Why You Should Consider Downsizing.
The superannuation downsizer scheme came into effect on 1 July 2018. Many are unaware that it is available to them, or don’t realise the benefits for their superannuation and retirement planning.
While the premise of the measures is to reduce pressure on housing affordability and free up housing stock for younger, growing families, the provisions can be used in a broader context and have significant benefits in building up tax effective superannuation balances.
You can take advantage of the provisions where:
- You are 65 or over
- You sell your home on or after 1 July 2018 and you have owned the home for more than 10 years
- The home qualified as your main residence for CGT purposes for all or some of that period of ownership
- You make a contribution to your Superfund within 90 days of the disposal of the dwelling
- You can contribute the lesser of $3000,000 or the proceeds from the sale
- You notify your Superfund that you wish to treat the contribution as a downsizer contribution; and
- you have not previously made a downsizer contribution
A myth is that you need to “downsize””. So it is possible to still buy a new home which is the same or higher in value or size and take advantage of the concession.
There are a number of compelling reasons to use this concession including:
- If you are over 65 you cannot use the “Bring Forward Non – Concessional Cap” which allows you to contribute up to $300,000 in a year to your Superfund. Downsizer contributions are exempted from this restriction.
- If you are over 65 and not working, you normally can no longer contribute to Super if you don’t satisfy the “Work Test”. This doesn’t apply to downsize contributions.
- If you are over 75 you generally cant make any voluntary concessions. There is no age cap on downsizer contributions.
- If you have a Total Superannuation Balance of $1.6 million or more you can’t make any further contributions to Superannuation. Again downsizer contributions are exempt enabling you to put more into Super.
Furthermore, you and your spouse can make a downsizer contribution each, totalling up to $600,000.
In an environment where it is getting difficult for some to contribute any more to Superannuation this is very valuable.