2.1
This chapter considers the evidence received from submitters regarding the Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022 (the bill) and concludes with the committee’s views and recommendation.
Submitters’ views
2.2
The committee received three submissions regarding the bill from the following organisations:
Financial Services Council;
National Seniors Australia; and
the Australian Housing and Urban Research Institute.
2.3
All three submitters were broadly supportive of the bill’s intention to reduce the impact of selling and purchasing a new principal home on a pensioner or other income support recipient’s rate of payment.
2.4
The Financial Services Council, the peak body which sets mandatory standards and develops policy for the financial services sector, offered its support for the specific changes proposed in the bill, as well as its overall objective. It observed:
These are simple, effective changes to help individuals make decisions to ‘right-size’ their home to unlock trapped equity, boost their income and improve their quality of life in retirement.
2.5
National Seniors Australia (NSA), the peak consumer body for older Australians, provided the committee with research highlighting the issues the bill seeks to address:
We have found that a proportion of older people view the impact of downsizing on pension entitlements as one of the key factors discouraging seniors from downsizing. One-third of people planning to downsize indicated they would be encouraged to downsize if policy changes meant the extra money didn’t affect their pension.
2.6
NSA expressed support for measures to remove this barrier to encourage Australians to downsize as they age.
2.7
NSA specifically recognised that the bill may assist those experiencing delays in settlement for new housing, as well as those rebuilding or relocating after natural disasters.
2.8
It also highlighted that the exemption extension would bring settings into line with those offered to people entering residential aged care. NSA considered this a positive step, given that the change could benefit older people with limited life‑expectancy wishing to downsize and remain in a home environment (rather than in residential aged care) whilst receiving aged care support.
2.9
NSA outlined some reservations about the time-limited exemption period proposed by the bill, and encouraged the government to consider further changes to age pension means testing rules to further promote downsizing among older Australians.
2.10
NSA submitted that even under the proposed changes, pensioners may not be inclined to downsize, suggesting that concerns may remain about losing pension entitlements at the conclusion of the two-year exemption period.
2.11
However, the explanatory memorandum to the bill makes clear that the amendments double the assets test exemption period from a maximum of
12 months, to a maximum of 24 months. The explanatory memorandum also clarifies that on top of this, the current, additional 12‑month extension will continue to be available on a case-by-case basis for extenuating circumstances. This means that in exceptional cases, home sale proceeds could be exempt from social security assets testing for up to 36 months from the date of the house sale.
2.12
The Australian Housing and Urban Research Institute (AHURI), a national research institute dedicated to housing, homelessness, cities and related urban research, set out several ways that downsizing could benefit households, including:
improving retirement incomes through equity release;
reducing maintenance, cleaning, and other housing costs; and
facilitating access to service-integrated housing such as retirement villages.
2.13
AHURI also outlined the benefits that increased downsizing could have on broader economic and societal objectives, including:
reducing the underutilisation of housing and thereby improving the match between housing needs and existing stock; and
improving housing affordability or home ownership access for younger people and families.
2.14
AHURI considered that the proposed legislation would ‘provide some comfort to those in retirement selling and purchasing a new home’. It noted that the bill would achieve this by permitting greater flexibility around decision-making about future housing, and recognising the delays that can occur in settlement for new housing or for those rebuilding or relocating after natural disasters.
2.15
AHURI acknowledged that the bill might reduce or remove one of the disincentives around relocating, but suggested that the proposal might be of equal benefit to those choosing to invest all of the proceeds of a sale into a similar, or even larger property, in addition to those who choose to downsize.
2.16
AHURI added that going forward, it would be important to monitor whether the proposed legislation resulted in an increase in downsizing and ascertain which demographics were its main beneficiaries.
Committee view
2.17
The committee recognises that people weigh up many factors when making a choice to downsize their home. It appreciates that for pensioners and other income support recipients, a key consideration in the decision is how their income support payments will be affected. The committee highlights NSA’s evidence which indicates that a proportion of older people view the impact of downsizing on pension entitlements as one of the key factors discouraging seniors from downsizing.
2.18
The committee notes the broad support from submitters for the bill’s intention to reduce the impact of selling and purchasing a new principal home on a pensioner or other income support recipient’s rate of payment. It welcomes the specific amendments to apply the lower deeming rate to assess income on principal home sale proceeds and extend the assets test exemption period.
2.19
The committee echoes the Financial Services Council’s evidence that the bill’s provisions offer simple, effective changes to help individuals make decisions to ‘right-size’ their home, unlock trapped equity, boost their income and improve their quality of life in retirement.
2.20
The committee notes NSA’s concern around the ‘limited timeframe’ on the assets test exemption period and its assertion that even under the proposed changes, pensioners may still remain concerned about losing pension entitlements at the conclusion of the two-year exemption period.
2.21
However, the committee points out that the additional 12-month exemption in extenuating circumstances will still continue, and is satisfied that this would provide sufficient time, certainty and peace of mind for people purchasing, building, repairing or renovating a new home.
2.22
The committee welcomes the proposed extension to the assets test exemption period, as it recognises that many people do face repeated setbacks in purchasing or building a new home. It considers that this measure effectively addresses recent issues experienced throughout Australia’s building sector, including labour market and supply chain issues. The committee also appreciates that the extension to the assets test exemption period will benefit Australians in the many areas of Queensland and New South Wales who have experienced numerous severe flooding events over the past two years.
2.23
The committee is aware that the measures in the bill implement an election commitment of the Government to support pensioners and other eligible income support recipients to downsize their principal home.
2.24
The committee is satisfied that the bill would achieve its overarching objective of encouraging more older Australians to downsize, while at the same time improving housing access and affordability to allow growing families more opportunities to find suitable housing options.
2.25
The committee recommends that the bill be passed.
Senator Marielle Smith
Chair