“The trouble with retirement is
that you never get a day off”.
Abe Lemons
Government proposals around improving housing affordability in Australia were passed through parliament on 7 December 20171.
As part of the changes, Australians aged 65 and over will be able to contribute the proceeds from the sale of their family home into super.
So again, let’s take a look at what the changes could mean for you, bearing in mind that like with all important financial decisions, it’s a good idea to get financial advice before deciding what’s right for you.
Super benefits for downsizers
Currently, people aged between 65 and 75 who want to make voluntary super contributions must satisfy a work test, and people over 75 are generally unable to contribute to their super.
From 1 July 2018 that will change. People aged 65 or over will be able to make an after-tax contribution to their super of up to $300,000 using proceeds from the sale of their family home – regardless of their work status, superannuation balance, or contribution history.
Both members of a couple will be able to take advantage of this proposal, meaning up to $600,000 per couple can be contributed toward super.
How does it work?
Proceeds from the sale of the family home that are contributed into super as part of this initiative can be made in addition to any other before-tax or after-tax contributions you’re eligible to make.
The government said the aim is to encourage older Australians, where appropriate, to free up homes that no longer meet their needs and make room for younger growing families.
Things to note
To qualify, the property sold needs to have been your (or your spouse’s) main place of residence for at least 10 years.
‘Downsizing’ contributions are not tax deductible and can be made regardless of super caps and restrictions that otherwise apply when making super contributions.
The property that is sold must be in Australia and doesn’t include caravans, mobile homes, or houseboats.
No special Centrelink means test exemptions apply to the downsizing contribution.
Due to this, there may be means testing implications as a result of downsizing, which will need to be carefully considered. This is where an appropriate advice is crucial. Unwary retirees might not realise that selling home and contributing to super may reduce their Age Pension entitlement or loose the benefit altogether.
Meanwhile, additional rules may apply to your situation, so make sure you do your research before making any decisions.
Where to go for more information
Like with most things, when you’re making a big financial decision, which could have implications, it’s worth doing your research and speaking to your financial adviser first.
Source: AMP
& Katherine Isbrandt CFP
Principle of ASIRE Financial Planning