Downsizing is not a dirty word…
The government recently introduced the ‘downsizer contribution’ as one of a number of measures aimed at improving housing affordability; giving those 65 and over the opportunity to contribute up to $300,000 to superannuation after selling a qualifying property without standard contribution eligibility rules applying.
The thing is there’s no requirement to buy a lower priced or smaller home. In fact, a replacement home does not have to be purchased at all!
It’s potentially a mojor development for people aged 65 and older…
Why? Because ‘downsizer’ contributions aren’t:
- subject to the work test
- subject to any maximum age limit
- counted towards the client’s concessional or non-concessional contribution caps
- limited by the client’s total superannuation balance.
It should be noted a tax deduction can’t be claimed for a downsizer contributions.
The maximum downsizer contribution is the lesser of:
- the capital proceeds from the sale, and
- $300,000.
Each member of a couple has a limit of $300,000, so a couple could potentially contribute up to a maximum of $600,000 combined, depending on the capital proceeds from the sale.
Capital proceeds are the amount the seller is entitled to receive in relation to the sale. Any liabilities associated with the property or expenses associated with the sale are ignored when determining the amount of capital proceeds.
Timing is important
Downsizer contributions can be made where the exchange of contracts relating to the sale occurs on or after 1 July 2018. The time contracts are exchanged is relevant, rather than when settlement occurs. If the exchange of contracts occurs before 1 July 2018 but settlement occurs on or after this date, a client wouldn’t be eligible to make a downsizer contribution.
A further requirement is for the contributor to be 65 or over at the time the contribution is made and the contribution must be made within 90 days of the change of ownership.
Keen to know more..? Call Gayle on 0407159298 to find out how you too could benefit
