Age limit changes coming for downsizer super contributions
The new government has proposed a reduction in the age limit for downsizer contributions - from 60 years to 55.
This change will not come into effect until after the legislation receives royal assent. From that date, if you are 55 years or older you may be able to make a super contribution of up to $300,000 from the proceeds of selling your home.
Downsizer contributions were first introduced on 1 July 2018, with an original age limit of 65. Primarily, this law was put in place to ease housing affordability pressures, and to give people the option to put the proceeds from a sale of their home into super and receive tax benefits.
Ownership requirements
There are strict rules for making a downsizer contribution to super. The property must be owned for at least 10 years. The ownership period is calculated from your original purchase settlement date to the sale settlement date. Your home remains eligible even if it was a rental property at some stage. Other concessions to the 10-year ownership condition include where:
your home was compulsorily acquired and a new residence purchased
the sale is of your business premises which includes your home, and
there is a change in ownership of your home due to factors such as relationship breakdown or death.
One aspect of the downsizer contribution rules is there is no need to buy a new property. If you have an existing house, or a holiday home, that is considered downsizing too.
Making the contribution
To get the benefit, the downsizer contribution must be made within 90 days of your settlement date. When making the contribution, you must notify your super fund in an approved form. This is similar to other super benefits like a capital gains contribution. Please let us know if you need help finding this form.
A downsizer contribution sits outside the current rules for contributions, including the caps. Also, these contributions are exempt from the:
age test, meaning if you are over 75 you can still make a downsizer contribution, and
$1.7 million total superannuation balance test - in general terms this means you cannot make tax-free contributions if your super balance is more than this amount.
The contribution is limited to $300,000 for each person, meaning 2 owners could collectively contribute $600,000 into a concessionally taxed environment.
Other considerations
There are a range of other things that you will need to consider before you start thinking about selling your home.
A superannuation balance may count towards the Age Pension eligibility tests. The effect on Age Pension eligibility, or the amount of Age Pension received, needs to be considered.
The downsizer contribution is available on an individual basis, meaning both members of a couple can make the contribution as long as you both meet the age requirement.
If you are the only person on the title deed to the property, your spouse may still be eligible to make a contribution as long as your home is eligible.
You can only make this contribution on one property.
If you would like further information relating to this measure, please do not hesitate to give us a call. We would be delighted to assist you in putting more money away for your retirement.