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In it’s simplicity, this rule which was legislated to be operational from 1 July 2018 allows retirees (above age 65) who downsize their home to contribute the surplus funds to superannuation that were not previously possible.
The most Critical Criteria
- The contribution must go into super within 90 days of the property settlement.
- The property must have been owned for at least 10 years
- The property must be a current or former Principal place of residence that has at least qualified for a partial CGT exemption under ATO legislation.
- You must be over age 65 to qualify for this contribution
Other Attributes of the Downsizer Contribution
- The Contribution maximum is $300,000 per person ($600,000 for a couple jointly owning their home).
- The Contribution will not be subject to the Work Test
- The Contribution will not be subject to the non-concessional Contribution CAP
- The Contribution will not be subject to the new $1.6 Million Balance Limit.
- This contribution can only apply in relation to the sale of one property (not multiple properties).
- The surplus from a downsize will be Centrelink assessed and therefore cause a reduction in entitlement (or no entitlement at all).
This is a positive step for retirement planning for those who have been contemplating a move to a smaller property or a property of lower value. You can now at least get a large portion (if not all) of the surplus funds into the tax free environment of Superannuation and ultimately tax free Allocated Pensions (subject to a $1.6 Million Cap).
https://hudsonfinancialplanning.com.au/wealth_creation_step/superannuation-planning/Read more about Superannuation Planning.
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This article is for educational purposes only and cannot be taken as personal advice. It does not take into account any individual’s objectives, financial situation or needs. Any examples are for illustrative purposes only and actual risks and benefits will vary depending on each individual’s circumstances. You should consult with a financial adviser to discuss your personal situation.