The Downsizer contribution gives Australians over the age of 65 who have recently sold their home the ability to make a superannuation contribution regardless of your working status. The idea is that sale proceeds up to $300,000 per person can be put into super to help fund your retirement.
Who is this helpful for?
Anyone interested in investing their home proceeds in a tax-free environment. Take the following example, George & Angela sell their home, buy a new home and have $1.6m remaining. If they invest this jointly and earn (say) 4% pa, they will have combined taxable income of $64,000. They will likely have to pay approx. $6,000 p.a. in tax.
If they each make a Downsizer contribution, they will have only $1m in a joint investment and $300,000 each in a super (pension) account. Assuming they earn the same 4% pa, their combined taxable income will be
$40,000 and they will not have to pay any income tax, saving themselves $6,000 pa.
Ins and Outs
There is no work test and no age limit (you must be over the age of 65)
It does not matter what your existing superannuation account balance is and it does not count towards any contribution caps (e.g. Concessional or Non-Concessional).
Contributions must be made within 90 days of receiving the proceeds of sale.
Couples will be able to contribute up to $300,000 each into their super accounts.
You cannot claim a tax deduction for the contribution.
There is no requirement to buy a new home.
You can only make a Downsizer contribution from the sale of one home (you can’t make another Downsizer contribution in the future if you sell another home)
You must have owned the property for 10 years or more
The home must be located in Australia it must qualify for a partial main residence CGT exemption (i.e. you lived there as your home at some point in time).
If you need further information, please contact the Australian Tax Office (ATO) or get in touch with us.
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Disclaimer: This post has been prepared for general information purposes only. It is not specific advice to any particular person. You should consult an authorised Align Financial adviser before making financial decisions. Align Financial | Financial Planner Northern Beaches | Servicing North Narrabeen, Narrabeen, Mona Vale, Elanora Heights, Newport, Avalon, Palm Beach | Enquire with us online