Seniors group says Swan's seniors house downsizing pilot unlikely to work

A seniors group says the newly announced $112 million pilot to help seniors downsize their homes was welcomed but unlikely to work.

The scheme, announced in yesterday’s federal budget release, is designed to allow seniors to downsize their homes without reducing their age pension.

It will provide a means test exemption of up to $200,000 held in cash for ten years but does not include any stamp duty exemption and applicants will have to have owned their family home for at least 25 years.

The Combined Pensioners and Superannuants Association of NSW says the scheme looks unlikely to work.

“While the downsizing trial for age pensioners is laudable, it’s unlikely to encourage many pensioners to sell the family home and move into a smaller dwelling,” the group says.

“Pensioners welcome steps to make downsizing easier, but the 25-year home-owning rule is unnecessarily harsh and will exclude many because they’ve bought their house in their 40s or 50s.

“The restrictions on accessing money in the means-test-exempt fund will also discourage take-up of the offer because pensioners will be penalised for withdrawing money to pay for essential services like medical care.

“Stamp duty still acts as a major disincentive to downsizing.

"Pensioners living in the ACT will act as a litmus test in this trial, because the ACT exempts older people from paying stamp duty.

"The other states and territories should follow suit.”

The three year trial will commence on July 1, 2014 where senior Australian homeowners who downsize when buying another home will have an option to invest at least 80 per cent of surplus funds remaining (up to a cap of $200,000) in a special account. The funds invested in the account would be exempt from the age pension means test for up to 10 years. The scheme would only be available to Australians over age pension age who have owned their home for at least 25 years.