What You Need to Know About Making a Downsizer Contribution
You may be someone approaching your retirement days or already living the retirement dream. Either way, you might have noticed some changes in your living situation and lifestyle.
Many retirees begin to realise that their current home isn’t necessarily the right fit for their new retirement lifestyle.
Commonly, retirees realise their home is simply too big! Maybe you’ve decided you want a far more low maintenance home with less gardening, cleaning and renovating to do.
Some may find that their retirement goals include relocating to their dream location or closer to loved ones.
If these factors have crossed your mind before, then the downsizer contribution scheme may appeal to you and your needs.
The Downsizer Contribution Scheme
If you meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.
Downsizer contributions are separate from other superannuation contributions and are therefore exempt from contribution caps.
Plus, if you are a couple, both members can choose to make the contribution to their super fund – meaning you could together, contribute up to $600,000.
That being said, not everyone’s eligible for the contribution, and there are specific rules to be followed to ensure that the downsizer contribution is legitimate and done successfully.
Here’s a deep dive into downsizer contributions, which will convey the specific requirements to be eligible for the downsizer measure and how you can make a downsizer contribution:
Are You Eligible for the Downsizer Contribution?
If you are interested in making a downsizer contribution, you must meet all of the specific requirements.
According to the Australian Taxation Office (ATO), you are eligible to make a downsizer contribution to your superannuation if:
- you are 65 years old or older at the time you make a downsizer contribution,
- the home was owned by either you or your spouse for ten years before selling it and the house isn’t a caravan or any mobile home,
- the amount that is being contributed to your super is the proceeds from the home,
- the proceeds of the sold home are either fully or partially exempt from capital gains tax (CGT) or entitled to the exemption,
- you have provided the super fund with a contribution into super form either before or on the time of contributing,
- you have not previously made a downsizer contribution to your super from using the proceeds of another home you sold,
- you contribute within 90 days after receiving the proceeds from your sold home.
That’s a lot to read through, but knowing the requirements is essential to ensure eligibility. If you find yourself answering “no” to any of the above requirements, you will not be eligible to make a downsizer contribution to the super.
Keep in mind that a home that was only owned by one spouse, whether you or your partner, still allows the other spouse to contribute, given they meet all the other eligibility requirements.
How to Make a Downsizer Contribution:
When making a downsizer contribution, your first task should be to see if you meet all the eligibility requirements. If your circumstances are complex, seek financial advice to determine if you are eligible.
When contributing, there are several forms that you may need to complete for the downsizer contribution to be directed to your super fund. This must be provided to the super fund when or before contributing. If you are making multiple contributions, a separate form is required for each.
It’s important to remember that you need to make this contribution within 90 days of receiving the proceeds, but you can request an extension if you run into issues.
Downsizer contributions are an excellent way for older individuals to make the contributions needed to top up their super fund. That being said, there are plenty of considerations to be made when contributing.
Retirement Planning and Financial Advice in Newcastle
If you’re planning to make a downsizer contribution to your super, contact our financial advisers in Newcastle who can help walk you through the process.
123 Financial Group are financial experts offering financial advice, mortgage broking, retirement planning and more. If you are looking to start planning for retirement or to maximise your super (or both!), contact our financial advice team.