Individuals aged 65 years or over are now able to contribute up to $300,000 (per person) to superannuation from the proceeds of selling their main residence. These ‘downsizer contributions’ can be made regardless of other restrictions and caps that apply to voluntary super contributions (eg age, meeting the work test or the total super balance test).
Downsizer contributions must:
* Apply to contracts for sale entered into on or after 1 July 2018, relate to the sale of a dwelling that was their main residence (wholly or partly) and was owned for at least 10 years before disposal, and be made within 90 days of the change of ownership (settlement date), with any extensions to be approved by the Commissioner of Taxation.
* Contracts entered into prior to 1 July 2018 are not eligible even if the settlement occurs after this date
The strategy will mainly benefit people who can now contribute more money to superannuation than would otherwise be possible and consequently reduce the tax payable on future investment earnings.
Issues that need to be considered before implementing this strategy include:
- Capital gains tax may apply if the property has not always been the owners’ “principal place of residence” for the entire period.
- Capital that is invested into a superannuation fund or income stream would be fully asessable under both the asset and income tests. This could reduce or even eliminate the person’s Age Pension entitlements.
General Advice Warning: The advice does not take into account any of your objectives, personal circumstances, financial situation or needs. Therefore, you should consider the appropriateness of the advice in light of your own circumstances.