7 minute read
Downsizing incentive for seniors
Downsizing Incentive
BY SOPHIE DOYLE FOR SENIORS
Are you over 65*, have owned your own home in Australia for ten years or more and considering selling your home? If you answered “Yes”, you may be eligible for the Downsizing Incentive for Seniors.
As part of its “housing affordability” theme in the 2017 Federal Budget, the Federal Government is incentivising older Australians to downsize their family home by allowing them to invest the proceeds into superannuation.
What’s it all about?
Individuals aged 65 and over can make a personal superannuation contribution of up to $300,000 using proceeds from the sale of a family home, which has been owned for at least 10 years. These new contributions can be over and above any other voluntary contributions the person is able to make under the existing contribution rules and concessional and non–concessional caps.
The contribution must be made within 90 days of the disposal of the home (i.e., from settlement date).
Currently, a person must be over age 65 at the time of making the contribution. From 1 July 2022, the age for eligible downsizer contributions will reduce to age 60.
Eligible Home/Dwelling
To make a downsizer contribution, an individual or their spouse must have ‘disposed’ of an ‘ownership interest’ in a ‘dwelling’ they held just before the disposal which is located in Australia. In respect to this measure, the definition of the term ‘dwelling’ is modified to exclude caravans, houseboats and other mobile homes. The effect of this modification is that a ‘dwelling’ includes:
A) a unit of accommodation that: (i) is a building or is contained in a building; and (ii) consists wholly or mainly of residential accommodation; and
B) any land immediately under the unit of accommodation.
Contribution Rules
Voluntary contribution rules for people aged 67 and older can be restrictive. Currently, for those aged between 67 and 74 years, a 40–hour work test must be met.
Under the downsizer rules there is no requirement to meet the work test regardless of age. Individuals over age 65 can contribute up to $300,000 regardless of their age or work situation, as long as the home has been owned for a minimum of 10 years. It means a couple can contribute up to $600,000 for the same home via the downsizer cap. The only requirement in this respect is that the individual/s must be over age 65 at the time the contribution is made. As mentioned earlier, from 1 July 2022 the eligibility age for downsizer contributions will be reduced to age 60. This allows people more opportunity to save a greater amount within the super environment for retirement.
Social Security Assessment
Age pensioners should exercise caution before considering this strategy.
The full value of a family home is exempt from both the Income and Assets test for social security purposes. However, any remaining sale proceeds (after a new home is purchased) will be assessable regardless of whether funds are contributed into super or not. Therefore, a sale of the existing family home could actually result in the individual, or couple, losing some or all of their age pension benefits. If full benefits are lost so too is access to the pensioner concession card.
Downsizing and the $1.7 million Pension Transfer Balance Cap
While there is no “Total Super Balance” limit that needs to be considered, such as there is with non–concessional contributions, individuals will still be subject to the $1.7 million Pension Transfer Balance Cap. Individuals and couples will need to consider how funds contributed into super under this scheme can be used. That is, funds may have to remain in an accumulation (taxable) account if the member has used up his or her personal Transfer Balance Cap. Funds remaining in the accumulation phase will not be tax exempt and a maximum of 15% tax will apply on earnings and capital gains. Talk to me today
Selling and/or buying a home is a major life decision and can involve significant amounts of money. Access to advice can help to ensure that you make a fully informed decision and understand the impacts on your pension or aged care fees – mistakes are too costly to make.
For further information on the Downsizer Contribution and to discuss if it is right for you, contact Sophie Doyle. Sophie has a passion for assisting people make informed financial decisions, as they navigate their way through retirement and aged care. To contact Sophie phone 4325 0884 or 0488 521 844.
Sophie Doyle (AR#000470612) is an Aged Care Specialist at Morgans Financial Limited (Morgans AFSL 235410 / ABN49 010 669 726) Disclaimer: The information contained in this article is provided to you by Morgans Financial Limited as general advice only and is made without consideration of an individual’s relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726 AFSL 235410 Level 29 123 Eagle Street Brisbane QLD 4000 Australia | A Participant of ASX Group. *From 1 July 2022, the age for eligible downsizer contributions will reduce to age 60.
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An exciting and affordable exercise program for people aged 50–100+ is now running at several locations across the Central Coast. Now is the time to rebuild your strength after the Covid–induced period of hibernation!
Living Longer Living Stronger is an innovative strength and balance program. It involves progressive resistance training to improve your strength, balance, and mobility, as well as having benefits for your overall energy and vitality.
The program was developed by COTA (Council on the Ageing) Australia. Your Living Longer Living Stronger instructors have all undertaken specialised training with COTA NSW which covers the needs of older people and how to work with the types of injuries and conditions that affect us as we age.
‘Moving and getting stronger has a flow–on effect on your general quality of life. It will be easier to carry shopping and play with your grandchildren, as well as help reduce the risk of falls and other injuries. The classes are also a great way to meet new people.’ said COTA NSW CEO Meagan Lawson.
Heather is one happy participant at Charmhaven Living Longer Living Stronger classes. She says: ‘I have been enjoying COTA’s strength and balance program two mornings a week for some time. I follow my individual program devised for my needs, strength, and limits by Amanda Doring to assist and improve my wellbeing. Interacting with a group of similar age and ability makes a great social morning. I love my strength and balance mornings.’
‘We may never be Olympians, but I am stronger now than I was and hope I can continue to attend for years to come.’
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Living Longer Living Stronger is very reasonably priced. You undertake an initial assessment to develop your personal program, which costs $50 (max) and from there classes cost $10ph session.
For more information and to book your assessment, contact your local provider: CHARMHAVEN Amanda Doring – 0412 611 727 amandadoring@hotmail.com DAVISTOWN, EAST GOSFORD & WYOMING Mai Speirs – 0411 039 643 m@urban-pt.com.au MOONEY MOONEY Angela Brislo – 0466 792 455 angela@brooklynfitnesstribe.com
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