More than 8000 pensioners downsized last year, but that figure would likely have been significantly higher if not for fears of assets test rules that could lead to a loss of the pension after selling the house.
Now, the Albanese Labor government, recognising this as an issue for many pensioners and keen to tackle a ballooning housing supply shortage, has introduced legislation that could tip the scales in favour of previously reticent pensioners deciding to sell up.
The bill, introduced into the lower house last week, seeks to extend the assets test exemption on pensioners’ home sale proceeds, currently set at 12 months, for a further 12 months, taking it to a full two years. In addition, the bill would also see the deeming rate, an assumed rate of return on assets used to determine pension amounts, lowered from 2.25 per cent to 0.25 per cent per annum.
Read: Expert solution to housing crisis calls for downsizing
The policy was actually proposed by former prime minister Scott Morrison prior to May’s federal election, with Mr Albanese agreeing to the proposal on the same day, describing it as a practical suggestion.
In relation to the bill’s introduction, social services minister Amanda Rishworth said the aim was to provide greater flexibility for pensioners.
“We don’t want people putting off downsizing to a more suitable home because they are concerned about the impact it could have on their payment rate and overall income,” she said. “These changes will hopefully free up larger housing stock for younger families who need it.”
Read: Baby boomers aren’t to blame for housing affordability woes
The legislation will be comfortably passed in the lower house, but will need the support of the Greens and at least one crossbencher in the Senate in order to pass without the Coalition. However, given it was the Coalition’s Scott Morrison who first proposed the concept, that is unlikely to be an issue.
Data released earlier this year by the Australian Bureau of Statistics revealed that the number of spare bedrooms in Australian houses had increased from 12.7 million in the 2017–18 financial year to 13 million in the 2019–20 financial year, highlighting the reluctance of many to downsize.
In addition to last week’s bill, the federal government is also seeking to entice the superannuation sector to invest in social and affordable housing as another way to tackle the supply shortage.
Read: Experts propose including home in the pension assets test
At a round table meeting with leading industry group the Association of Superannuation Funds of Australia (ASFA), assistant treasurer and minister for financial services Stephen Jones put forward the idea, which came after the government announced that it would make $575 million from the National Housing Infrastructure Facility (NHIF) available to encourage private investment, particularly from superannuation.
“There are many areas where the government can partner with the super funds to advance the national interest,” Mr Jones said. But the superannuation sector, while not opposed the move, is yet to be convinced, citing high risk and low financial returns.
In a statement released following the meeting, the ASFA said it was the start of the conversation and that “identifying models for investment which work economically, both for the government and for fund members, will be key”.
After a fifth consecutive interest rate hike last Tuesday, any legislation that will help make downsizing more affordable for pensioners will be welcome.
Are you considering downsizing? Will the new legislation sway your decision? Why not share your experience and thoughts in the comments section below?
So, for those who already downsized, will this be readjusted or are they losers for acting earlier when asked? What about those who haven’t downsized but get income calculated based on the 2.25% deeming rate for anything over $85,000 for couples? Will they immediately see a drop?