How you can use your home to provide for a tax effective retirement.
You have worked most your life to provide for you and your family. You have provided your children with a good lifestyle, education and a home. But now they have all grown up, some of them with a family of their own. Your home is no longer a crazy bustling residence and you find yourself with a lot more room than you need.
For many of us, the family home is the biggest asset we will own. What if there was a way to use this asset to fund the retirement you dreamed of? Not only that but do it in the most tax effective way.
Maybe the Downsizer Contribution is for you?
What is it
A great opportunity for those moving home. It was one of the responses the Federal Government put forward in order to address housing affordably. Essentially it is an incentive for retirees to downsize from a larger house to a smaller one. Thereby putting more ‘family friendly’ housing supply into market with a hope of reducing prices.
How does it work
From 1 July 2018, if you are eligible, you can choose to use the proceeds of the sale of house to make a ‘downsizer contribution’ into your superannuation. The contribution can be up to $300,000 for each eligible person. You can only utilise this once in your lifetime.
To be eligible you must:
- Be over age 65 (Decreasing to age 60 from 1 July 2022)
- The sale of you house must be after 1 July 2018. You have not previously made a downsizer contribution,
- Your (or your spouse) must have owned the house for at least 10 years
- Your home is in Australia (and is not a caravan, mobile home or houseboat)
- Proceeds from the sale of your house are CGT exempt (or possibly partially) under the main residence exemption.
- You make the contribution with 90 days of receiving the proceeds of the sale and you provide your superannuation fund with the Downsizer contribution into super form.
What’s in it for me.
The best thing about the downsizer contribution is that allows you to get a lump sum into your superannuation and it not count towards your annual contributions cap. For a couple this can be up to $600,000 into your superannuation. That then can provide you with the most tax – effective income in retirement.
Also, no maximum age limits or work test need to be met in order to make the contribution. Which gives even retirees scope to add to their super.
Do I need Advice?
Like anything to do with superannuation, there are rules around making the contribution and how that then affects your superannuation balances. Not meeting all the rules could leave you with an unwanted tax bill.
It would be prudent to seek the assistance of a professional if you are looking to utilise the downsize . If you would like to discuss your suitability – Schedule a no-obligation Discovery Chat with us.
Discovery Wealth – The Hills trusted name in financial advice.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.
