Downsize your home, upsize your super
31 August 2018
Is your house getting too big now that the children have probably flown the nest? Downsizing will not only free up some funds, but a new piece of superannuation legislation means that the money from the sale of your home can now work even harder for you.
At some point, most retirees find they want a smaller home with lower maintenance or one better suited to their empty-nester needs. Selling the family house can also be a good way to release capital to help fund your retirement needs and preferences, such as living and medical expenses or travel and other social activities.
From 1 July this year, new legislation known as a ‘downsizer contribution’, allows you and your spouse to each contribute a proportion of the sale of your home to boost your super. And when you’re in the tax-free pension phase of superannuation, this additional contribution will work even harder for you when you draw down a pension. The legislation allows you and your spouse to each contribute up to $300,000 from the sale of your home into super.
As the legislation is relatively new and complex, seeking appropriate financial advice is recommended. There are certain criteria you have to meet to qualify for this concession, for example:
- The money must be from the proceeds of selling your principal home which you or your partner have owned for 10 years or more.
- You (and your spouse) need to be 65 years of age or older.
- Once you receive the sale proceeds, you must make the contribution to your super within 90 days.
- You can only make the contribution on one home, being you principal home.
In the past, those aged over 75 have not been able to make nonconcessional contributions to their super, but this does not apply to funds from downsizing. And you don’t actually have to buy a new home once you have sold your existing principal home.
Of course having a greater balance in your superannuation does mean that it might impact on your eligibility for the age pension. The contributions may be subject to asset and income tests because you will be switching from having the money in your family home – which is an exempt asset – to superannuation which is potentially a non-exempt asset.
But generally it is a win-win situation. You can boost your retirement savings at the same time as moving into a smaller, more manageable home.
It’s important to seek professional advice to make sure you get it right for your individual circumstances. Call 1300 LGSUPER (1300 547 873) to make an appointment or you can request an appointment here.
This has been issued by LGSS Pty Limited (ABN 68 078 003 497) (AFSL 383558), as Trustee for Local Government Super (ABN 28 901 371 321). This document contains general advice only and is not a substitute for personal advice as it does not take into account any individual’s investment objectives, financial situation or particular needs. Accordingly, an individual should seek professional personal advice before making a financial decision.