15 April 2019
Major parties in the Federal election campaign are under pressure to change social security rules to allow people to downsize from their home without losing access to the age pension.
The Property Council of Australia and National Seniors have separately called for the change as part of their pre-election policy positions.
At present, the release of funds as a result of downsizing can result in a person losing access to their full or part pension, as the funds count towards the pension assets test.
National Seniors, which represents some 130,000 seniors across Australia, on 10 April called for $250,000 from the proceeds of a home sale to be exempt from the age pension assets test.
“Many older Australians need support to help them downsize for a better and safer life in retirement,” the lobby group says. “National Seniors is calling on the Australian Government to allow retirees with limited superannuation or assets to unlock the wealth held in the family home.
“Quarantining downsizing proceeds from the age pension means test and directing them to superannuation will boost the incomes of older people and allow them to live in more suitable housing.”
A research report on downsizers published by National Seniors in 2017 found that around a third of people planning to downsize would be encouraged to do so if their pension was not impacted.
Meanwhile, in late March, major property industry lobby group the Property Council of Australia made a similar call as part of its pre-election manifesto.
“An age-appropriate home can reduce the risk of falls and social isolation, which are the two biggest causes of hospitalisation for over-65s in Australia,” the Property Council’s document says.
“However, the age pension assets test serves as a financial disincentive to age-appropriate options by potentially penalising older Australians if they choose to move into smaller, more affordable homes.”
As a result, the lobby group is calling for full-rate age pensioners aged 75 years and older to be allowed to “quarantine” the proceeds of a home sale from the pension assets test.
In 2013, former Prime Minister Kevin Rudd launched a trial scheme to allow people to exempt up to $200,000 from the sale of the family home from being considered as part of their pension assets test.
By doing this, people would be able to release equity from their home and still keep their existing pension level. The measure would have cost the government around $112m over three years from 2014 to 2017.
The scheme would have required the family home to have been owned for 25 years, with the $200,000 to be deposited in a special account with a bank.
However, this move was scrapped by the incoming Abbott Government in 2014 as part of its inaugural and infamous "razor gang" 2014-15 budget, before the Rudd trial could ever get off the ground.
In 2017, ALP MPs criticised the government for scrapping this trial scheme, as part of debate over legislation which allowed downsizers to move up to $600,000 into their superannuation fund after selling the family home.
With polls indicating that the ALP will return to power on 18 May, time will only tell if the ALP decides to move from critical words to positive action and re-introduces the pension exemption. Equally so, the Coalition Government now has the opportunity to promise this policy for the first time as part of its re-election bid.
By Mark Skelsey, News Editor of Downsizing.com.au, email Mark at [email protected]