From 1 July 2018, Australians aged 65 years or older will be able to make a non-concessional (after-tax) contribution into their super account of up to $300,000 from the sale proceeds of their family home if they have owned the property for at least 10 years.
The good news is for couples, this means a total of $600,000 could be contributed as it’s $300,000 each. The other bonus is this is a separate contribution cap and therefore does not affect your non-concessional limit. It also does not impact the new $1.6M balance cap.
The important point to make is currently the rules do not allow retirees over age 65 who are not working to make any further contributions to super. Therefore, this is a notable change for retired Australians.
Now that we have established the benefits and rules, the question to ask is whether this is a good idea for you.
There is a substantial amount of wealth locked up in people’s homes and sometimes this has been achieved to the detriment of building their super. Particularly for the generations who started work before compulsory super was introduced. Being able to transfer some of these funds to super can provide a tax effective solution.
Whether utilising this this option is beneficial or not will always depend on your circumstances, overall asset structure, your goals and may even depend on your Estate planning needs. Super is a non-estate asset and can be passed outside of the Will. If the funds are not added to super they may be transferred to the Estate upon death and therefore distributed via the Will. These factors should also be considered before proceeding with any contributions.
So before adjusting your retirement plan or packing any boxes, please be aware this is still a proposal from the May 2017 Budget and has not yet become law. As a result, the exact details of this “Downsizing” legislation could change before 1 July 2018.
For more information and advice on whether this could be something to consider implementing, please talk with your Altitude Adviser.
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