s rapidly-ageing population.
The latest nationwide population projections released by the Australian Government in late 2013 show that Australia’s median average age is due to increase from 37.3 years in 2012 to anywhere between 38.6 years and 40.5 years in 2031.
This median age increase is the result of the post-war ‘baby boom’ generation, along with post-war migrants, entering retirement and old age.
In 2012, Australians aged over 65 made up 14 per cent of Australia's population. This is projected to increase to around 18-19 per cent in 2031 – which represents an overall population increase of 2.6 million.
This rapidly-growing ageing population requires access to the right sort of housing, particularly housing with more manageable and accessible homes and yards, which is close to transport and facilities and in great neighbourhoods. This is where downsizing (which involves moving to a new home with less bedrooms than the former home) becomes such an alluring option for the over 50s.
In fact, a recent survey of 865 Australians undertaken by Downsizing.com.au and LJ Hooker, found that 35.2% of people aged over 50 are currently looking to downsize, while a further 31.1% said they would downsize in the future. The same survey found that downsizing could free up millions of unused bedrooms in large family homes across Australia.
The issue, of course, is that there are currently many impediments in the way of downsizing.
The same survey found these impediments were primarily:
- A need for greater choice and availability of downsizing-suitable housing.
- State Government stamp duty; and
- The asset pension test, which means that all or part of the proceeds from the sale of the family home could impact on pension availability.
Governments, either provincial or national, have the ability to address all these issues. So how they did they go this year?
The budget season
During the months of May and June, Australia and each of its States and Territories (excluding Western Australia) released their annual budgets.
Below is an analysis of each of these budgets. We’ve given each budget a ranking from A to D for its downsizing-friendly policies. A warning though…if you are looking to downsize soon the below does not make for particularly pretty reading.
|Budget date||9 May 2017|
|What it announced to help downsizing||The government announced it will make it easier for over 65s to contribute up to $300,000 from selling the family home into their personal superannuation fund. Find out more here.
This $300,000 contribution will be exempt from the existing age and work tests for people aged over 65.
This would mean, for instance, that someone who is aged over 75 who is currently not allowed to make voluntary superannuation contributions will now be able to do this when selling the family home.
Similarly, currently if you are aged 65 to 74, you must have worked for at least 40 hours over 30 consecutive days in the financial year to be allowed to make a voluntary contribution. That rule will also not apply for contributions from the proceeds of the family home.
|What we say||The incentive is a good start, however it has a few problems.
For starters, the initiative will not begin until 1 July 2018. Secondly, you need to have owned the home as a principal place of residence for ten years, which seems like a very long time.
Thirdly, there are many dreaded checks and balances and oodles of red tape. For instance, superannuation balance changes as a result of a family home sale contribution will still affect a person’s aged pension asset test.
Impacts on the aged pension asset test therefore remain a major barrier to downsizing.
The former Rudd Government recognised this when it announced, as part of the 2013-14 budget, it would be allowing downsizers to keep up to $200,000 of the value of their sold home out of the pension assets test. However, the incoming Abbott Government scrapped this measure just one year later in Joe Hockey’s famous austerity 2014-15 budget, citing budgetary pressures.
In addition, there doesn’t appear to be anything else in the 2017-18 budget which specifically seeks to help senior Australians to downsize.
There are of course a wide range of housing affordability measures, including working with State and Territory governments to set housing supply targets and facilitate planning and zoning reform under a new National Housing and Homelessness Agreement.
However, the budget fell well short of a comprehensive plan to support downsizing.
Australian Capital Territory
|Budget date||6 June 2017|
|What it announced to help downsizing||There were no specific new measures to support downsizing, although the government continued its scheme which allows eligible pensioners to move to accommodation more suited to their needs (e.g. from a house to a townhouse) by reducing the duty payable on their new purchase of a residential home or residential vacant land.
In December 2016, the government ceased offering a separate complementary scheme offering a stamp duty concession scheme for non-pensioners aged over 60.
|What we say||This budget provides little for ACT-based potential downsizers to get excited about, which is somewhat disappointing given the government’s new focus on urban renewal alongside the new Canberra light rail system. It is hoped this renewal may be able to bring new downsizing supply on the market.
The budget though does get a C, not a D, because at least the government has retained some measures to support downsizing.
New South Wales
|Budget date||20 June 2017|
|What it announced to help downsizing||The government announced a large number of housing supply initiatives, including committing to allowing private certifiers to approve terraces, townhouses and dual occupancy developments, which may be attractive to downsizers. It also announced funding to allow councils to update their planning instruments to support more housing and also announced 15 priority rezoning precincts across Sydney.
However, the government’s announced stamp duty exemptions were all targeted at first home buyers, with no relief offered to downsizers or seniors in general.
|What we say||While the supply-side initiatives may be of some value to downsizers, stamp duty remains a major barrier, given that NSW’s capital city Sydney has the most expensive real estate in Australia. This budget does not address this issue.
This is somewhat disappointing, particularly given that NSW for a short period did have what was considered one of the most progressive downsizing stamp duty policies in Australia.
In 2010, the Keneally government announced that people aged over 65 would pay no stamp duty to buy a newly-constructed home valued up to $650,000. This exemption was introduced to drive housing construction in the post-global financial crisis era.
The incoming O’Farrell Government extended the concession for a further year and reduced the eligibility age to 55. But the system ceased in July 2012 and the government has not revived it.
|Our rating||C Minus|
|Budget date||2 May|
|What it announced to help downsizing||The Northern Territory Government announced a continuation of the Senior, Pensioner and Carer Concession, which assists eligible senior citizens, pensioners and carers that are not first home owners to acquire a home, or land on which to build a home, by reducing the stamp duty that would otherwise be payable. The concession represents a stamp duty discount of up to $10,000.
The scheme is not means tested but eligibility ceases if the dutiable value of the home or land at the date of the conveyance exceeds $750 000 and $385 000 respectively.
Alternatively, the government also continued to support:
· A stamp duty Principal Place of Residence Rebate of up to $7,000 to persons purchasing a new home or land on which to build a home (you can’t claim both the concession above and this rebate at the same time); and
· The Home Improvement Scheme, which allows any owner-occupier to access up to $4,000 to undertake improvements on their existing home
|What we say||The ongoing stamp duty concessions for seniors and home improvements are welcome and should be of some assistance to downsizing. This helps the Northern Territory avoid the dreaded D rating.|
|Budget date||13 June 2017|
|What it announced to help downsizing||The government allocated $250,000 per annum over the next two years to address recommendations by the Advisory Taskforce on the Residential Transition for Ageing Queenslanders.
One of these recommendations was to “review the current Queensland Government’s State Planning Policy to support planning for age-friendly communities including affordable and adaptable housing, affordable living, and access to services and amenities.”
The government has continued an existing program which gives stamp duty concessions to anyone who buys a home as a principal place of residence.
|What we say||The Queensland Government appears to have a reasonable plan in place for support downsizing-friendly housing, but its ability to deliver this plan still remains in question. For this, it gets a D rating.|
|Budget date||22 June|
|What it announced to help downsizing||The government extended and increased concessions for people looking to buy an off-the-plan apartment, including:
• An extension of the off-the-plan stamp duty concession to 30 June 2018, allowing eligible applicants to benefit from up to $15,500 in stamp duty relief on off-the-plan apartment purchases.
• The introduction of a $10,000 pre-construction grant for eligible off-the-plan apartment contracts entered into between 22 June 2017 and 30 September 2017, where construction is yet to commence.
• The introduction of a five-year land tax exemption for investors purchasing off-the-plan apartments, for contracts entered into between 22 June 2017 and 30 June 2018.
|What we say||The government’s tax concessions are clearly aimed at driving housing construction in general, rather than specifically assisting downsizers. Nevertheless, the concessions could be used by downsizers.|
|Our rating||C Minus|
|Budget date||2 May 2017|
|What it announced to help downsizing||The government did not announce any specific new measures to support downsizing, with most of its initiatives heavily targeted towards first home buyers.
But it did announce it would continue stamp duty concessions which are available for off-the-plan purchasers. These concessions are available for purchases up to $550,000 for people who are using the home as their principal place of residence. The government announced it had removed investors from this scheme.
Like NSW, it has also announced a strong focus on boosting housing supply in both greenfield and existing suburban areas, although there is no reference to any of this supply being specifically suitable for downsizing seniors.
It also announced an interesting shared equity scheme for housing, but this is only targeted at first home buyers and low-income salary earning households and therefore is not suitable for downsizers.
|What we say||Like other State Governments, the Victorian Government’s focus was on first home buyers, with downsizers and seniors in general not getting a mention. The small plus is the focus on supply and the fact that seniors remain eligible for an off-the-plan stamp duty concession.|
|Budget date||25 May 2017|
|What it announced to help downsizing||Tasmania didn’t announce any specific measures to support downsizing.
There was a general announcement that stamp duty will only have to be paid on the value of land for eligible house and land packages, providing stamp duty relief of around $7,500 on the average cost of a standard “off the plan” house and land purchase.
It also announced measures to boost housing supply, through updating planning regulations.
|What we say||Tasmania has Australia’s oldest population, with 19.4 per cent of its residents aged 65 and above, compared to 15.8 per cent nationally. Given this, strong measures to encourage downsizing would have been welcome – but were not included in the budget.|
The 2017-18 budget season rates as an extreme disappointment when it comes to downsizing policies.
Despite considerable publicity in the lead-up to the State, Territory and Australian budgets about the need for government action to support downsizing, there were few tangible incentives announced. The most notable exclusion to this would have to be the Australian Government’s superannuation contribution exemptions.
First home buyer stamp duty relief, along with generic policies to boost housing supply, appeared to be the main focus of most State and Territory budgets.
The great hope for the State budget season is the upcoming Western Australian budget, to be announced in September. The defeated Coalition government, before the election, announced a $15,000 downsizing incentive. The question is whether the new Labor government will honour this commitment.
Overall, an analysis of the 2017-18 budget season shows that considerable work still needs to take place to advocate for downsizing-friendly policies and funding.