The ‘downsizer contribution’ opportunity came into effect with the start of the new financial year. From 1 July 2018, eligible people can boost their superannuation balance by making an extra contribution from the sale proceeds of their home.
An individual who is 65 years or more may choose to contribute up to $300,000 to their superannuation without counting towards their non-concessional contributions cap. However, the contribution will count towards their $1.6 million transfer balance cap (that is, the limit on total super that can be transferred into the retirement phase from 1 July 2017).
What you need to know:
It can only be used for the sale of one home. It can’t be used again for the sale of a second or subsequent home.
The contribution is not tax deductible and will be included when determining eligibility for the age pension.
There is no requirement to purchase another home.
There is no maximum age limit – the person just needs to be 65 years or older at the time of contribution.
The contract of sale for the home must be exchanged on or after 1 July 2018. A contract signed prior to this date is not eligible.
The home must have been owned by a person or their spouse for 10 years prior to the sale (date of settlement of purchase to date of settlement of sale).
One spouse must have had ownership to make both eligible to contribute up to a maximum of $300,000 each.
The home must have been located in Australia and must not be mobile. That is, houseboats, caravans and mobile homes are not eligible.
The capital gain or loss from the sale will have either been exempt or partially exempt from capital gains tax.
The contribution must be made within 90 days of receiving the sale proceeds and a ‘Downsizer contribution into super’ form must be provided to the fund at the same time or prior. Extensions of time can be applied for (to the ATO) if it the circumstances are outside of the persons control.
The contribution cannot be greater than the total proceeds from the sale of the home.
Multiple contributions from the same sale totalling $300,000 can be made. That is, it doesn’t need to be one lump sum transfer into super.
A couple sell their home for $1,000,000. Each spouse can make a contribution of up to $300,00.
A couple sell their home for $350,000. The maximum combined contribution (of the couple) cannot exceed $350,000. The couple can choose the split up to $300,000 for an individual. For example, $300,000 to one spouse and $50,000 to the other, or $200,000 for one spouse and $150,000 to the other.
A couple sell their home for $600,000, but only one of the couple is on the title. Both can still contribute $300,000 each to their super.
Speak to a Private Client Adviser at BlueKite Capital today to discuss this opportunity and your retirement planning needs. Call us on 1300 883 594 or email email@example.com