Welcome to a new financial year! I can't believe that the 2018 tax year is over and we are now starting 2019! There have been some major tax changes that will start from 1 July 2018, and the first one I thought I would feature is the Downsizer Contribution. With the current super contribution thresholds, this measure that was announced in the 2017-18 Federal Budget, provides an incentive for older Australians to 'downsize' their house and boost their retirement savings.
The Downsizer Contribution applies from 1 July 2018 (i.e. the contract of sale must be exchanged on or after 1 July 2018). Individuals aged 65 or over are eligible to use the proceeds from the sale of an eligible main residence to make a 'downsizer' super contribution up to a maximum of $300,000 per person (i.e., up to $600,000 per couple), without having to satisfy the age or gainful employment tests that usually apply. The contribution cannot be more than the total proceeds of the sale of the relevant home (e.g. if a couple sell their home for $500,000, the maximum 'downsizer' contribution that they can make is $500,000).
Although this measure has the name 'downsizer', there is actually no requirement to acquire a smaller property or even purchase another property at all. This will allow older Australians to choose a living situation that will suit their needs (e.g., retirement village, nursing home, renting, living with family and even purchasing a bigger (or smaller) home).
To be an eligible main residence, the property must have been owned for at least 10 years and was your main residence at some time during the ownership period. This means that an investment property that was at some stage your main residence could meet the eligibility criteria to make downsizer contributions.
If you would like to see if these contributions will apply to you, please give us a call on 0438 018 348.
General Advice Warning – The information in this article is educational and general in nature. It does not take into consideration your personal financial or taxation information, goals and objectives. Please ensure you seek appropriate financial and taxation advice.