The Government is looking to incentivise older Australians considering downsizing, to take the leap.
Previously, selling the family home may have resulted in adverse tax and/or social security impacts.
However the asset rich and cash poor now have an option to make a large contribution to their superannuation from the proceeds of selling their primary residence.
The downsizing legislation allows eligible homeowners aged 65 or over to each make a “downsizer contribution” into their superannuation of up to $300,000. The contribution amount cannot be greater than the total proceeds of the sale, which means that if the residence sells for $500,000, then a couple’s combined contributions could only total up to $500,000.
If the same couple sells their home for $800,000, each spouse can make a contribution of up to $300,000 (ie $600,000 into superannuation).
Importantly, the residence must have been held for 10 years or more to qualify.
These rules can provide a timely boost to superannuation accounts for many Australians and allows them to access the low or no tax rates available within the superannuation system. In turn, it is hoped that more housing will be freed up for the younger generations.
If you are thinking of downsizing in the near future we recommend speaking with us before or soon after entering into a contract of sale. There is a relatively short time frame in which action must be taken after settlement, so it is not always something that can be adequately addressed at the annual review meeting.