Budget 2017: Retirees’ superannuation changes
The government is encouraging older Australians to sell their family home and put the money into super.
Compared to the plethora of changes to superannuation announced in last year's budget, this year's spending plan didn’t contain any huge surprises affecting Australian's retirement savings.
Other than the First Home Super Savers Scheme, which is causing the most hype, the biggest superannuation policy change in last night's budget aims to encourage ageing Australians to sell their family homes, or "downsize", and add the proceeds to their superannuation.
The government proposes allowing Australians aged over 65 to downsize their home and make non-concessional contributions to their superannuation of up to $300,000 from the proceeds of the sale.
This $300,000 limit is per person rather than per property, meaning a couple can each direct the amount into their separate superannuation accounts to a combined total of $600,000.
Currently there is a limit on how much you can contribute towards your superannuation; if a person has $1.6 million in super savings they cannot make any additional non-concessional contributions.
Under the new proposal, this cap will not apply to Australians aged over 65 who sell their home to make non-concessional contributions. In order to qualify for this downsizing cap, the property being sold must be the seller's primary place of residence and must have been owned for at least 10 years.
The government says the idea behind this policy is to help solve Australia's housing affordability crisis.
The superannuation sector, while not against the policy, is skeptical of the potential for positive impact.
Australian Institute of Superannuation Trustees CEO Eva Scheerlinck said these downsizing measures, while unlikely to have a significant impact on housing affordability, will "at least give greater flexibility to those older Australians wanting to move into a smaller home and also free up housing stock".
Superfund Partners director Mark Beveridge said the measure won't affect housing supply.
"It is doubtful that the incentive of putting money into superannuation free of the thresholds will be the motivating factor in downsizing. For an average couple on the age pension with say $550,000 in assessable assets, there is no incentive at all for them to downsize and put money into superannuation because it means they immediately lose all their age pension," he said.
Any change in your super balance from selling your home will affect the Age Pension assets test, meaning those who take up the offer could lose some of their pension as asset levels increase.
The downsizing incentive is expected to cost $30 million over four years.
- Starting your first job in the new year? Here are 4 things you need to know
- Will you have to work harder and for longer because of coronavirus?
- Sunsuper vs HESTA: Which super fund is right for you?
- Hostplus vs HESTA: Which super fund is right for you?
- QSuper vs Sunsuper: Which super fund is right for you?