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Downsize the home, upsize the super

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From 1 July 2018, if age 65 or older and satisfy the eligibility requirements, you may be able to make a downsizer contribution into super of up to $300,000 from the proceeds of selling your home.

Both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to super through the downsizing cap.

The usual contribution rules for people aged 65 and older* will not apply to contributions made under this new special downsizing cap.

Key points to consider:

  • You can only make downsizing contributions for the sale of one home. You can't access it again for the sale of a second home.
  • The contribution amount can't be greater than the total proceeds of the sale of your home.
    • Example: if a couple sell their home for $400,000 the maximum contribution both can make is $400,000.
  • Your home was owned by you or your spouse for 10 years or more prior to the sale (contract was exchanged on or after 1 July 2018).
  • Each spouse can make a contribution of up to $300,000, split any way.
    • Example: the same couple above can contribute half each ($200,000) or $300,000 for one and $100,000 for the other.
  • Downsizer contributions are not tax deductible and will be taken into account when working out age pension eligibility.
  • If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

These new contributions will be in addition to any other voluntary contributions that are able to be made under the existing contribution rules and concessional and non-concessional caps.

* If you’re under age 65, consider the First Home Super Saver. ** Satisfying a work test for 65-74 year olds, no contributions for those aged 75 and over, and restrictions on non-concessional contributions for people with balances above $1.6 million do not apply.

Example

Charli and Jon are still working part-time at age 65 and decide to sell their home. The home sells for $1.4 million and they’re able to make a downsizer contribution of $300,000 each ($600,000 in total).

This is regardless of how much they have in super already. They may also make additional contributions to their super using the sale proceeds under the usual contributions rules (such as satisfying a work test from age 65 to make personal contributions).

What to think about

Downsizer contributions:

  • Are taken into account for determining eligibility for the age pension.
  • Are not a non-concessional contribution and doesn’t generally count towards your contributions caps. The downsizer contribution can still be made if a person has a total super balance greater than $1.6 million.
  • Don’t affect your total super balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of the financial year.
  • Are not exempt from the $1.6 million transfer balance cap. Only people who have remaining transfer balance cap space will be able to convert their contributions into a pension phase account where earnings are tax-free (ie starting an income stream using super).

More information

Check out the Tax office website and pay special attention to the timing requirements, eligibility rules and forms.

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