Downsizers and pensioners are federal budget winners
Older Australian homeowners who have sought to downsize in the past, but have been put off because they could not invest the proceeds into superannuation, may want to consider resurrecting their sale plans.
Motivated by a desire to boost housing supply, the Government has used the recent federal budget to reduce barriers to downsizing by enabling retirees who sell larger homes to reinvest capital into the tax-friendly superannuation system.
This incentivises more older Australians to unlock the value of over-sized housing assets to enjoy a comfortable retirement, while also increasing housing stock available for younger families and first home buyers. First home buyers will also be allowed to make voluntary superannuation contributions up to $15,000 per year and $30,000 in total to put towards a deposit.
How does it work?
As of 1 July 2018, Australians aged 65 and older will be able to make non-concessional (post tax) contributions to their superannuation accounts of up to $300,000 from the proceeds of the sale of their principal home, which they have owned for ten years or more. Both members of a couple can participate in the scheme, meaning a combined $600,000 can be contributed to superannuation from the sale of the one home.
These new contributions will be in addition to any other voluntary contributions homeowners are able to make under current contribution rules. The work test and $1.6 million balance test which ordinarily apply when making contributions, will not be applicable in these circumstances.
Pensioner cards returned
There is good news for older Australians who lost their Pensioner Concession Card on 1 January due to asset testing changes. The asset threshold above which older Australians were not eligible for pensions dropped from $793,750 to $542,500 for single homeowners and from about $1.1 million to $816,000 for couple homeowners. Many older people not only lost Centrelink pensions, they also lost accompanying Pensioner Concession Cards.
More than 90,000 of these people will now have their pensioner concession cards reinstated, and again have access to a range of state and national benefits, including:
- Discounts and concessions offered by states and private providers for things such as public transport.
- Access to subsidised medication.
- Eligibility to receive the Energy Supplement, to assist in energy costs.
- Hearing services from the Department of Health.
The Government will provide $268.9 million over two years for a one-off winter energy payment in 2016-17 of $75 to singles and $125 per couple. In addition, it will provide $5.5 billion for home support services for the elderly as Australia’s population continues to age. However, the residency requirements will be tougher, with recipients required to have 15 years of continuous Australian residence.
If you would like to find out more regarding how any outcomes of the federal budget may impact you, call MyState Wealth Management on 1300 651 600 or visit mystate.com.au/wealth
Information is current as at 22 May 2017. We recommend you seek independent tax advice. This is general advice only, before making any decisions please speak with a MyState Wealth Management Financial Planner.