Planning opportunity for those 65 and over

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Some older Australians from a lifestyle perspective, are deciding to downsize their homes.

Where children have grown up and left the family home, and the desire for ageing parents to maintain a large dwelling isn’t present, a legislation change potentially provides opportunity. For those in this category, they are now able to bolster their superannuation resources when they downsize, where previously that door for further super contributions may have closed for them.

Retirees wishing to downsize

From 1 July 2018, eligible homeowners aged 65 and over will be able to use the proceeds from the sale of their family home (main residence) to make a downsizer contribution of up to $300,000 each (that is, up to $600,000 per couple) into their superannuation.

This is referred to as the ‘Downsizing Measure’.

Please note:

  • Homeowners do not need to comply with the existing work test and age limit eligibility criteria for contributing to superannuation.
  • The family home must have been owned for 10 years or more prior to disposing of it and not be a caravan, houseboat or mobile home. In addition, the proceeds from the sale must be either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption.
  • The exchange of contracts for the sale must occur on or after 1 July 2018. Furthermore, the contribution to superannuation must be made within 90 days of the date of change in ownership as a result of the disposal (e.g. the date of settlement); however, an extension may be granted in certain circumstances.
  • The contribution amount cannot be greater than the total proceeds of the sale of the family home. For example, if a couple sell their family home for $500,000: the maximum contribution both can make cannot exceed $500,000 in total – this means the couple can either choose to contribute half each (i.e. $250,000), or split it (e.g. $300,000 for one and $200,000 for the other).
  • The contribution is not limited by the contributions caps or the $1.6 million total superannuation balance limit on making non-concessional contributions; however, the amount contributed will increase the total superannuation balance and can therefore limit the ability to contribute in future years.
  • Unlike the family home, funds that have been contributed to an individual’s superannuation may reduce their Age Pension benefits, and increase any means tested Residential Aged Care and Home Care fees they pay.
  • Lastly, the Downsizing Measure may only be used once (i.e. on one family home) and despite the name, ‘Downsizing Measure’, there is no requirement to purchase another home nor is there a restriction imposed on purchasing a more expensive replacement home.

So, for the right situation this could be a potentially useful strategy to employ, to maximise the tax advantages that superannuation provides.

It is important to seek advice specific to your situation, in order to ensure the right balance of factors is considered in making appropriate financial decisions. Contact us should you wish to discuss this.

( Source: Incito Wealth Financial Knowledge centre, http://www.incitowealth.financialknowledgecentre.com.au/kcarticles.php?id=1589)

General advice disclaimer: The information provided (including taxation) is general in nature and may not be relevant to your individual circumstances. You should refrain from doing anything in reliance on this information without first obtaining suitable professional advice.

You should obtain and consider the relevant Product Disclosure Statement (PDS) before making any decision to acquire a product.

The views expressed in this article are solely those of the author; they are not reflective or indicative of Millennium3 Financial service’s position and are not to be attributed to Millennium3. They cannot be reproduced in any form without the express written consent of the author.

Incito Wealth Pty Ltd is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252

Disclaimer: Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252. The information provided in this document is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position, and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author.

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Incito Wealth Pty Ltd (ABN 93 161 013 565) is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL No. 244252 Unit 7, 50 Borthwick Ave, Murarrie QLD 4172
General advice disclaimer This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement. The views expressed in this publication are solely those of the author; they are not reflective or indicative of the licensee’s position and are not to be attributed to Millennium3. They cannot be reproduced in any form without the express written consent of the author. Furthermore, the information on this website is for Australian Residents only.
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