Downsizing contributions into superannuation

As of 1 July 2018, Aussies have one more tactic they can use to plan a successful retirement. Called the Downsizer Contributions Cap, it allows a once-off contribution to Superannuation of up to $300,000 per individual, from the sale of a residence.

With this, the Government will encourage some older people to downsize from homes that no longer meet their needs and free up housing stock for young families starting out. Older Australians will be provided with greater flexibility to contribute the proceeds of the sale of their home into superannuation, reducing a current disincentive to downsizing.
How does it work?

People aged 65 and over will be able to make a non-concessional (post-tax) contribution into their superannuation of up to $300,000 from the proceeds of selling their home. The contribution has to be made within 90 days from the change of ownership/settlement. You may be able to request a longer period for making the contribution in some circumstances, for example, where a delay has been caused by factors outside your control.

Couple of interesting points:

  • The downsizer cap can only be used once.
  • There is no requirement to actually ‘downsize’, or even buy another property
  • It will apply to a principal place of residence held for a minimum of 10 years. Though, the property sold does not have to be the main residence immediately prior to the sale – it is enough if the property was used as a main residence at some stage. This means that the sale of an investment property that once was a main residence could qualify.
  • Both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to superannuation through the downsizing cap.
  • The property does not have to be owned by the contributor. It could be owned by the spouse or member for whom the contribution is made.
  • The recipient must be 65 years of age or older, but there is no age restriction on the contributor.
  • There is no requirement that the proceeds of sale are actually used to fund the superannuation contribution.
  • Total superannuation balance restrictions of $1,600,000 do not apply

Interested to read more? Make sure you visit ATO’s website.

If you need more information or advice in regards Downsizer Contributions Cap, or want to discuss what super or investment strategy is suitable for you, get in touch with us today!