Government incentives for older Australians are (sort of) thick on the ground. But are they as valuable as the government would like us to believe they are.
Take the downsizer contribution as an example. The aim of the scheme is to encourage older Australians to move out of their ‘too large’ homes and free up housing for younger families. The original statement from Treasury says the intent is “reducing barriers for older Australians to downsize from homes that no longer meet their needs”.
When the legislation was first introduced in July 2018, you had to be 65 to participate. That qualification was reduced to 60 in July 2022 and since 1 January 2023, eligibility starts at 55.
But there’s a problem, according to YourLifeChoices members – actually, two problems. And they’re in addition to the impact extra funds in superannuation could have on any Age Pension payments.
YourLifeChoices members emphatically told us that age is not the hurdle preventing them from taking advantage of the scheme that allows them to stash $300,000 from the sale of the home in super – but do not count towards any of the contribution caps or the $1.7 million balance cap.
The major barriers are stamp duty on the purchase of a new home and a shortage of suitable smaller homes in their desired location.
This comment was typical: “We would certainly like to downsize, however the thought of giving between $50,000 and $65,000 to the government in the form of stamp duty is an absolute disgrace just for the act of moving home. They’re dreaming.”
And this comment outlined the problem of housing availability: “And at the age of 55 or 60 we relocate where? A nursing home? Or try and find a suitable small home or unit in this current difficult market? It’s a good idea, but not so easy in practice.”
Another wrote: “If the government is serious, they will abolish stamp duty for genuine downsizers and remove the 10-year limit to accommodate those downsizers where there are extenuating circumstances.”
You can calculate the stamp duty on selling your home here, but given decades of price increases, it’s a red flag for many.
Taxation statistics from the Australian Bureau of Statistics (ABS) show a record high $24 billion was collected in stamp duty during 2020–21. Stamp duty accounted for more than 20 per cent of state and local government tax revenue in NSW and Victoria in 2021.
In NSW, first home buyers are able to choose between paying a cheaper (in the short term) land tax or stamp duty, but that’s no use to older downsizers.
The downsizing debate comes with much baggage – in addition to stamp duty and suitable housing alternatives.
- Legal fees – payable on the sale and purchase of your home.
- Sales fees – for advertising, real estate commission and auctioneer costs.
- Preparing your home for sale – do you need to paint, replace carpet, hire furniture, refresh the garden?
- Building inspection report – a handy item in the sales package.
- Moving fees – even if you sort and pack yourself, you’ll no doubt need a professional removal service.
- Connection fees – you’ll need to get utilities established and set up before you move in.
Before you downsize, MoneySmart suggests you:
- Consult a legal professional to review sale contracts and oversee settlement.
- Get independent advice from a financial adviser about options for investing your sale proceeds.
- Ask the Services Australia Financial Information Service how it will affect your Age Pension or government benefits.
Should the government consider axing stamp duty for downsizers? Given stamp duty is collected by the states and territories, do you think that could ever happen? Why not share your thoughts in the comments section below?