Retirement Income Strategy – Downsizer House Sales

Tuesday, June 08, 2021

Property prices and home sales have gone through the roof on the Sunshine Coast and SE Queensland regions for months now. Some retirees may use their profits to downsize their living situation and boost their retirement income by utilising the Downsizer Contribution to their superannuation.

By Maher Digby Financial Planners Sunshine Coast 

Property prices and home sales have been going gang busters on the Sunshine Coast and SE Queensland regions for months now. Everywhere you go you will hear stories of massive financial gains for local homeowners selling their properties.

Some people approaching retirement may see this as a chance to downsize their living circumstances and boost their retirement income through contributing some of their profits into superannuation as part of their SMSF investment strategy. This is certainly a retirement planning strategy option. Since 2018 the Australian Government have made available a Downsizer Contribution scheme to people 65yrs and older in which they can contribute up to $300,000 from the sale of their home into their superannuation. In the May 2021 Federal Budget, the Government announced a plan to extend this scheme to people as young as 60yrs who sell their home - most likely starting from 1st July 2022 (once passed through parliament this year).

Keep in mind, there is also currently an allowance for people until 65yrs old to contribute up to $300,000, over a 3 year period, as non-concessional funds into their superannuation. These funds can be from any source. Please see our article ‘Retirement Investment Strategies – Superannuation Lump Sum Contributions’ from August 2020 for more details on this option.

The Downsizer Contribution is an option in addition to the non-concessional option.

What are the current rules for Downsizer Contributions?

  1. You need to be aged 65 or older
  2. The property must have been yours or your spouse’s main place of residence at some point and owned the home for at least ten years.
  3. Both you and your spouse can make up to $300,000 downsizer contributions each so there is potential to boost both of your superannuation balances.   

What are the advantages for Downsizer Contributions?

  1. Retirees looking for more money in their Superannuation to fund their retirement income and have those funds in a tax beneficial environment.
  2. There is no requirement for you to be working to make the contribution and there is no upper age limit for making the contribution – currently you must be 65yrs and older.
  3. You are not required to purchase another home with the money from sale of your home (this is a big decision to make and should be done in consultation with your Financial Adviser)

What are the considerations for Downsizer Contributions?

  1. With regard to the Age Pension tests - you are moving your money out of an exempt asset (your family home) into a non-exempt assessable situation – your Superannuation Fund.  Your superannuation is also used to assess eligibility for residential care and home care services.  If you are considering an aged care facility you should seek advice from your Financial Adviser.  
  2. Costs of property sale and your ultimate profit margin in real terms needs to be considered.

If you are selling your home and considering the Downsizer option, or in fact the option for a non-concessional contribution to your superannuation as part of your SMSF investment strategy, there are rules and regulations to consider for each of these. We recommend seeking professional advice regarding your individual circumstances and your retirement plannig income strategy. Maher Digby are specialists when it comes to estate planning Sunshine Coast services, so why not contact us today to find out more about your Downsized Contribution estate planning options. 

For more Information contact Mark Digby at Maher Digby Securities Pty  Ltd - Financial Advisers – AFSL No. 230559. This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such.  Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a financial advisor