Downsizing your house for Super’s sake

The Ord Minnett.

By Mark Davidson

 For those of you over the age of 65, you may be asking: is there a way to top up my super savings so that I retain the flexibility to afford an enjoyable retirement?

In short, from 1 July 2018 the government has given you that opportunity.

The government is allowing those over the age of 65 to relocate for the purpose of making a contribution to super.

Where you satisfy the rules (which are broadly detailed below) it may be possible to contribute up to $300,000 per person from the proceeds from the sale of your residence.

Importantly the contribution won’t count towards your concessional or non-concessional contribution caps. Further, you are not required to satisfy the work test and there is no maximum age limit to make the contribution.

Understandably, there are a number of key requirements that need to be satisfied before taking advantage of such an opportunity – broadly:

• You haven’t already made use of the downsizer contribution rule

• You must be 65 or over at the time you make the contribution

• The contract of sale needs to be entered into after 1 July 2018

• You are required to make the contribution within 90 days of the change of ownership

• You are required to complete documents to confirm it is a downsizer contribution

• You are unable to claim any part of the contribution as a tax deduction

• You must satisfy the main residence capital gains tax exemption in whole or part

• The property must have been owned by yourself and/or your spouse for more than 10 years prior to the sale

Other conditions may apply and this is why you need to seek advice before doing anything.

To be clear, there are other factors that need to be considered before undertaking such a strategy.

For example, implementing such a strategy may mean you have further assets to use in your retirement which should provide you with increased flexibility to enjoy retirement. Conversely, one key down side is that the money you contribute from the sale may become assessable from a Centrelink and Aged Care perspective.

You also need to consider how much you already have in a tax free retirement income stream, the costs involved with selling your residence and purchasing a new one, and if there are any capital gains tax implications.

You also need to consider the lifestyle implications of selling the residence and moving.

As always, before doing anything, seek advice around your situation and objectives.

Mark Davidson is an Authorised Representative (no 427049) of Ord Minnett Ltd, AFS licence 237121. This article contains general financial advice only and does not consider your personal circumstances; you should determine its suitability to you. Before acquiring a financial product you should consider the relevant product disclosure statement. Past performance is not a reliable indicator of future performance.

Mark Davidson is Managing Partner and a Senior Financial Adviser with Ord Minnett Sunshine Coast, having first started in the financial markets in 1986. Since joining Ord Minnett, Mark has established a successful advisory business providing direct investment advice and funds management services to a select group of private individuals and families, their companies, trusts, and superannuation funds.

Mark can provide advice and portfolio management services in a range of areas including Australian shares, fixed interest, international shares, managed funds, exchange traded options, cash management services, leveraged investments, initial public offerings (IPOs) and other capital raisings. Specific areas of expertise include superannuation (including Self Managed Super Funds), retirement planning, the age pension and other Centrelink benefits, wealth creation strategies, and portfolio management.

 

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