Coalition unveils policies to encourage older Australians to move into smaller homes

Retired, self-funded retirees and working older Australians are getting new financial incentives to sell their family home early and downsize to something smaller.

The Prime Minister will use the launch of today’s liberal campaign in Brisbane to unveil the new policy aimed at freeing up bigger homes in the property market for younger families.

The policy has two main thrusts: the first is an extension of an existing tax benefit that allows up to $300,000 from the sale of a family home to be placed in retirement without penalty.

The second is another adjustment that encourages retirees to sell by exempting the proceeds of the sale from the asset test for two years instead of one.

Prime Minister Scott Morrison said it aimed to remove barriers for older Australians to sell their homes and put more larger properties on the market for people who want to move in.

“We are now giving Australians more choice in deciding how they want to live the next phase of their lives by removing financial barriers for people looking to downsize their homes,” said Mr Morrison.

“By removing barriers for Australians downsizing to housing more suited to their needs and lifestyle, we are helping to free up larger homes for younger families.”

Federal Labor also used its campaign two weeks ago to launch a housing policy, outlining a share-share scheme to help people buy into the market.

Changes to super rules

Under current rules, anyone over the age of 65 can sell their home for 10 years or more and put $300,000 of the proceeds into retirement.

The $300,000 is outside the contribution limits and thus attracts significant tax benefits.

Couples can double the benefit and contribute $300,000 each to their retirement benefits.

The age limit would be lowered to 60 years from July 1, but the coalition has promised to lower it to 55 years upon re-election.

The policy was first introduced in the 2017-18 budget, but has had a relatively low take-up rate since then.

Some housing policy experts have pointed to evidence suggesting that many older Australians are emotionally attached to their properties and are unlikely to be motivated by financial incentives.

Retirees encouraged to sell

Retirees who want to sell their home risk hefty fines for doing so, because while the family home is exempt from the asset test, the proceeds of a sale are included.

It means that retirees are effectively discouraged from selling their homes and buying or renting a smaller, cheaper home.

Currently, post-sale retirees are given a one-year grace period to purchase a new home or settle their assets, with the cash earned from the sale being exempt from the assets test.

The new policy would double that period to two years from January 1, 2023.

The government expects the policy to be relatively low cost to the budget, an estimated $62 million over four years.

Nearly 2 million retirees currently own their own home.

Labor announces advanced manufacturing fund

Federal Labor has also worked out a new policy, announcing that it will establish a $1 billion fund to invest in advanced manufacturing projects if elected.

The money would come from Labour’s already announced National Reconstruction Fund.

The fund would provide loans, guarantees or equity to companies looking to expand their advanced manufacturing operations, in a manner similar to the Clean Energy Finance Corporation.

An independent board of directors would make investment decisions, but Labor said it would prioritize supporting innovation and creating new jobs.

Labor has previously indicated it would honor contracts already signed under the government’s similar $1.3 billion Modern Manufacturing Initiative.

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