It has been a long time coming but downsizers can finally take advantage of new superannuation incentives that came into effect yesterday.
This initiative was announced more than 14 months ago with much fanfare, but based on my conversations with clients, there appears to be a real lack of awareness of it.
There has been a little media coverage as the scheme came into effect, and if you have a good accountant or financial advisor they will have definitely bought it to your attention.
However when I have mentioned it to some clients, they were surprised to learn about it.
So will it make a difference?
Well, based on the lack of awareness, and also the fact that the increased super balances will still count towards the age pension assets test, I don’t think we will see a ‘flood’ of empty nesters putting their home on the market.
However I think it will at least create a noticeable increase in turnover, particularly in the higher end of the market where age pensions are less of a consideration.
This will present opportunities for growing families who are looking for larger 3-4 bedroom homes with backyards, as well as people selling quality self-contained, low-maintenance apartments in good locations.
Most importantly it will help downsizers move into homes where they can put maintenance behind them and enjoy a ‘lock up and leave’ lifestyle.
The fine detail
From 1 July 2018, people aged 65 and over are able to make a non-concessional (post-tax) contribution into their superannuation of up to $300,000 from the proceeds of selling their home.
The existing voluntary contribution rules for people aged 65 and older (work test for 65-74 year olds, no contributions for those aged 75 and over) and restrictions on non-concessional contributions for people with balances above $1.6 million will not apply to contributions made under this new special downsizing cap.
This measure will apply to a principal place of residence held for a minimum of 10 years. Both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to superannuation through the downsizing cap.
These new contributions will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps.