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Downsize your home and contribute to super

March 2019

Individuals can now make an after-tax contribution to their super of up to $300,000, using the proceeds from the sale of their main residence.

Selling your family home can be great way to release built-up equity to pay for retirement living expenses.

Usually, people aged 65 to 74 need to satisfy a work test to make voluntary super contributions, while people aged 75 and over are generally unable to contribute to their super.

However, thanks to the “Downsizer Contribution”, if you are 65 years old or older and meet the eligibility requirements, you may be able to contribute up to $300,000 from the sale of your main residence to superannuation. Even though called the “Downsizer” contribution there is no actual requirement for you to downsize.

You are eligible to make a downsizer contribution to super if:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
  • your home is in Australia and is not a caravan, houseboat or other mobile home
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT asset rather than a pre-CGT (acquired before 20 September 1985) asset
  • you have provided your super fund the relevant documentation either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement, and
  • you have not previously utilised the downsizer contribution

(Source: www.ato.gov.au)

It’s worth noting that for couples, both spouses can make a downsizer contribution up to a maximum of $300,000 (each), however, the combined contribution amount can't be greater than the total proceeds of the sale of your home.

The benefit of these downsizer contributions is that they can be made regardless of contribution caps and restrictions that otherwise apply when making super contributions.

Want to find out more about making a downsizer contribution? Contact our team today!

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Topics: Superannuation

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