Elderly home owners who are asset rich but have little income should be afforded the ability to downsize by a more accommodative aged pension means testing program according to one property lobby group.
The Property Council of Australia (PCA) believes many older Australians are effectively trapped in unsuitable homes, as they wish to move to age-appropriate accommodation yet can’t do so because of the effect selling their family home would have on their pension eligibility.
“Many older Australians have a desire to move to more age appropriate accommodation, like a retirement village apartment or villa, but will be hit with a reduction in their income despite owning exactly the same amount of assets if they make the move,” PCA executive director – retirement Mary Wood said.
“The Property Council is proposing an adjustment be made to the means test, to exempt some proceeds from the sale of the family home by full-rate age pensioners aged over 75. The cost to the Budget is minimal,” Wood said.
The PCA claims figures from the Australian Bureau of Statistics show a third of older low income households have less than $5000 in liquid assets available to them.
“A typical older Australian will have $600,000 in property assets but will be living day-to day on a fixed income”, Wood said.
“We need to put in place the right policies that help older Australians downsize. All too often, a pensioner considers downsizing only to reject it because it would mean a hit on their pension.”
Wood claims the PCA’s proposed means test changes would provide a better quality of life for older Australians while also strengthening the pension system.
“The reasons for downsizing are often health related – wanting homes without steps, or big backyards to maintain, and lower rates and utility costs.
“It makes little sense, both from an economic and a health and wellbeing perspective, to trap older people in large and often unsuitable family homes, with little money available to spend.
“This type of targeted reform that removes the current disincentive to downsize will benefit income poor pensioners, as well as make the pension system fairer and more sustainable.”
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