The Downsizers

Houses cost a stupid amount. The young feel disenfranchised. Oldies, house-rich and cash-poor, are trapped inside their equity. Living costs are escalating while incomes are not. There’s unrest in the land over population growth, immigration and the frayed social safety net. Politics are polarizing. Stress is building.

Sound vaguely familiar?

Yes, Aussies have been dealing with some of the same stuff we little beavers face. And Australia has come up with an interesting fix for part of this angst. Word is the Carney government’s closely eying what’s happening Down Under (and where our PM was recently given a standing ovation in Parliament. Apparently they love the guy.)

Blog dog Randy writes to remind me of an Australian plan which lets wrinklies cash out of their homes and stick the proceeds into a tax shelter. So real estate is freed up for younger buyers while retirees can benefit from tax-free growth and better cash flow.

“Where do I sign up for that?” he asks.

Well, it’s true. They did it.

The thing is called the Downsizer Superannuation Contribution. It’s a simple concept. Would it fly in Canada, or just be another sop to the Boomer generation that – as the kiddos keep telling us – was born on third base and has already sucked the country dry?

It works this way. People 55 or older who have lived in their home – which must be the primary residence – for at least a decade (continuously) can use this scheme just once in their lifetime. They’re able to contribute $300,000 per person, or $600,000 per couple, into their superannuation account, the Aussie equivalent of our RRSP mixed with the TFSA.

(In that country, wisely, saving for later life is mandatory with 12% of paycheques taken and placed in a retirement account. Both contributions and growth are taxed lightly – at 15% – but all withdrawals after age 60 are completely tax-free. While the RRSP system in Canada wildly favours higher-income earners, the Australian model provides a baseline retirement income for almost all workers.)

The Downsizer plan does not impact the ability to make other contributions to the retirement scheme. There is no age limit (as with our 71-year-old RRSP rule) nor is employment income required. The point is to shift net worth out of an illiquid asset (your home) into a tax-advantaged, income-producing shelter. Inside the plan (as with an RRSP) income and capital gains are untaxed. The downsizer contribution itself is not subject to the 15% tax when it goes into the plan, and when money is withdrawn as income, it is – as with a TFSA – tax-free.

By the way, the average house in Australia currently sells for just over $1 million. In Sydney the normal detached place is worth about $1.6 million. (These days Canadian and Aussie dollars are roughly equivalent in value). So, for a couple to tuck away $600,000 for tax-free growth and untaxed retirement income is a big deal.

So, good idea for Canada?

Would this encourage more geriatric, house-hugging old farts to do the sensible thing and give up their nearly-empty, four-bedroom family homes to rent or downsize into a cozy condo and ensure they have a stable income stream? Is it good social policy to use the tax system to encourage people to give up on real estate at a certain age so younger gens can get in? Does this help national finances by lessening the need the wrinklies might have for costly support programs like our OAS and GIS?

Or, is it just another tax break for the people who need it least? After all, if there is one group that’s benefitted the most from a decades-long escalation in house prices, it’s you-know-who. Hating the Boomers is now a growth industry, and letting them slide half a million bucks into an account yielding tax-free asset growth and untaxed income – after their real estate profits were also tax-free – might be a bridge too far.

Is this something the Carney Libs would be enlightened to consider? Or would it engender revolution and mayhem?

Lemme know. I’ll tell the boss.

About the picture: “This is my nephew Zach and his girlfriend Amanda,” writes Jeff. “They took a year off from work to travel the world. Being a dog lover he sent me this picture of Tex who they met on Bronte Beach in Sydney, Australia. Thanks for the daily blog and your valuable insight!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/04/21/the-downsizers/