5 minute read

A guide to government incentives for seniors to downsize

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If you ever thought about downsizing your home, but need that one more reason to be convinced, here is a magic trick: government incentives for senior citizens.

Although selling your property and moving into a downsized space already comes with plenty of benefits, it becomes even more attractive with access to extra financial help. How does this sorcery work? We already used the magic tricks up our sleeves and collected the information you need to get started in your wicked downsizing journey.

Let’s talk downsizing and why it’s a good idea

As an experienced Aussie homeowner, you probably have played with the thought of swapping your current house with a smaller one. You might not need all this space anymore and not enough people are taking up the rooms either. And unfortunately there is no spell you can cast to make the tiresome housework go away, leaving you to spend hours and hours to keep your home clean and tidy. Or maybe because your latest fortune-cookie said it’s time for a change. Meaning: scale down and make room for a bigger lifestyle.

Downsizing follows the idea of updating your living situation to your current needs and creating a great foundation for your retirement plans at the same time. By the way, we highly encourage considering downsizing in your 50s, whether you are a full working force or semi-retired, because you are young enough to enjoy life in your new home to the fullest.

Imagine all the time you can free up by not having to constantly roam around your four walls, having to fix, clean, groom, scrub, declutter and decorate until you lose the sparkle and purpose for having a big home. Going smaller means more time for the things you really want to do! Like stepping up your lifestyle game, picking up new hobbies and updating your social life.

But there is also a financial bonus! When selling your current home to then buy a downsized one, you can also unlock equity – often more than $200,000 – which is a nice add-on to your retirement savings or age pension. Not to forget the reduced costs for bills and house maintenance.

However, the stars don’t have to align in order for you to make use of the government incentives in front of you. There are more schemes that support your downsizing ride to retirement land.

What is the downsizer superannuation contribution program?

Depending on your age and situation, you are able to access your Superannuation somewhere between 55 to 60 years old on average.

As of August 2023, the Australian Taxation Office has an enchanting superannuation contribution program on offer for people aged 55 or above. When you sell your current property, you can be eligible to add up to $300,000 from the proceeds of the (part) sale to your super fund. And for couples it’s up to $600,000! This type of downsizer contribution also doesn’t affect any contribution caps or your total total super balance at first.

If you are not trained in financial fortune-telling, best to seek advice from an independent advisor that can break down your individual situation and how much you can or should contribute.

What are stamp duty discounts and how does it work for downsizers?

Stamp duty is also known as land transfer duty. It’s essentially a tax fee charged by the government when you are buying a new property. This also applies when downsizing your current home.

Now watch closely for a WOW-moment: The state of Victoria has put on its magic gloves and pulled a great incentive out of the hat.

There is a full waiver of stamp duty available to assist older Australians when purchasing a smaller property. It’s a one-off chance to be exempt from that tax fee specifically designed for elderly homeowners to downsize. We repeat. You can only use this incentive once and for your next long-term home.

For Victoria, this means you get to keep up to $12,750 in your pouch! If you really needed another reason to swap homes, this is the one.

What are my options when I need aged care support?

As you get older you might need a little support with your household, personal care, equipment or everyday living things. If you are looking into aged care help, how much you pay is based on both your income and assets.

There is an income test and an asset test to determine whether you are eligible for government assistance or how much you contribute in order to cover the costs for the service. Note: there is also an income and asset test for your pension, but these are two separate things when calculating your aged care service.

If you seek aged care support, you can still live independently in your own home but choose to sell the house for a downsized version. Your family home is treated differently if someone, e.g. your partner, is still living in it, meaning the value of the property is not counted towards the asset test. However, there is a government Home Exemption Cap and as of March 2022 the amount of the value of your home is capped at $175,239.20. The cap applies separately to each person in the relationship, so in most cases 50% of the total property value belongs to each of you.

Looking to downsize?

Being in the downsizing business for two decades, we really know how to champion the home-with-a-bigger-lifestyle-situation here at Lifestyle Communities®.

Moving into a splendid house within a like-minded community and lots of great facilities connected to your property – doesn’t that sound magical?

Get comfortable in your new way of living with more time for the fun things in life. Lifestyle Communities® has indoor or outdoor pools, a cinema, communal spaces, a library, workshops, sports courts and plenty of other amenities on offer.

There are different neighbourhoods in Victoria for you to explore with the option to do a virtual home or community tour: check out homes in Mornington Peninsula, Geelong and Bellarine Peninsula, the North West or South East of Melbourne.

No hocus pocus, just a dedicated team helping you to find the right future home for all-year holiday vibes. Whether you need another chat about how to start your downsizing journey or just have any other questions, get in touch and we will get back to you shortly.