Australians aged 65 and over who are downsizing for retirement can now contribute the proceeds from the sale of their main residence (up to $300,000) into super1.
We take a look at what this could mean for you, bearing in mind that like with all important financial decisions, it's a good idea to get financial advice before deciding what's right for you.
Super benefits for downsizers
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, that changed on 1 July 2018, with those aged 65 and over now able to make a non-concessional contribution to their super of up to $300,000 using the proceeds from the sale of their main residence – regardless of their work status, superannuation balance, or contribution history.
For couples, both spouses are able to take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.
How does it work?
Proceeds from the sale of your main residence that are contributed into super as part of this initiative can be made in addition to any other before-tax or after-tax contributions you’re eligible to make.
The government said the aim is to encourage older Australians, where appropriate, to free up homes that no longer meet their needs and make room for younger growing families2.
- The contracts for sale must be exchanged on or after 1 July 2018
- The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time
- You need to have owned the home for at least 10 years
- The property that’s sold must be in Australia and excludes caravans, mobile homes and houseboats.
‘Downsizing’ contributions are not tax deductible and can be made regardless of super caps and restrictions that otherwise apply when making super contributions.
Things to note
No special Centrelink means test exemptions apply to the downsizing contribution. Due to this, there may be means testing implications as a result of downsizing, which need to be considered.
Meanwhile, additional rules may apply to your situation, so make sure you do your research before making any decisions.
Also note, if you’re an AMP customer, a Downsizer Contribution Form from the Australian Taxation Office (ATO) will need to be provided to AMP when making, or prior to making, this type of contribution.
Check out our infographic below for a snapshot of some of the advantages and considerations.
Further reading that may be of interest
- Government fact sheet – Downsizer superannuation contributions
- ATO info page - Downsizing contributions into superannuation
- Article - Do I have to downsize my home when I retire?
Where to go for more information
Like with most things, when you’re making a big financial decision, which could have implications, it’s worth doing your research and speaking to your financial adviser first.
If you don’t have an adviser but would like to seek some advice, you can call AMP on 131 267 or use our find an adviser search engine.
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