Downsizing incentives for seniors
About the author:
- Author name:
- By Terri Bradford
- Job title:
- National Manager Wealth Management
- Date posted:
- 27 November 2018, 10:35 AM
The Seniors Downsizing legislation became effective 1 July 2018. Contracts entered into from this date on the sale of a family home that has been owned for at least 10 years may allow the owners to contribute up to $300,000 each from proceeds of sale into super.
Our top tips aim to help you understand the finer points of this strategy:
- A person must be age 65 or older at the time of making the downsizer contribution. If the contract is signed when the person is still age 64, as long as they were age 65 when the actual contribution is made (within 90 days of the settlement date), then they will be eligible to make the contribution. Note: there is no maximum age limit.
- Contributions can be split between a couple without regard for actual ownership proportions. For example, if the couple owned the home as tenants-in-common in a 70/30 split they can still each contribute up to $300,000 as their own downsizer contribution.
- There is no 40 hour work test, nor will the person making the contribution need to consider what their Total Super Balance is. However, once contributed the person must consider their $1.6m Transfer Balance Cap. If already used, the funds must remain in the accumulation account.
- The appropriate Approved Form must be used when making a contribution into super under the downsizing rules. The form must be provided to the super fund trustees on or before the day the contribution is made.
- Sale proceeds contributed into super become assessable under Centrelink rules - for both the Income and the Assets Tests. Therefore, age pension benefits may be impacted as previously the family home was an exempt asset for testing purposes. It is important individuals in this situation understand the implications of the downsizer strategy in relation to their Centrelink benefits.
- If the property is owned in a Trust or Company structure capital proceeds from the sale are not eligible proceeds for the downsizer rules.
- The property being sold does not have to be the family home. As long as the individual or couple has lived in the property for a period of time and that property, upon sale, is eligible for partial main residence CGT exemption then proceeds can be contributed to super under the downsizer rules. As long as the property has been owned continuously for at least 10 years prior to sale and the person has not previously made a downsizer contribution from the sale of another dwelling.
If you would like to discuss this Seniors Downsizing measure with a Morgans Adviser please contact your local Morgans office or call 1800 777 946.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
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