Younger downsizers will be able to boost their superannuation when they sell their home, while the Australian Government will make it easier for retirees to tap into the equity of their existing home.
These are the headline over 50s housing announcements from the 2021-22 Australian Budget delivered tonight.
As part of the Budget, Treasurer Josh Frydenberg has announced that the eligibility age for the government’s downsizer superannuation scheme will be reduced from 65 to 60.
The downsizer contribution allows people to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.
Both members of a couple can contribute in respect of the same home, and contributions do not count towards existing after-tax contribution caps.
According to the government’s budget papers, the measure will allow more older Australians to consider downsizing to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families. Another expected benefit is that the changes will help Australians to retire early.
In separate media coverage this week, it was claimed the change could trigger some $10 billion in property sales by downsizers.
The changes require legislative amendment and therefore are not expected to come into place until 1 July 2022.
However, in making these changes, the government has not addressed one of the fundamental overall issues with the scheme relating to pension payments.
Any downsizer superannuation contribution will count towards a person’s pension assets and income limits, meaning that it could lead to reduced pension payments. This means the scheme is mainly suitable for self-funded retirees.
Separately, the government has announced changes to improve the uptake of its Pension Loans Scheme, which allows people who are eligible for the pension to loan money from the government using property they own as security.
These changes will cost the government $21.2 million over four years.
The first change will, from 1 July 2022, allow scheme participants to access payments in up to two lump sum payments, rather than via fortnightly payments which is currently the case.
This means scheme participants will be able to access up to $12,385 per year for singles, or $18,670 for couples, via either one or two lump sum payments.
These payments will be able to be accessed by pensioners, along with self-funded retirees who would otherwise be eligible for the pension.
Secondly, and also from 1 July 2022, the government will introduce a No Negative Equity Guarantee so borrowers will not have to repay more than the market value of their property.
Finally, the government will invest funds to raise awareness of the Pension Loans Scheme through improved public messaging and branding.
The scheme’s current interest rate is 4.5 per cent, and remained unchanged in tonight’s budget.
Find out more:
- The downsizer contribution superannuation scheme: your questions answered
- Surging house prices deliver $286,000 retirement funds boost to downsizers, new report finds
- Budget fact sheet on downsizer superannuation scheme and Pension Loans Scheme changes
- Australian Government’s Pension Loans Scheme site
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