The Federal Treasury recently announced a new incentive for over 65s who are looking to downsize. Find out exactly what the new Downsizer Incentive entails, and what it means for you.
Did you know, from July 1 this year, any couple or individual over 65 years of age can sell their home and put up to $300,000 straight into their superannuation without penalty – much more than the current cap on super contributions.
By reducing the barriers for older Australians who are looking to move from homes that no longer meet their needs, the Federal Government hopes to make more homes available for younger Australian families. It’s a win-win for everyone.
While under 65s can already make non-concessional contributions of $100,000 per year (or $300,000 in a year using the three-year ‘bring forward’), this new incentive provides an exception to existing contribution rules for over 65s, who were previously restricted in how much they could contribute to their super in a single year.
Are you looking to downsize, but aren’t sure if your home is eligible? The sale of any dwelling in Australia (other than a caravan, houseboat or mobile home) can qualify you to make a downsizer contribution, provided you have owned the dwelling for at least 10 years – you or your spouse must have held the property at all times for the 10 years leading up to the sale.
While you don’t have to have lived in the home for all of the last 10 years, it must meet the test for a ‘main residence’ exemption under CGT rules. You may need to seek advice about this.
You don’t actually have to ‘downsize’, either. Once you’ve sold an eligible home, you will be able to make a contribution – whether you’ve made any subsequent home purchase or not. You can move into any living situation suitable for you, and have 90 days after the settlement of your home sale to make the contribution. You may also be able to seek an extension from the ATO.
At the very most, you can contribute $300,000 or the sale price of your home – whichever is less. You can also make more than one contribution, so long as the total doesn’t exceed the maximum, and contribute less than the maximum.
Both you and your spouse may each make a downsizer contribution, even if your spouse was not on the title of your home, but the combined value of your spouse’s contribution and your own cannot exceed your home’s sale price.
You can also only ever make downsizer contributions in respect of a single main residence, so you can’t downsize more than once.
Talk to your superannuation fund about how to make a downsizer contribution. If you don’t have a superannuation account, you may open a new account to make your contribution. Also, seek financial advice to consider whether the Downsizer Incentive will affect your Age Pension, as downsizer contributions are not exempt from the Age Pension means test. And, while downsizer contributions are exempt from contribution rules, they still count toward the $1.6 million transfer balance cap, so seek financial advice if you have any concerns or queries.
Is this just the incentive you’ve been looking for to make your move into a Palm Lake Resort home? Talk to our Sales Teams for more information.