Downsize your home and boost your super The downsizer contribution was announced in the 2017-18 Federal Budget. Janelle Ward reports on the uptake of the scheme, its supporters and critics.
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n the 2017-18 Budget, the government announced that, from 1 July 2018, an eligible person could make a downsizer contribution into his or her superannuation.
You are eligible to make a downsizing contribution if:
Costs to consider Actuaries Institute fellow and author John De Ravin writes in his book, Slow and Steady: 100 wealth building strategies for all ages, that when estimating the financial impact of downsizing, you need to allow for the expenses of selling and buying.
• you are aged 65 or older at the time you make the contribution • the contribution is from the proceeds of selling your home on or after 1 July 2018 • your home was owned by you or your spouse for 10 years or more prior to the sale • your home is in Australia and is not a caravan, houseboat or other mobile home • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption • you have not previously made a downsizer contribution to your super.
“Typical selling expenses are in the order of 3 per cent to 5 per cent of the sale proceeds – the main items are commission (often 1.5 per cent to 2 per cent) and the expenses of preparing the property and the marketing campaign, but there are also other expenses such as legal/conveyancing expenses and removalists,” he writes.
How much can you contribute?
Obviously, anyone whose family has moved out would consider downsizing – especially if maintenance of the home and garden is becoming a burden.
Individuals – singles and both members of a couple – can contribute up to $300,000 to their super. It is regarded as a non-concessional contribution, will not count towards the contributions caps and can still be made even if the total super balance is greater than $1.6 million.
“Typical buying expenses are of the order of 5 per cent to 7 per cent of the purchase price of the property with the main expense being stamp duty, and minor expenses being legal expenses, the cost of inspections and mortgage-related expenses.”
To downsize or not to downsize?
And if there is a fear that the nest egg is unlikely to provide the desired retirement lifestyle, a downsizer contribution is valuable. So are older Australians using the downsizer strategy?
YourLifeChoices Retirement Affordability Index™ May 2021
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