Downsizing the family home? Read this.

Downsizing the family home? Read this.

Have you been thinking of downsizing the family home? Before you make an appointment with a realtor, you should consider how the new “Downsizer Contributions” measure could impact you.

From 1 July 2018, the Australian Government will introduce the Contributing the proceeds of downsizing into superannuation (downsizing) measure. If you are 65 years old or over and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

An eligible downsizer contribution is where:

  • the contribution is made to a complying super fund by a member aged 65 years or older
  • the amount is equal to all or part of the capital proceeds received from the disposal of an ownership interest in a dwelling that qualifies as a main residence in Australia
  • the member or the member’s spouse had an interest in the main residence before the disposal
  • the interest in the main residence was held by:
    • the member
    • the member’s spouse
    • the member’s former spouse
    • a trustee of the estate of the member’s deceased spouse during the 10 years prior to the disposal, and
  • the member has not previously made downsizer contributions in relation to an earlier disposal of a main residence.

If eligible, you can make a downsizer contribution up to a maximum of $300,000 each. The contribution amount can’t be greater than the total proceeds of the sale of your home.

For example:

A couple sell their home for $800,000:

  • Each spouse can make a contribution of up to $300,000.

A couple sell their home for $400,000:

  • The maximum contribution both can make cannot exceed $400,000 in total.
  • This means they can choose to contribute half ($200,000) each, or split it – for example, $300,000 for one and $100,000 for the other.

Seek advice:

  1. If you have a self-managed superannuation fund (SMSF), the trust deed may not allow you to make such a contribution. You should contact us to discuss your personal situation, as an amendment may be needed.
  2. Taking advantage of the Downsizer Contribution may impact your Centrelink entitlements. Your financial planner should be able to confirm this for you, or please contact us if you would like us to introduce you to Ryan Dobbrick of our affiliated financial planning practice, Liberum Financial.
  3. Significant changes to superannuation in Australia came into effect on 1 July 2017. The downsizer contribution may impact your ability to make future non-concessional contributions (i.e. if it tips your super balance over $1.6m), so timing is critical to maximise what you can contribute to super. We recommend you contact us to discuss your personal situation.

If you’d like to review and confirm that your investment mix within your superannuation fund and other assets can support your retirement plans, we invite you to take advantage of our complimentary superannuation and investment review with our financial planning partner, Liberum Financial.  Please contact us if you would like us to make an introduction.