Understanding Government Incentives for Downsizing Seniors
It’s no secret that we have both a housing shortage and an ageing population in Australia. These trends are combining to put pressure on governments to find practical and financial solutions. Read on to find out about the benefits of downsizing, including government incentives.
The practical benefits of downsizing
Downsizing can provide you with a range of practical benefits, including:
- Moving out of a big family home to something more manageable
Let’s face it, time spent maintaining a large family home is time that could be spent doing fun things or just relaxing instead. When you downsize to a smaller home, you’ll spend less time maintaining your home and more time enjoying yourself ‒ maybe taking off to travel Australia or the world. - Location and convenience
If you downsize into a retirement village or land lease community, you can choose accommodation that has on-site facilities and services you enjoy or need. - Enable a ‘lock-and-leave’ lifestyle
A ‘lock-and-leave’ lifestyle is possible when you downsize to a retirement village or land lease community. Whenever you go away, you won’t have to organise yard maintenance or someone to keep an eye on your home for security while you’re away. There’s no need. You can just lock up and go, safe in the knowledge that there is an on-site management service.
Financial benefits of downsizing
Downsizing can also provide you with a range of financial benefits, including:
- Freeing up some of the funds that are tied up in your family home
When you downsize to a smaller and cheaper home, you will be able to access the excess cash to help enhance your retirement lifestyle. These funds could supplement your super and/or your Age Pension.
However, if you are currently receiving a full or part Age Pension, it’s important to get independent financial advice to see what impact (if any) your potential downsizing decision may have on your Age Pension entitlements in terms of the Assets test. You do not have to include the proceeds of the sale of your home in the Assets test for the first two years after you sell your home. - Lower insurance and utility bills
A smaller home will save you money on insurance and energy (electricity or gas) prices. - There are government financial incentives available
Let’s look at these incentives in more detail.
Government financial incentives
You can find a range of government incentives, including:
- Exploring the Downsizer Superannuation Contribution Program
If you decide to downsize and you’re aged over 55, you can contribute up to $300,000 of the sale of your existing home into your super provided you have owned your home for at least 10 years.
Superannuation is a very tax-effective environment in Australia because contributions and earnings are taxed at just 15% (lower than even the lowest marginal tax rate). In addition, you can access your super tax-free once you turn 60 and meet a condition of release (such as retiring from the workforce). - Maximizing Benefits: Stamp Duty Discounts for Downsizers
Some State and Territory governments in Australia (that at time of writing included Western Australia, Victoria, Tasmania and the ACT) will provide eligible applicants with stamp/transfer duty concessions when you downsize. This could potentially save you tens of thousands of dollars when buying your downsized home.
You can find out what downsizing stamp/transfer duty concessions are on offer in your State or Territory by checking stamp duty concessions for downsizers in your state. To make sure the information is up to date, speak to your financial adviser.
Making the Most of Government Incentives for Downsizers
Retirement living can be the best time of your life. We’re committed to making life better for the over 55s. Check out downsizing.com.au for more insights and great advice on living life to the fullest. We also have a great range of ‘over 55 properties’ to help you do that with like-minded people in land lease communities and retirement villages.
