Downsizing the family home forms part of the long-term financial plan for many Australian retirees and provides the opportunity for them to boost their super balance using the downsizer contribution. Let’s explore a few insider tips from Perth’s leading superannuation financial advisers, ensuring your retirement is as comfortable and stress-free as possible.
What Is The Downsizer Contribution?
Australians aged 55 years or older who sell their primary residence may be eligible to make a downsizer contribution of up to $300,000 to a complying super fund. The contribution doesn’t count towards any of the contribution caps and can be made even if the person has a total superannuation balance greater than $1.7 million.
Provided the person’s spouse is also 55 years or older, they too can make a downsizer contribution to their own super, even if they were not an owner of the property. Importantly, the total contributions made by the couple cannot exceed the sale price of the property. The downsizer contribution can only be used once and will not apply to the sale of any future residences.
Benefits Of The Downsizer Contribution
1- Contribution Caps Do Not Apply
Downsizer contributions are not limited by regular contribution caps, which means people can direct up to $300,000 over and above any funds already in their super. The money will however count towards the person’s total super balance and is subject to the transfer balance cap.
2- No contributions tax
The downsizer contribution is an after-tax contribution, so 15% tax is not deducted by the super fund when the funds are contributed.
3- You don’t need to downsize or buy a new home
There is no need to move into a smaller or cheaper property. In fact, if the sale relates to a previous principal residence that is now an investment property, there is no need to move at all.
4- You don’t need to contribute the proceeds from the sale of the property
If you purchase a more expensive property but have funds invested outside the superannuation system, you can contribute those funds to super using the downsizer provisions.
Eligibility
To be eligible to use the downsizer contribution, you need to be at least 55 years old, sell a property which is located in Australia and which you have owned for at least 10 years. Furthermore, at the time of selling the property, you need to be eligible for an exemption from capital gains tax on the sale of the property under the “main residence” provision, meaning that the property needs to have been your primary residence for at least some time during the period you owned it.
Financial Advice
A qualified financial adviser will be able to assess your eligibility for the downsizer contribution, determine whether it is appropriate for your individual circumstances, and guide you through the more technical aspects of the contribution. Here at Boutique Advisers, we understand that navigating your retirement can be challenging, but our expert team of superannuation financial advisers in Perth are here to help you! Schedule a consultation with us today!