If you’re thinking of downsizing, it’s likely you’re also thinking about setting yourself up for retirement. Whether retirement comes hand in hand with downsizing, whether you downsize and continue to work or whether the right time to downsize comes well after retirement, it’s all about finding the right time for you. When you downsize from your family home, either to a smaller home, a townhouse, apartment or even an aged care facility, it’s likely you’ll have a substantial chunk of money left over. Once the sale of your old home and the purchase of your new one is finalised, what is the best thing to do with the proceeds?
From the 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home. This is officially termed a “Downsizer Contribution” and is accepted by all Australian super funds.
This downsizer contribution was announced as a part of the 2017/2018 budget, allowing citizens who’ve been living in the primary residence they are selling for over 10 years to contribute the proceeds to their selected super fund. This money does not count towards any contribution caps. In addition to this, the person making the downsizing contribution into their fund is not required to meet many of the existing restrictions that apply to other types of super contribution: age requirements, work requirements and retirement phase transfer caps (the amount of super that can be transferred to the retirement phase at any one point in time) all do not apply.
The Federal Government brought about this contribution as part of reforms to reduce pressure on housing affordability in Australia and applies to those who signed their sales contract any date after the 1 July 2018. The contribution you make, which is capped at $300,000, does not necessarily have to be 100% of the proceeds from the sale. Use some of that money to take holiday you’ve been dreaming of, buy that RV you’ve had your eye on or even invest elsewhere. What’s important is the downsizer contribution gives you a choice, and here at PropertyMash, we’re all about choice.
To confirm your eligibility and request forms to make a downsizer contribution, contact your super fund today.