Downsize your home, upsize your super
19 February 2019
One of the most unforgettable days in the life of any parent is when their children fly the nest and begin professional careers of their own. The family home may seem over-sized now they’ve left, and you may be thinking of moving to a new home better suited to the next phase of your life.
As well as representing this new chapter in your life, downsizing your home also presents an opportunity to upsize your super.
How does this work?
As of 1 July 2018, if you're aged 65 or over and you meet certain eligibility criteria, you have the option of making a downsizer contribution to your super fund from the returns you gain if you sell your home.
What makes you eligible?
- You're 65 or older when making the contribution.
- You, or your spouse, owned your home for at least 10 years prior to the sale.
- The funds you contribute into your super come from the house sale, which must have occurred on or after 1 July 2018.
- The property is in Australia, and is not considered a mobile home.
- This is the first time you've made a downsizer contribution.
- Your downsizer contribution is made within 90 days of receiving the money from the sale.
- You provide a completed 'Downsizer contribution into super' form available at ato.gov.au to your super fund at the time, or before, you made the contribution.
- The proceeds from the sale are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption (being the home that you lived in as your main residence).
How much can you contribute?
If you meet these requirements, you're able to contribute up to $300,000 into your super account.
This contribution is non-concessional, meaning that you won't pay tax when it's in your super, and it won't count towards your contributions cap but will be included in your total super balance when it is recalculated at the end of the financial year on 30 June. However, the contribution itself isn't tax deductible.
It's also worth knowing that a downsizer contribution will be included in your transfer balance cap, the limit that comes into action when your savings are moved into retirement phase. Currently, this cap stands at $1.6 million.
At a time in life where moving into a smaller property is common, you also have the opportunity to boost your super to provide more financial security as you move through retirement.
Of course, before making important decisions about your super or retirement planning, seeking professional advice is recommended.
If you think this may be an option for you, speak to your financial planner first to ensure it’s the right strategy for your personal circumstances. You can request an appointment with an LGS financial planner or call us on 1300 547 873.