Since the start of the new financial year, 1 July 2018, superannuation contribution opportunities for those aged 65 or over have expanded to include the new Downsizer Contributions.
These contributions enable eligible individuals to contribute up to $300,000 from the sale of one eligible property to super within 90 days of change of ownership, without needing to satisfy the work test. Bonus!
This extra payment can be made in addition to the concessional contribution and non-concessional contribution caps and is not restricted by your total superannuation balance.
An “eligible property” must have been owned by an individual, their spouse or former spouse for 10 continuous years just before the sale of the property. Also, the individual must satisfy all the requirements to qualify for a full or part capital gains tax (CGT) exemption for that property.
TIP!! Downsizer contributions can also present an opportunity to implement a re-contribution strategy. What’s this, you ask?? This particular strategy enables you to increase the tax-free component of superannuation which can help reduce the tax liability on death benefits that will paid to non-dependent beneficiaries, such as adult children.
TRAP!! Age Pensioners should know, that selling the family home then making a Downsizer Contribution may reduce their Age Pension entitlements. This is because the principal home is an exempt asset for Centrelink purposes whereas superannuation is counted as an asset for clients who are of Age Pension age.
If this sounds like something you’d like to know more about, give your adviser a call, or we’d be happy to walk you through whether or not it’s right for you.