4 July 2019
Thousands of Australians have collectively contributed an additional $1 billion to their superannuation funds in just one year, thanks to an Australian Government initiative which encourages people to downsize from the family home.
Assistant Treasurer Michael Sukkar (pictured) has revealed, for the first time, key funding and usage statistics about the government’s downsizing superannuation initiative.
The release of the statistics has prompted calls to expand the scheme, to allow people to downsize from the family home and not lose access to the age pension.
This initiative makes it easier for Australians aged over 65 to use the proceeds from the sale of the family home to make contributions of up to $600,000 into their superannuation fund.
Mr Sukkar said that since the initiative began on 1 July 2018:
4,246 people have made a downsizing contribution
These people have used the initiative to contribute a collective $1 billion to their superannuation funds (an average contribution per person of $235,000)
55% of contributions have been made by females and 45% by males;
People from every State and Territory have made contribution with the top three States being NSW (31%), Victoria (26%) and Queensland (24%).
Individuals can release up to $300,000 into their super as a result of the initiative, while couples can release up to $600,000.
To access the initiative, the home would need to have been owned by at least one member of a couple, or by an individual, for at least ten years, and be considered a family home under capital gains tax law.
Caravans, houseboats or other mobile homes are not eligible under the scheme.
There is no requirement that individuals or couples need to move into a smaller dwelling to access the initiative, despite it being called a ‘downsizing contribution’.
However, the government is counting on older ‘empty nesters’ to use the initiative to vacate large family homes, and therefore free these home up for younger and growing families to occupy.
In addition, contributors do not need to meet the usual work test to use the initiative, and once inside the fund, the downsizing contributions are tax-free.
Downsizing.com.au has recently revealed that, from July 2020, it may be possible for couples to combine the downsizing incentive and other new superannuation incentives announced in the 2019/20 Budget to release up to $1.2 million from the sale of the family home to their superannuation fund.
Given that contributions under the initiative may impact on age pension eligibility, the initiative is best suited to self-funded retirees who have less reliance on the pension.
Calls to expand scheme
Seniors lobby group National Seniors used the release of the statistics to call for a change to the pension assets test, to make it easier for people to downsize and not lose access to part of all of the pension.
Ian Henschke, chief advocate of National Seniors Australia, told The Australian: “The strong take-up of this very conditional scheme tells you clearly the demand is there — what needs to happen now is a proper downsizing program that anybody — not just a lucky few — can access.”
“We would like to see up to $250,000 made exempt as far as pension income tests are concerned, then you would really have a universal downsizing scheme that everybody could access,”
Find out more
For further information on the scheme, please go to the Australian Tax Office website.
What’s more, if you are looking at downsizing into a new home later in life, you’ve come to the right place. Search for properties here.
By Mark Skelsey - email Mark at [email protected]