What was already good news for older Australians may be about to get even better.
Legislation introduced into parliament is seeking to lower the age threshold for the downsizer contribution from 60 to 55, just a month after it was lowered from 65 to 60.
The change would mean thousands more older Australians could boost their superannuation savings by up to $300,000 (or $600,000 for a couple), outside the normal contribution caps, by selling the larger family home and moving into a smaller one.
Downsizer contributions do count towards your transfer balance cap (currently $1.7 million per person), which is the limit for a tax-exempt superannuation pension.
Read: Downsizing – is it the right move for you or your parents?
But crucially, if you’ve already hit your $1.7 million limit, you can still make the downsizer contribution – potentially boosting your tax-free retirement nest egg to $2 million.
Assistant treasurer Stephen Jones told parliament the measure would also increase Australia’s housing supply.
“This measure will increase the availability of suitable housing for growing Australian families by encouraging more older Australians to downsize to homes that better meet their needs,” Mr Jones said as the bill was introduced to parliament.
Tony Negline, superannuation leader at Chartered Accountants ANZ, told Accountants Daily the changes were a boon for older Australians.
Read: ATO data reveals big shortfall in average super balances
“You’ve now got 10 more years to sort out what works for you and what doesn’t work for you,” he said.
“And if you’ve already reached contribution caps and maxed out on total super balance and all those other sorts of things, it does allow you to get more money into the system.”
Peter Burgess, deputy CEO of the Self Managed Super Fund Association told the Courier Mail that taking advantage of the downsizer contribution was all about timing.
“Some people could find that they are able to maximise their retirement savings by waiting and then making that downsizer contribution later in life, which will enable them to keep making other contributions in the meantime,” he said.
Read: Explained: Super co-contribution
“If you make that downsizer contribution now and you’re only 55, if it pushes you over $1.7m, it means you can’t make any further voluntary contributions.
“You may end up getting to retirement with a smaller balance than you would have otherwise had if you waited.”
To qualify for the downsizer contribution, there are other eligibility requirements apart from your age.
You must have owned your home for at least 10 years. Plus, the contribution must be made to your fund within 90 days of settlement of sale.
You must not have previously made a downsizer contribution, and you must inform your super fund that this is what the contribution is for.
Would you consider downsizing if it meant boosting your super by $300,000? Or is keeping the family home just too important to you? Let us know in the comments section below.
Question – “You must have owned your home for at least 10 years”. This only applies to owning your residence even if you have bought and sold within 10 years ???