Older Australian couples who downsize can add $600,000 into their superannuation

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A sculpture entitled 'Old Couple on a Bench'. Reuters/Toby Melville

Older Australians, specifically those aged 65 and above, can add an extra $300,000 each into their superannuation fund if they decide to sell their homes. The incentive is set to start in July 2018 and will apply to those who sell their family homes which belonged to them for at least 10 years.

Both members of a couple can participate and make non-concessional contributions of $600,000 in total. Based on the budget paper, these contributions will be in addition to those under existing rules and caps. Participants will be exempt from the existing age test, the $1.6 million balance test and work test.

The decision is part of the Turnbull government’s efforts to increase housing supply. It is expected to free up larger homes for younger families.

Moreover, pensioners affected by the asset test changes announced in January will have their concession cards reinstated, which means 92,300 more people will have access to discounts. Annette Barbetti, a 74-year-old who retired in 2004, told Sydney Morning Herald that a lot of older people “will be very pleased” about the latest announcements. "One friend told me she would spend too much moving and could not put the money into super so this will be very helpful,” she said.

Jason Andriessen, StatePlus’s chief customer officer, said retired homeowners have more wealth in housing than ever before. He told the West Australia that eight percent of retirees have their own home, but do not have much superannuation, adding that the move to downsize is a good thing for several retirees, as well as those planning to resign.

How it benefits younger Australians

The said measure is expected to cost $30 million over four years. Younger Australians will be benefited too, as they will have to pay less tax on their deposit savings after they managed to salary sacrifice into their superannuation.

By July 1, first home savers can tell their employers to deposit money from their pre-tax income into their super account. They can make added contributions to their super through salary sacrifice up to a maximum of $15,000 a year and $30,000 in total.

Some critics argue that the amount doesn’t come close to the money needed for an average house deposit. But for economists, there is a good chance that the First Home Super Savers Scheme will flood the market with more money and actually push prices up. For other news in Australia, see the clip below. 

Read more: Australian visas to become more expensive starting July 1

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The Sydney Morning Herald/YouTube