If you’re 55 or older and considering selling your home, the Australian Government’s downsizer contribution scheme offers a valuable opportunity to enhance your superannuation savings. Here’s what you need to know:
What Are Downsizer Contributions?
Downsizer contributions allow eligible individuals to contribute up to $300,000 from the sale proceeds of their home into their superannuation. For couples, this means up to $600,000 combined. These contributions are tax-free upon entry into your super account and can be withdrawn tax-free later.
Key Benefits:
- Tax Advantages: Downsizer contributions don’t count towards your concessional or non-concessional contribution caps, providing flexibility to boost your retirement savings without breaching standard limits.
- No Work Test or Age Limits: There’s no requirement to meet a work test, and no upper age limit applies. This is particularly beneficial for those aged 75 or over, who are generally unable to make other voluntary contributions.
- No Requirement to Purchase Another Home: You aren’t obligated to buy a new home after selling your current one to make a downsizer contribution.
Eligibility Criteria:
- Age Requirement: You must be 55 or older at the time of making the contribution.
- Property Ownership: The home must have been owned by you or your spouse for at least 10 years prior to the sale and must have been your primary residence at some point.
- Property Type: The property must be in Australia and cannot be a caravan, houseboat, or mobile home.
- One-Time Use: You can only make a downsizer contribution from the sale proceeds of one home; the scheme cannot be accessed again for the sale of a second home.
- Contribution Timing: The contribution must be made within 90 days of the change of ownership, typically the settlement date.
Considerations:
- Impact on Age Pension: Adding the sale proceeds to your super may affect your eligibility for the Age Pension, as it will be included in the assets test once you reach Age Pension age.
- Transfer Balance Cap: The transfer balance cap limits the amount you can transfer into a retirement pension. Downsizer contributions are subject to this cap, which is up to $1.9 million, depending on your circumstances.
- Non-Deductible Contributions: While downsizer contributions are tax-free, they aren’t tax-deductible.
Next Steps:
If you’re considering making a downsizer contribution, consult with your SWU Group financial adviser to ensure it aligns with your retirement goals and to navigate the eligibility requirements effectively. For more detailed information, visit the Australian Taxation Office (ATO) website.
Note: This information is general in nature and doesn’t constitute personal financial advice.
Looking for guidance on your financial journey? Connect with us at: FinancialSuccess@simonwu.com.au