Downsizer contributions can be a way to boost your superannuation in or approaching retirement. When you retire over the Age of 60 any funds held in superannuation receive tax free status for earnings and withdrawals.
The most important part to understand about a downsizer contribution is that you only have 90 days to make the contribution once the proceeds from the sale of your house are received. You must notify your super fund when you make the contribution and complete a form.
Some other eligibility criteria include:
your 55 or older
your selling your main residence (or a property that has been used as your main residence)
your property is not a caravan, houseboat or mobile home
you owned the property for 10 years or more
You can only make a downsizer contribution once, and there is no maximum age limit.
The amount you can contribute is $300,000 for both you and your partner, or a maximum of $600,000 in total. The contribution however cannot be more that the total proceeds from the sale of your home.
Downsizer contributions do not affect of the other superannuation contribution caps. The contribution is after tax, so not tax is payable when making the contribution, and the funds are returned to your estate tax free if you do not use all your super in your lifetime.
So in a year where you sell your house (assuming you have sufficient funds) you may be able to contribute $300,000 as a downsizer contribution, plus $330,000 using the bring forward rule under the non concessional cap. This limit is per person, so that is over $1million for a couple.
This can be a significant boost to your superannuation.
It should be noted that when you sell your residence there may be an impact on your Aged Pension eligibility. Your residence is not counted towards the Assets test for Aged Pension eligibility. Any proceeds released (assuming you downsize), whether contributed to your super or held in your own name, will be counted towards the Aged Pension assets test.
For more professional retirement planning advice, call 02 9634 6698 or book a free consultation online with our expert financial advisors at our office in Sydney's Norwest.
*Please note that this article is for information purposes only and does not constitute advice, and you should not act on this information without consulting a financial planner and/or a registered tax agent.
**This blog was written using data from third part websites, over time the material may become out of date. We do not accept any liability should you act on this material with receiving individual advice that considers your personal needs and current legislation.
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