Government drops downsizer contribution age to 55

Under the downsizer scheme, eligible candidates can contribute up to $300,000 from the proceeds of selling their property into their superannuation. The scheme was introduced to incentivise more older Australians to sell to increase the supply of larger homes for younger families.

Prior to the 2022 election, the Morrison government reduced the downsizer contribution eligibility age from 65 to 60 and now the federal government has moved to reduce the age further to 55 and over.

Along with the individual contributions of $300,000 upon the sale of a home, couples aged 55 and over can make a total contribution of up to $600,000 from home sales ($300,000 for each spouse).

Assistant Treasurer and Minister for Financial Services, Stephen Jones MP, commented: “Labor built Australia’s superannuation system, we are proud of it, and we’ll always fight to strengthen it.”

In September 2022, an additional 12-month asset test exemption, the Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022, was introduced to help incentivise more pensioners to downsize.

The purpose behind the legislation was to give older Australians more time to “purchase, build, rebuild, repair or renovate” a new principal home before their pensions were affected.

The changes reduced the deeming rate, dropping them from 2.25 per cent to 0.25 per cent per annum on principal home sale proceeds intended to purchase a new home.

Before the changes, if a pensioner or other eligible income support recipients intended to use the proceeds from a home sale to build or purchase another home, the proceeds are exempt from the social security assets test for up to 12 months.

According to the government, over 8,000 pensioners downsized in 2021 and hoped that the additional 12-month exemption would incentivise more to downsize due to housing stock being at a premium.

Minister for Social Services, Amanda Rishworth, said at the time that the change would “benefit thousands of pensioners and other recipients each year”.

“We don’t want people putting off downsizing to a more suitable home because they are concerned about the impact it could have on their payment rate and overall income,” she said.

“These changes will give pensioners more flexibility to find a suitable new home and it will hopefully free up larger housing stock for younger families who need it.”

[RELATED: Government introduced incentive for pensioners to downsize]