Selling your house may open up an opportunity to make your retirement a lot better

Perhaps you already have substantial assets within the tax efficient superannuation system or perhaps you have left it too late to maximise the assets you will have to enjoy your retirement years.

Regardless of which camp you might be in, an opportunity may exist to boost your retirement asset base which will provide a greater asset and income delivery to ensure you can live the life you deserve in retirement.

Over the recent years the Government has looked to restrict the amounts individuals can contribute to super, with concessional contribution limits reducing from $100,000 a year down to $25,000, whilst non-concessional contribution limits have reduced from $180,000 a year down to $100,000.

The “downsizer” opportunity

A new opportunity now exists where an individual may be able to make a contribution of up to $300,000 and for couples, a combined $600,000. These contributions are known as ‘downsizing’ contributions and will not be considered a concessional or non-concessional contribution, rather it will be its own class of contribution.

These new rules commenced on 1 July 2018 and allow those over age 65 to make contributions to super when they sell their home.  Careful planning is required to make the most of this opportunity.

The opportunities presented by the downsizer contribution are also greater than they may appear. Spouses are able to make downsizer contributions when their partner sells their home, regardless of whether the contributor owned the home themselves or received any part of the proceeds. Other saved funds may also be used to make the ‘downsizer’ contributions.

What are the traps?

As always, there are a few traps in the rules to watch out for. Restrictions on how long you must have owned the home, how much you can contribute to super and how old you must be, need to be considered before a downsizer contribution can be made. Making sure the contribution is made in the correct form is similarly crucial. Also, if you are receiving (or expect to be eligible for) the Centrelink Age Pension then the strategy needs to be fully considered to ensure the optimal financial outcome can be achieved.

Next Steps

There are other ways to benefit from the downsizer contribution but the complexities are such that they are best discussed in person. If you are considering selling your home or looking at ways to boost your super it is best to contact Ocean Advice for an initial complimentary discovery session to identify if you may benefit from the ‘downsizer’ contribution, or other superannuation strategies.

The information in this article and the links provided are for general information only and should not be taken as constituting professional advice.