As you get older, the idea of downsizing your home becomes more appealing. Only you’re concerned about losing money to stamp duty and your Age Pension.
If the government passes new incentives for downsizers in the next budget, your troubles could be answered.
In with the young, out with the old. This is the government’s latest solution to our housing affordability crisis. Although the details are a little sketchy at present, the plan is for retirees to receive financial incentive to downsize their family home in a bid to release more housing stock to the market for younger families.
So, if the thought of downsizing has crossed your mind, it could soon be time to bite the bullet.
If the new incentives go through, you’d benefit from two main areas:
Stamp duty is one of the biggest deterrents for elderly people considering downsizing – and according to the Productivity Commission, that’s 15% of you. But the government’s proposed tax incentives include a one-off exemption from stamp duty for elderly citizens purchasing a smaller property. On a NSW property worth $500,000, that’s a saving of $17,990. This would mean you get to keep the majority of the profit from selling and downsizing, which could be used to boost your retirement income.
Profits from selling your family home currently affect the welfare payments and concessions available to you. Under the new budget plan, you’d be able to quarantine up to $250,000 from the asset test so long as the funds are invested in aged-care bonds or an approved superannuation scheme. This way, your super gets a boost and your Age Pension is unaffected. The exemption would operate with a time limit to allow you to buy your next home.
It means greater choices.
Under the new scheme, you’d no longer be locked into a home that’s too big, expensive and time-consuming to maintain. And you wouldn’t be trapped in an asset rich, poor income situation, which is a common scenario for many retirees these days.
Selling your family home can be an emotional decision and not one to take lightly. You need to weigh up all the pros and cons and make sure it’s the right decision for you. Whether the new budget plan would be enough to entice you to downsize should depend on your individual situation and finances.
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