If you are getting close to retiring and are starting to consider selling your family home to downsize, then this article is for you. In the current housing market, it is likely the thought has crossed your mind in thinking whether it is time to downsize. If you are in this boat, you might be able to make a significant difference on your superannuation through what is called the Downsizer Contribution. This contribution is a unique opportunity to grow your retirement savings and achieve a more comfortable financial future. Here at Lifelong Wealth, Bald Hills (Brisbane) our team of expert financial planners are able to guide you through this process, discussing the ins and outs of the downsizer contributions and help you take advantage of this strategy.
What is a Downsizer Contribution?
A Downsizer Contribution is a contribution made to your superannuation that has it’s own special category and allows you to grow your super without affecting your concessional contribution cap. This special contribution allows individuals aged 55 years and over to contribute up to $300,000 (each) from the proceeds of the sale of their home. Couples therefore have the potential to add up to $600,000 combined to their supers.
In order to make this contribution you do need to meet the eligibility criteria. The conditions include the following:
- Your home was owned by you or your spouse for at least 10 years
- It is a permanent house (not a caravan, houseboat or mobile home)
- It is your main residence (eg not an investment property that will incur CGT)
- The contribution is made within 90 days of settlement
- This is your only downsizer contribution
- You provide your superannuation the correct form at the time of the contribution
Does a Downsizer contribution affect my contribution caps?
The Downsizer contribution will not count towards your concessional or non-concessional contribution caps. Although this is a non-concessional contribution, it will not affect your contribution cap. However, it will affect your transfer balance cap which will be important for when you are moving your super savings to the retirement phase. It will also be important to note that the downsizer contribution will affect your age pension asset test and your eligibility for age pension. We highly recommend to come and speak to one of our financial advisers here at Lifelong Wealth to discuss the ins and outs of this.
Are Downsizer Contributions taxed?
Downsizer contributions have the added advantage of not being subject to the usual contributions tax. The proceeds from the sale of your home that you wish to contribute to super will not incur additional tax liabilities and therefore making this contribution an attractive tax advantage option. The downsizer contribution is a contribution that is made after tax, and therefore there is no extra tax paid on the way in.
Benefits of a Downsizer Contribution:
- Boosts your savings or retirement: Adding a large lump sum of money to your superannuation is one of the top benefits of a downsizer contribution. You are able to significantly increase your savings within your superannuation and therefore prepare you for a more comfortable financial retirement.
- Tax Advantages: as discussed before the downsizer contribution is an after-tax contribution and therefore not subject to extra contributions tax. It is a really efficient way to add to your super and you can have further tax advantages if you were to start pension payments.
- Flexibility: You do not actually need to downsize or purchase a home smaller than your current house. It also does not need to be a cheaper home. As long as it involves the sale of a previous primary residence, then what your future living situation looks like is completely up to you.
Why seek Financial Advice from Lifelong Wealth in Bald Hills?
Understanding the difficulties of the downsizer contribution can be tricky, however the financial planners here at Lifelong Wealth are able to support you through the process. We understand this can be challenging, especially as this is a big decision and it can be challenging to decide how to manage such a large sum. If you are in Brisbane and looking for Financial Advice, then Lifelong Wealth will be able to provide help. We understand the intricacies of these contributions and will know how to apply the strategies to your financial situation.
At Lifelong Wealth, we provide personalized financial advice in north Brisbane, and specialize in retirement planning, superannuation strategies, investment portfolios, and insurance. Our financial advisers have many years’ of experience in the finance industry and all the changes that occur with each financial year, and are able to provide you with quality financial advice while maintaining honest communication.
Take the Next Steps towards a brighter financial future.
If you would like to get more information on the downsizer contribution and how this will affect your specific financial situation, then please get in touch with us here at Lifelong Wealth. We can show you how a downsizer contribution might increase your superannuation savings and provide you with a more secure financial future as you prepare for retirement. Partner with Lifelong Wealth today to take control of your finances and let us help you reach your financial goals, no matter what stage of life you’re in. Your path to a more comfortable retirement starts here. Contact us today on 07 3188 5140 or email admin@lifelongwealth.com.au .
