Why the Federal Budget’s downsizing-to-super boost needs a number crunch

Posted 22 May, 2017


A PLAN to encourage older Australians to downsize their homes and shift extra money into superannuation has been broadly welcomed, but with a warning that retirees will have to do their sums.

Last week’s Federal Budget included a measure allowing over-65s to each pump $300,000 from their home sale proceeds into super — on top of existing rules, caps, age limits and work tests — in an attempt to free up larger homes for younger families.

The Property Council’s executive director of retirement living, Ben Myers, said the plan removed a big barrier for retirees wanting to improve their quality of life.

How to access your super early

“One of the biggest drags on Australian health budgets is the impact of older people living in three, four or five bedroom houses not suited for ageing, with high levels of maintenance and trip hazards,” he said.

“Allowing eligible seniors to sell their home and invest up to $300,000 — effectively $600,000 for couples — into superannuation will encourage downsizing and lead to happier and healthier lifestyles.”

Superfund Partners director Mark Beveridge said the allowance to override existing caps and rules was great for financial planning flexibility and reducing tax for older Australians.

“It is a nice option to have when the downsize decision has been made for other reasons,” he said.

BDO national super leader Shirley Schaefer warned that the plan did not address the fact that some older Australians held onto their family home because its value was exempt from age pension means testing.

“In other words, it may not be effective for people where the extra assets in superannuation will be counted in the age pension asset test,” she said.

Baillieu Holst financial adviser Helen Dundon said while it could free up money for retirees to help with ongoing living expenses, “there could be a reduction in age pension payments due to an increase in assessable assets”.

NGS Super CEO Anthony Rodwell-Ball said people needing to balance a small Centrelink pension and higher superannuation balance would have to look closely at the incentive.

The SMSF Association has supported the move. “We welcome the ability for older Australians to top up their superannuation where downsizing their home provides them with funds to do so,” said its CEO, John Maroney.

The Budget’s other key superannuation measure was to allow first home savers to contribute up to $15,000 year or $30,000 in total into super — within current contribution caps — to fund a home deposit. Only these extra contributions and associated earnings could be withdrawn for the deposit, not a person’s other super money.

Mr Rodwell-Ball raised concerns about the infrastructure costs related to this measure. “This particular initiative will be logistically impossible to implement by 1 July 2017 in a cost-effective manner,” he said.