Considering Downsizing? Good news at hand.

Posted on 14 February 2018

Legislation has now passed enabling individuals who are 65 years and over to contribute proceeds from the sale of one eligible property to superannuation without the need to pass the work test. This is great news for those wanting to increase the longevity of their tax free income streams in retirement.

From 1 July 2018, retirees can make “downsizer” contributions and use the contributions to access superannuation retirement products (subject to their transfer balance caps).

Like with anything else there are conditions:

• at the time of the contribution, the individual must be 65 or over – no upper age limit
• the contribution must be in relation to the sale of an “eligible” property that the individual or the spouse owned just prior to the sale
• the contract of sale must have been entered on or after 1 July 2018 – there is no requirement to purchase another property
• the total amount of the downsizer contribution in respect of the eligible property cannot exceed the capital proceeds from the sale or $300,000 per person
• contribution must be made within 90 days after the change of ownership of the property (generally the settlement date)
• contribution must be made using the approved form

The amount of the downsizer contribution is not governed by an individual’s concessional or non-concessional caps (or their total super balance). It can be made in addition to these contributions. However, the amount is capped at the lesser of $300,000 for each individual and the capital proceeds received (before any mortgage repayments).

Downsizer contributions are not tax deductible and cannot be made in respect of a second property regardless of how much was contributed for the first.

For the property to be “eligible”, it must be in Australia and cannot be a caravan, houseboat or mobile home.

The property must have been owned by the individual, their spouse or their former spouse for 10 continuous years just before the sale of the property. The 10-year period is calculated from the day the ownership commenced to the day it ceased.

The property does not need to have been owned by both the individual and their spouse for each to make use of the downsizer contribution.

This is a big win for those that find themselves in a home that is too large or for those making a lifestyle change. If you have any queries at all in relation to whether you may be able to make use of the downsizer contributions, please contact the team at Vue Financial.