From 1 July 2018, Australians over 65 can make additional superannuation contributions from the proceeds of selling their home. As part of the government’s strategy to tackle the issue of housing affordability, this change in legislation was recently passed to encourage the over 65s to think about downsizing the traditional family home.
Although the contributions are referred to as, downsizer contributions there is no requirement to purchase another home, so it is a measure that may be appropriate for those aiming to free up capital to maintain their standard of living.
Prior to this new legislation, additional super contributions were not able to be made by those aged 65 and over and no longer working.
Many of us might think that once you hit retirement age that most Australians raid their super straight away. However, most seniors opt to take regular tax-free pension payments from their super fund by establishing what is called an account-based pension. With significant improvements in health and wellbeing, now more than ever there is a need for well-diversified retirement portfolios – designed to provide an ongoing income stream for the two decades that (on average) we will enjoy in retirement.
Am I eligible?
You need to have owned the home for more than 10 years, or held it in the name of your spouse, and you need to make the contribution within 90 days of receiving the property sale proceeds. Providing you meet these, and some other eligibility criteria, you can make a downsizer contribution of up to $300,000 per person.
With the 2016 Federal Budget, the Australian Government introduced other superannuation laws which limit your ability to make lump sum contributions once your total super balance exceeds $1.6 million. For those fortunate retirees where this rule applies, the downsizer contribution strategy can be a way for them to potentially add an additional combined amount of $600,000 to their super assets.
Like any investment strategy, there are always several factors to consider. Whether this applies to you or perhaps your parents, make sure you are well-informed before making any changes to your superannuation. Take the time to speak to one of our financial specialists today.