Downsizing incentives for seniors announced in the Federal Budget last year come into effect on 1 July, and now is the time to start planning.
As part of its “housing affordability” theme the federal government is looking to encourage older Australians to downsize their family home by allowing them to invest the proceeds into superannuation.
The good news is that the bill has now passed through parliament!
Individuals aged 65 and over will be able to make a personal contribution of up to $300,000 using proceeds from the sale of the family home, which has been owned for at least 10 years, into their superannuation. These new contributions can be over and above any other voluntary contributions the person is able to make under the existing contribution rules and concessional and non-concessional caps.
This measure only applies in relation to contracts entered into on or after 1 July 2018. Furthermore it is a once-only application and cannot be used for any future sale of another main residence.
Until 1st July 2018, voluntary contribution rules for people aged 65 and older are quite restrictive.
For 65 - 74 year olds a 40 hour work test must be met and no contributions are allowed for those over age 75 regardless of work arrangements. Additionally, from 1 July 2017 after-tax personal contributions for people with total super balances above $1.6 million cannot be made. Under rules proposed and now legislated for the new downsizing measures, these contribution restrictions have been lifted.
Individuals over age 65 will be able to contribute up to $300,000 regardless of their age or work situation as long as the home has been owned for a minimum of 10 years. It means a couple can contribute up to $600,000 for the same home via the downsizing cap. The contribution must be made within 90 days of the disposal of the dwelling, or such longer time as allowed by the Commissioner.
It is always important that you seek advice in this area as you financially plan for your post downsizing life. Simply Downsize can put you in touch with financial advisors who can point you in the right direction.
Also, please feel free to call me on 0410 691 990 for advice on how to start your downsizing journey.