Tuesday, March 21, 2023

Coalition offers incentives for older Australians to downsize

Pensioners, self-funded retirees and working older Australians are being offered new financial incentives to sell their family home earlier and downsize to something smaller.

The Prime Minister will use today’s Liberal campaign launch in Brisbane to unveil the new policy, aimed at freeing up larger homes in the property market for younger families.

The policy has two key planks — the first is an extension of an existing tax break allowing up to $300,000 from the sale of a family home to be placed into superannuation without a penalty.

The second is another tweak encouraging pensioners to sell by exempting the proceeds of the sale from the assets test for two years instead of one.

Prime Minister Scott Morrison said it was aimed at clearing hurdles for older Australians to sell their home and put more larger properties on the market for those looking to get in.

“We are now giving Australians more choice to decide how they want to live the next stage of their life by removing financial barriers for people wanting to downsize their home,” Mr Morrison said.

“By removing barriers for Australians downsizing to residences that better suit their needs and lifestyle, we are helping to free up larger homes for younger families”.

Federal Labor also used its campaign launch two weeks ago to launch a housing policy, outlining a shared-equity scheme aimed at helping people to buy into the market.

Changes to super rules

Under the current rules, anyone aged over 65 can sell their home of 10 years or more and place $300,000 of the proceeds into their superannuation.

The $300,000 is outside of contribution caps, and so attracts significant tax breaks.

Couples can double the benefit, and contribute $300,000 each to their superannuation.

The age limit was already due to be lowered to 60 from July 1, but the Coalition has promised to instead lower it to 55 if re-elected.

The policy was first introduced in the 2017-18 budget, but has had a relatively low take-up rate since then.

Some housing policy experts have pointed to evidence suggesting many older Australians are emotionally attached to their properties and are unlikely to be motivated by financial incentives.

Pensioners encouraged to sell

Pensioners looking to sell their home face significant penalties for doing so, as while the family home is exempt from the assets test, proceeds from a sale are included.

It means pensioners are effectively discouraged from selling their home and buying or renting a smaller, cheaper property.

Currently, pensioners are given a year’s grace period after selling to buy a new home or arrange their assets, during which the cash made from the sale is exempt from the assets test.

The new policy would double that period to two years from January 1, 2023.

The government expects the policy will have a relatively low cost to the budget, estimating a cost of $62 million over four years.

Nearly 2 million pensioners currently own their own home.

Labor announces advanced manufacturing fund

Federal Labor has also detailed a new policy, announcing it will establish a $1 billion fund to invest in advanced manufacturing projects if it is elected.

The money would come from Labor’s already-announced National Reconstruction Fund.

The fund would offer loans, guarantees or equity to businesses looking to expand their advanced manufacturing operations, operating in a manner similar to the Clean Energy Finance Corporation.

An independent board would make investment decisions, but Labor said it would prioritize supporting innovation and creating new jobs.

Labor has previously indicated it would honor contracts already signed under the government’s similar $1.3 billion Modern Manufacturing Initiative.

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