Changes to government policy can make a big difference to you, especially when you are considering making a downsizing move.
We’ve done the hard work of researching changes that will come into effect at the start of the new 2021-2022 financial year.
A spoiler alert: it’s not all good news. Here’s our summary, starting with three changes that apply no matter where you live in Australia:
Social security threshold and age changes
1 July will see incremental increases in a range of thresholds which help determine eligibility for the age pension and Commonwealth rental assistance.
These small increases will provide some additional flexibility for retirees and downsizers.
For example, single pensioners who want to claim the full pension will from 1 July be allowed to earn $180 per fortnight, a $2 increase. For couples, there’s a $4 jump to $320 a fortnight.
Each dollar earned over this amount will cause the pension payment to drop by 50 cents.
Meanwhile, asset thresholds which limit the number of people who can receive the full or part pension have also increased.
For instance, home owning couples who want to claim the full pension are allowed, from 1 July, to have $405,000 in assets, up from $401,500. The family home is excluded from the asset value calculations, but not things such as superannuation, shares, cars or bank deposits.
It’s particularly important to keep the asset thresholds in mind, particularly when releasing cash equity by selling the family home to downsize or to fund a move by parents into aged care.
In addition, important thresholds relating to granny flats and retirement villages - known as extra allowable amounts - have also changed.
From 1 July, if you pay more than $216,500 for a retirement village dwelling, you’ll be regarded under social security law as a home owner and therefore the home owner pension thresholds will apply. You’ll also no longer be eligible for Commonwealth rental assistance.
It’s a similar story with granny flats. If you pay more than $216,500 (say to a family member) to secure the occupancy of a granny flat, you may also be regarded as a homeowner under social security law.
It’s also important to know that, from 1 July, the eligibility age for the pension increases - from 66 years to 66 years and six months of age.
It’s important to speak to a financial and legal advisor before making any transaction which could have impacts on pension payments to yourself or family members.
Our rating: The threshold changes are in the right direction but too small to be of any real benefit
Superannuation contribution cap changes
From 1 July, you’ll be able to choose to put more money into your super, which could come in very handy to build retirement nest eggs.
The cap for concessional (or tax-free) contributions will increase from $25,000 to $27,500 a year. Non-concessional caps (on contributions like personal after-tax and government co-contributions) will increase from $100,00 to $110,000 a year.
The changes are happening in response to increases in Australia’s average weekly earnings, as measured by the Australian Bureau of Statistics.
According to Colonial First State General Manager Kelly Power, Australians aged 60 have the potential to increase their retirement savings by $100,000 if they take full advantage of the increase in mandatory employer superannuation payments and the new $27,500 cap on concessional contributions.
As fine details vary depending on the size of your superannuation balance and other personal circumstances, we recommend you research details specific to you and consult a professional before taking action.
Our rating: Savvy investors should be able to take advantage of these changes
Granny flats becoming more family and financially friendly
Brand new legislation – only passed on 24 June 2021 - will make it easier for elderly and disabled family members to occupy granny flats, without the main family home incurring capital gains tax.
The legislation will apply when a granny flat agreement is in place and is not subject to a commercial rent. This is great news for families and friends who are keen to keep a close eye on loved ones - which brings significant peace of mind in these unsettling COVID-19 times.
The change also encourages granny flat arrangements to be more formalised, which is one factor in minimising risks of financial exploitation that is more likely with an informal arrangement.
Our rating: Very positive for those interested in granny-flat style downsizing
Victoria: CBD stamp duty savings on unsold apartments
In an effort to reinvigorate Melbourne’s centre following the COVID lockdowns, from 1 July 2021, if you buy apartment for less than $1 million in the Melbourne City Council area that’s been on the market unsold for over 12 months, you won’t pay any stamp duty.
That’s a big saving – up to $55,000. If the apartment has been unsold for less than 12 months, you’ll pay stamp duty but only half of the usual rate.
It’s worth noting that the same legislation will see increased stamp duty for properties worth more than $2 million, so this is a rare win for those with less to spend.
Our rating: Well worth considering if you’re interested in apartment living
Northern Territory: no more stamp duty concession
For reasons that have not been adequately explained, the scheme that gave eligible seniors and pensioners a $10,000 stamp duty discount when buying a home under $750,000, will not continue into the new financial year.
This is particularly disappointing as it comes at a time of rapidly increasing property prices, meaning that the discount made a substantial difference to older people’s prospect of buying a suitable downsized home.
Our rating: Decidedly disappointing
ACT: New scheme to cut stamp duty for off-the-plan sales
Downsizers looking to purchase a newly-built apartment or townhouse in Canberra will save around $10,000 thanks to a decision by the Australian Capital Territory Government to cut stamp duty from 1 July. The permanent stamp duty cut will apply to off-the-plan home purchases.
In addition, the government has confirmed its existing pensioner stamp duty concession scheme will operate for at least one more year from 1 July and has increased the price threshold to access the scheme by $50,000.
Some final words from Downsizing CEO, Amanda Graham
“The changes coming into place are a mixed bag, with the granny flat, superannuation contribution and Melbourne CBD stamp duty changes most likely to be able to help downsizers,” she said.
“We call on governments to recognise the important benefits of actively encouraging downsizing - both to those choosing to make a move for financial, health and social reasons, as well as freeing up existing housing stock for growing families looking to move into family-style homes vacated by empty nesters.”
Whatever downsizing option is right for you, we have you covered. Start your search today.
Find out more
- Buying a retirement village unit? Here’s the little-known trick allowing you to claim government rent assistance
- 1 July 2021 pension thresholds
- How to slash thousands from your stamp duty bill when downsizing
- Granny flat tax reform confirmed for 1 July start
- Pensioners and downsizers big winners from Canberra stamp duty cuts
Please note this story has been prepared as a general guide only, and should not be relied upon as a substitute for seeking your own independent legal and financial advice.
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