Australian pensioners are being encouraged to downsize their homes under a potential new law.

Labor is set to introduce a Bill to parliament that would give age pension recipients more time before the proceeds from the sale of their homes affect their pension payments.

The Albanese government’s legislation would give pensioners an additional 12-month asset test exemption on their home sale proceeds.

Labor says the exemption is designed to give people more time to purchase, build, rebuild, repair or renovate a new principal home before their pension is affected.

They also said the new law is to help free up larger homes for young families struggling to get on the property ladder.

More than 8000 pensioners downsized last year and Labor hopes this number will increase if its changes are legislated.

“We don’t want people putting off downsizing to a more suitable home because they are concerned about the impact it could have on their payment rate and overall income,” Social Services Minister Amanda Rishworth said.

“These changes will give pensioners more flexibility to find a suitable new home and it will hopefully free up larger housing stock for younger families who need it.”

Image credits: Getty Images

This article first appeared on OverSixty.