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Super incentives to downsize home could leave less wealthy retirees worse off: Accountant

Many lower-wealth retirees would be left worse off if they take up the Government's proposed new scheme to help them downsize their home.

Key points:

• Retirees eligible for a part-pension likely to be worse off if they downsize under scheme
• Pensioners lose $78 per year for every extra $1,000 in assets, meaning they would need to get a 7.8pc per annum return
• Retirees who already have too much in asset value to get the pension will benefit from being able to boost tax-free super

The 2017-18 federal budget, released a fortnight ago, contained several housing affordability measures, including a scheme to encourage older people in retirement to move out of big family homes into smaller houses and apartments.
From July 2018, the scheme will allow people aged 65 or more to put up to $300,000 from the sale of their homes into superannuation, earnings on which are tax-free after retirement.
The additional money will be also exempt from various existing limits on superannuation contributions, including the $1.6 million balance cap introduced in last year's budget.
Jonathan Philpot, a partner at accounting and advisory firm HLB Mann Judd, said the changes will undoubtedly benefit some retirees who want to downsize, particularly those otherwise unable to contribute more to their super due to various restrictions.
"This could include those who do not pass the work test (this would be the majority) or who have total super balance above $1.6 million (this would be the minority)," he wrote in a note on the changes.

(Australian Broadcasting Corporation )