Using Home Downsizing Contributions as part of your Retirement Income Strategy

Wednesday, November 15, 2023

At some stage during retirement, you may consider the option to downsize your living circumstances and boost your retirement income via contributing some of the profits into your superannuation. This is certainly a possible retirement strategy option. Read on to learn more from our Sunshine Coast retirement income strategy specialists.

Since 2018 the Australian Government made available a Downsizer Contribution scheme to people in which they can contribute up to $300,000 (per person) from the sale of their home into their superannuation. The minimum eligible age for this has gradually reduced over the past few years. From January 2023 the Government extended this scheme to people as young as 55yrs who sell their home.

Keep in mind, there is also currently an allowance for people up to 75yrs old, to contribute up to $330,000, over a 3 year period, as non-concessional funds into their superannuation. These retirement income funds can be from any source.

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

What are the current rules for retirement income Downsizer Contributions?

1. You need to be aged 55 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 of 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.
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 using Downsizer Contributions as part of your retirement income strategy?

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 perhaps the option for the non-concessional contribution to your superannuation, there are rules and regulations to consider for each of these. As retirement income strategy specialists, we can provide professional advice regarding your individual circumstances and help you come up with a retirement income plan that best meets your needs.

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 adviser for retiree income strategy advice.