New downsizer contribution takes effect 1 July

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Many Australians downsize their home when they retire. There are pros and cons you need to weigh up, including the Government's downsizer measure coming into effect on 1 July 2018.

If you're 65 years or older, and meet the eligibility requirements, you may be able to make a downsizer contribution of up to $300,000 to your super from the proceeds of your home.

The measure only applies if the contract of sale is exchanged on or after 1 July 2018.

A contribution of up to $300,000 can be made by each owner but the total can't exceed the proceeds of the sale. You also have the option of splitting the amount between your accounts.

You can make the downsizer contribution whether you're still working or already retired, as long as you meet the below criteria.

Are you eligible?

You will be eligible to make a downsizer contribution if you can answer yes to all of the following ATO criteria:

  • you are 65 years old or older at the time you make a downsizer contribution (there's no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale
  • your home is in Australia and is not a caravan, houseboat or other mobile home
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset
  • you have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

How do you make a downsizer contribution?

You will need to complete the ATO's downsizer contribution form and provide it to your super fund when – or prior to – making the contribution.

You can split the contribution across multiple super funds but must provide a form to each fund.

You must make your downsizer contribution within 90 days of receiving the proceeds of the sale.

Important information about the downsizer measure

The downsizer contribution does not count towards your annual super contribution cap, and you can still make the contribution if you have a super balance greater than $1.6 million.

However, the contribution does count towards the $1.6 million transfer cap when you move your super into a pension account.

You can only make downsizing contributions for the sale of one home.

The contribution is not tax deductible and will be taken into account for determining Age Pension eligibility.

For full details and considerations, please see the ATO’s Downsizing contributions into superannuation page.

We're always here to help

Before you decide to make a downsizing contribution to you super, you should make sure you fully understand any potential impacts on your super or pension account(s), retirement income and Age Pension.

Depending on your circumstances, you may want to deposit the full, partial or no proceeds from the sale of your home into your super. There may also be advantages to splitting the amount between your account and your partner's (if applicable).

Whether you're ready to downsize now or planning ahead, Media Super's Financial Planners* can help you work through the pros, cons and potential impacts on your retirement income.

To talk to a Financial Planner, please call the Helpline on 1800 640 886.

* Media Super has engaged Industry Fund Services Limited (IFS) ABN 54 007 016 195 AFSL No 232514 to facilitate the provision of financial advice to members of Media Super. Advice is provided by one of our Financial Planners who are Representatives of IFS. Fees may apply. Further information about the cost of advice is set out in the relevant Financial Services Guide, a copy of which can be obtained by calling IFS on 1300 138 848. IFS is responsible for any personal advice given to you by its Representatives.