Proposal overlooking the most needy
NATIONAL Seniors’ Rightsizing proposal was pretty straight-forward.
We asked that $250,000 be quarantined from the profits of the sale of the family home and exempted from the Aged Pension means test.
Older Australians could keep this money to pay for essentials and keep their pension and concessions.
Around one in four National Seniors’ members have told us they live in unsuitable houses – they are too big, too expensive to maintain, or even unsafe if your mobility is compromised.
Our aim was to help those older Australians who most needed it – the ones on part and full aged pensions, that top out at $888pf for a single person and $1339.40pf for a couple, including supplements.
The government’s initiative is more about superannuation than downsizing. It’s complex and relies on the transfer of surplus sales proceeds into superannuation.
That money will then be considered for the means test. So those who want to downsize will lose some, most, or all of their pension depending on the calculations.
That was a key reason many home-owning pensioners were staying put before the budget, and it’s hard to see how that will change because of this initiative. There’s also the added issue of stamp duty costs, which vary from state to state.
But here’s a couple of scenarios.
A single pensioner in a house worth $870,000 sells and downsizes to a $320,000 single bedroom unit. They make $550,000 on the sale and would be able to put $300,000 into a super account, leaving $250,000 cash.
This puts them over the pension threshold, without considering any non-home assets (e.g. car and furniture). They would need to earn a return of 4.25% pa on their $550,000 in super and cash just to replace the pension (now $23,096pa, including supplements, with no tax payable), and that’s a tall order in today’s economic climate. They’d also lose the pension concession card, which is worth $2-3000 pa.
A couple who are self-funded retirees have more than $821,500 in non-home assets so are not eligible for a pension. They are asset rich because they have a home worth $2.4 million. They downsize to a unit worth $1.8 million. They can add a further $600,000 in proceeds from the sale to their super, taking it to a total of $1,421,500. The minimum income they are allowed to draw is $71,075 pa, with no tax payable.
They are winners, but hardly living a life of luxury.
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