Over Sixty Spring 2022 Digital

17 DOWNSIZING OVERSIXTY.COM.AU | ISSUE 2 | 2022 Downsize to suit your lifestyle Government support for downsizing seniors Two major federal government initiatives are encouraging pensioners to downsize: • the Morrison government introduced legislation enabling downsizers aged 60 and over to contribute up to $300,000 from the sale of their family home into superannuation, effectively boosting their super fund’s income earning potential. Super income and lump sum withdrawals are tax-free for most Australians over the age of 60. • the Albanese government is set to introduce the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022 into parliament. When passed, this legislation will exempt the proceeds of the sale of the family home from the Age Pension assets test for two years, up from the current one year. The deeming rate on the proceeds would also be lowered from 2.25% to 0.25% for the purposes of the Age Pension income test, ensuring that older Australians’ decision to downsize won’t unduly affect their Age Pension rate.  From page 1 or sell the property. There are also likely to be flexible lease terms, and the building will be maintained by an on-site manager. You might even be able to take your pets. Things to consider Rent increases are likely to be stable and or- derly. However, rental-only apartment build- ings aren’t always a cheap option due to the high-end facilities and high-quality finishes. You could also consider rental retirement villages, which offer secure long term rental and are usually affordable to people on the age pension. GRANNY FLATS WITH LIFE INTEREST What are they? Granny flats are small dwellings built on a family property. You could move into a gran- ny flat on an adult child’s property, or build a granny flat on your own property and live in it while your family lives in the main house. What’s involved? You enter into an arrangement with “life in- terest”, meaning you have a right to accom- modation for life on the property in return for transferring to your family member the title of your home or proceeds from its sale. The benefits Granny flats are better designed and easier to build and fund than ever before. You can share costs with your family, and you’ll have someone close by to care for you and keep you company as you age. HELEN SIGNY DOWNSIZING House prices, large mortgages and a desire to be close to family mean more Australians than ever before are looking for new options to downsize. If buying a smaller house or apartment isn’t for you, there are many other options to consider, says Amanda Graham, Co-Found- er and CEO of downsizing.com.au , which re- cently published Australia’s Ultimate Guide to Downsizing . “This is one of the biggest and most com- plex financial transactions of your life, so look closely at all the available options, as you are not always comparing apples with apples,” she says. “There are many different types of legal title and occupancy rights offered in var- ious retirement properties, most offering excellent value for money as well as other non-financial benefits. However, it is very important you get good legal and finan- cial advice before committing so you fully understand exactly what you are paying for, and so there are no unwelcome surprises down the road.” RETIREMENT VILLAGES What are they? Retirement villages are residential complex- es in which you own your own home. There are normally shared facilities like commu- nity centres or swimming pools, social pro- grams, and visiting health professionals or other care services. What’s involved? You pay a fee when you enter the retirement village and then a monthly service fee. There is usually an exit fee, sometimes called a “de- ferred management fee”. The benefits Apartments or villas in a retirement village are often available at a price point below the market value of surrounding homes, making themmuch more affordable and attractive. Things to consider The social security arrangements and tax laws around granny flats are complex, and can affect your pension or expose you or your family member to capital gains tax. If you’re handing over cash or assets to family members, always make sure you have alegallybindingagreementinplaceoutlining everyone’s rights and responsibilities. This will protect you if circumstances change, for example, in the situation of a divorce or if a family member dies. Things to consider Retirement villages come with a range of types of title and ownership and occupancy rights – sometimes residents don’t own their own home, for example, and some may be strata title. It’s important to get legal advice. LAND LEASE COMMUNITIES What are they? Land lease communities are home estates or residential parks usually marketed as life- style or over 55 communities. What’s involved? You buy the dwelling outright and lease the land from the community operator. The land rent pays for all the community facilities, maintenance costs, council rates and man- agement costs. The benefits Most land lease communities offer high quality, modern homes in pleasant, land- scaped grounds with resort-style facilities. The community should be safe, suitable for people who are ageing, and you could find yourself surrounded by like-minded people. Things to consider These communities are often more afforda- ble than other options, with lower entry prices. Because you’re not buying the actu- al land, you don’t pay stamp duty or council rates. And you’re not likely to need to worry about exit fees, deferredmanagement fees or refurbishment costs. You may qualify for the Commonwealth Rental Assistance to subsidise the cost of leasing the land. If or when you decide to sell the home, you keep 100% of any capital gains made on the property. RENTAL APARTMENT BUILDINGS What are they? Rental-only apartment projects, or “build to rent” developments, are springing up all over Australia. These combine the flexibility of renting with the same security as if you owned your own home. What’s involved? In a build to rent development, all the apart- ments are owned by the developer and leased out to tenants. Everyone shares com- munal facilities such as kitchens, libraries, gyms and co-working spaces. The benefits Renting in a rental apartment building can be more secure than renting from a mum- and-dad investor, who might end your lease This is one of the biggest and most complex financial transactions of your life Whether your priorities are social opportunities, lifestyle facilities or proximity to family, there’s a downsizing option to suit you Photos: Getty Images DOWNSIZING