Downsize and SUPERSIZE your retirement savings

by Brett Cribb, Financial Adviser

While it’s common to downsize the family home when you retire, thanks to legislative changes that came into effect on 1 July 2018, downsizing to supersize your retirement savings has taken on a whole new meaning.

The ‘downsizer measure’ could enable you to boost your retirement savings by up to $300,000 each using proceeds from the sale of your family home, and enjoy the tax savings available in the super environment.

The new downsizing super contribution scheme stands to offer retired empty-nesters (especially those who may be finding retirement more costly than they’d expected) and who no longer need a large family home, an opportunity to contribute up to $300,000 from the sale proceeds of their family home to their super fund.

Before making the decision to downsize, it’s important to carefully consider how the rules and regulations apply in your particular circumstances.

Here’s what you need to know:

#1 The new downsizer legislation allows homeowners aged 65 years and over to downsize their family home and invest the surplus into their super account if they have owned the property for at least 10 years.

#2 The property sold must be the person’s main residence and eligible for the main residence exemption for capital gains tax.

#3 Couples may contribute up to $300,000 each to super, giving a total non-concessional contribution per couple of up to $600,000.

#4 You can only take advantage of this opportunity for one home sale.

#5 Your downsizing contributions are invested within the super environment, which means such assets take advantage of the lower tax rate levied on investment returns within the super system. Earnings received on a super balance are only taxed at 15% (or are tax-exempt if rolled into a retirement income stream), rather than taxed at your normal marginal tax rate.

#6 You must make the downsizing contribution within 90 days of receiving the sale proceeds from your family home (usually settlement day).

#7 When you make a downsizing contribution from the sale of your principal place of residence, you are not obliged to purchase a new home.

Be aware that withdrawing capital from an exempt asset (your home) for Centrelink purposes and placing it into an assessable asset may mean that the entitlement to the age pension is reduced. Therefore professional advice is critical.

View our 3-minute video on the Downsizing Measure.

Your next step…

Naturally there are a number of other matters that need to be considered in relation to your individual financial and personal circumstances that will determine your eligibility for the downsizing measure. However, it may present a great way for you to release built-up equity in your family home to pay for your retirement living expenses.

To discuss the downsizer measure in relation to your particular circumstances, please call Brett, Ross, Steve or James on 3007 2007 or email bcribb@stratusfinancialgroup.com.aurmunro@stratusfinancialgroup.com.ausnicholas@stratusfinancialgroup.com.au or jmarshall@stratusfinancialgroup.com.au

 

At Stratus Financial Group, we help families, professionals, executives, business owners and retirees manage their complex financial affairs and coordinate their professional advisers. 

Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.