In the May 2017 Federal Budget announcement, new legislation was introduced whereby those aged 65 and over will be able to contribute an additional $300,000 into their superannuation upon the sale of their primary residence. These payments are referred to as ‘downsizer’ contributions and aim to incentivise property sales for current or upcoming retirees whilst having the added benefit of reducing pressure on housing affordability for other Australians.
Downsizer contributions become available from 1 July 2018 to eligible members and sale contracts must be exchanged from this date onward. It is important to note that it is not a requirement to subsequently purchase a new property. To meet the eligibility requirements, contributing members must be aged 65 or over (with no maximum age limit) and must have owned the house for a minimum of 10 years.
How Can You Contribute?
Once eligibility has been confirmed, it must be determined whether or not the superannuation fund accepts contributions of this form. This is mostly a question relating to self-managed superannuation funds, as many trust deeds will not allow these contributions. In this instance, the trust deed will need to be updated prior to proceeding.
Following the sale of a member’s (or members’) residence, each member can contribute up to a value of $300,000 (i.e. $600,000 for a couple), providing the combined contributions do not exceed the total value of the house. Put simply, a couple who have sold a $500,000 property will only be eligible to contribute $250,000 each – or some other combination less than or equal to the value of the property. This contribution must be made within 90 days of the sale unless an extension has been applied for and granted by the Australian Taxation Office (ATO).