As adult children (finally) leave home, many parents think about downsizing. But according to National Seniors and other consumer and housing advocacy groups, stamp duty can make such a move prohibitive.
A recent report by the Advisory Panel on the Economic Potential of Senior Australians entitled Realising the economic potential of senior Australians: turning grey into gold, noted that the State Government tax is a “financial disincentive to moving, often doubling the cost of moving house.”
“We’re very aware of large and attractive properties suitable for families where older parents, say in their 60s, are rattling around by themselves,” says Helen Young, a Sydney real estate agent.
“If they don’t make a move into something smaller by the time they’re 70-75, then they are unlikely to do so. My own neighbour is 87 years of age, widowed and living in a house that is 270 square metres.
“He says he’s not moving now because he hasn't got the energy to do so, but he didn't move earlier when his wife died 18 years ago because he didn't want to ‘waste’ money on stamp duty. I can perfectly understand his decision. His attitude is not unusual, but all these large homes occupied by one or two people are putting pressure on the housing market for younger families.”
Ms Young says this is an issue regardless of employment or retirement status.
The Federal Minister for Ageing, Mark Butler, says he would like to see stamp duty cut altogether for older Australians in receipt of a pension.
“Many people want to move into a smaller home that is more suited to their needs but stamp duty can make the move very expensive,” he said.
He said another disincentive to downsizing was the pension eligibility rules. Mr Butler said the Federal Government had acted on this with a $112.4 million trial program funded in the budget.
“Currently, if you sell your home, the sale proceeds factor into your pension eligibility means test, whereas if you just hold onto the asset, it doesn’t affect your pension.”
“So we’re funding a trial which will allow sale proceeds to be deposited in a special account which will not affect your pension.
“We’re doing our bit to help older Australians downsize and the states should do their bit.”
Under the Federal trial, eligible pensioners who have lived in their own home for at least 25 years and want to downsize will need to put a minimum of 80% of the excess sale proceeds from the sale of their former home into a special account, up to a maximum of $200,000 (plus earned interest).
The funds in this account will not be counted under the pension income and assets test for up to ten years or until a withdrawal is made from the account. It is expected around 30,000 pensioners could benefit from the exemption throughout the trial period.
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