Supersize Me – downsizing opportunities

Is downsizing your chance to upsize your Super in retirement? Many of us live in large homes that once provided for our busy family members but may now be feeling empty once they have left the nest. We see many reasons people want to downsize their home: a smaller property is easier to maintain; travel may be more frequent; mobility and access may be a problem; large gardens and empty rooms are unnecessary and a lot to look after. Downsizing to a smaller residence provides a great way to top up your superannuation, allowing you to fund your retirement longer.

supersize

New legislation was announced in the 2017 budget to allow a retiree to make a special, one off contribution to super in the event they downsize their home. You will need to meet the eligibility criteria for the downsizer contribution to apply. This allows you to contribute up to $600,000 ($300,000 each in a couple) provided you sell a qualifying asset after 1 July 2018.

The contributions won’t count towards the concessional (pre-tax) or non-concessional (after-tax) contribution caps and there is no maximum age limit. Also, the ‘work test’ (for people aged 65 to 74) and the ‘total super balance’ test won’t apply.

Eligibility is important, some of the strict rules include:

  • 10 year ownership test – you must have owned the home for 10 or more years.
  • You must be aged 65 or older when the contribution is made
  • The contract of sale must be entered into on or after 1 July 2018
  • The contribution must be made within 90 days of the disposal
  • The dwelling must have qualified as your main residence (at some time)

Considerations:

  • A new home doesn’t have to be purchased, be smaller or could cost more.
  • Downsizer contributions will count towards your ‘total super balance’ once made, which could impact your ability to make future contributions
  • Money held in super is assessed for both social security and aged care purposes

There are many benefits of investing within superannuation for your retirement, however any strategy that involves your money and your home should always be carefully considered. We highly recommend you seek advice to ensure you understand and meet the eligibility rules as well as consider whether this is the best option for you and your circumstances.

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This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs.