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Getting the most out of your superannuation in uncertain times


Campaigning for the recent federal elections resulted in much debate, often heated, about how the superannuation system will operate and be taxed going forward. In particular, opportunities to make contributions to super and the abolishment of refunds of excess franking credits in Self- Managed Super Funds (SMSFs) have the Coalition and Labor each taking very different views on the issues. 

Through all of this debate and uncertainty however, one valuable superannuation contribution opportunity continues to be supported by both the major political parties: the “downsizer contribution”. Why? The answer is simple. Apart from obviously bolstering superannuation balances and thereby providing an increase in superannuation pension payments, all parties recognise the potential it has to help improve housing affordability, a crucial issue in our increasingly crowded cities. This means that the downsizer contribution will remain a valuable opportunity for people looking to maximise their super. 

What is the downsizer contribution? 

From 1 July 2018, Australians aged 65 years or older are able to make a tax-free contribution to their super of up to $300,000 from the proceeds of the sale of their home. 

What are the benefits of making a downsizer contribution? 

You can top up your super balance 

If you haven’t had the opportunity to save enough funds for retirement, the downsizer contribution provides a great opportunity to top up your super balance. 

No work test or age limits apply to downsizer contributions 

If you are aged 65 to 74 and want to make voluntary contributions to super, you need to satisfy a work test while people aged 75 and over are generally ineligible to make any voluntary contributions to their super. This does not apply to downsizer contributions. 

Annual contributions caps do not apply 

The downsizer contributions can be made in addition to any concessional and non-concessional super contributions you may be eligible to make. 

Currently you can make concessional and non-concessional contributions to super of $25,000 and $100,000 a year respectively and in certain instances you can also carry forward any unused contributions from previous years. 

Downsizer contributions aren’t subject to the $1.6m total super balance restriction 

If your total super balance was more than $1.6 million as at 30 June of the previous financial year, you cannot make any further non-concessional contributions into your super. This rule does not apply to the downsizer contribution. 

You don’t actually have to downsize 

If you have excess cash, the downsizer contribution could help you get this cash into your super and use the proceeds from the sale of your home to fund the purchase of a new home of your choice. 

It’s available to both members of a couple 

Both members of a couple can take advantage of the downsizer contribution opportunity. This means a couple could contribute up to $600,000 towards their super. 

What do you need to be aware of? 

  1. You need to be aged 65 or over to make a downsizer contribution. 
  2. You need to have owned the property being sold for at least 10 years and it has to have been the main residence of you or your spouse at some point in time. 
  3. The property sold must be in Australia and it cannot be a caravan, mobile home or houseboat. 
  4. You have 90 days to make a downsizer contribution once you have received the sale proceeds. 
  5. The downsizer contribution can only be used once. 
  6. The maximum amount of super that can be transferred to a tax-free pension account is $1.6m. 
  7. It may impact your eligibility for an Age Pension as Centrelink has no means test exemption for making downsizer contributions. 
  8. You will need to take into account the property related costs of downsizing in making your decision. 

 Professional advice should be sought to ensure this strategy is right for your circumstances. To find out more, please contact Professional Wealth Services on 02 9455 0665 or simply visit our website for further information about us.

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