People over the age of 65 who downsize their home will be able to contribute up to $300,000 each into their superannuation fund from the sale proceeds. This super contributions from downsizing incentive will start from 1 July 2018 according to the Federal Budget 2017/2018.
To be eligible for this super contributions from downsizing incentive older Australians must have owned their principal place of residence for at least 10 years. This is also eligible to both members of a couple for the same home, meaning $600,000 per couple can be contributed to superannuation.
According to the budget paper “these contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions”.
However any change in the person’s superannuation balance as a result of this measure will count towards the age pension assets test. Therefore it is up to each person to consider whether the additional contribution and pension payments are an acceptable trade- off for losing pension entitlements.
Currently older Australians are unable to invest the proceeds of selling their principal place of residence into superannuation because of current restrictions and caps, but with this new incentive it will encourage older people to downsize from homes that are no longer appropriate to their needs and free up housing stock for younger, growing families in a bid for a more efficient housing market.
According to financial planning group StatePlus’s Chief Client Officer, Jason Andriessen, “eighty per cent of retirees own their own home but they don’t have much superannuation to live off”.
The downsizing measure is forecast to cost the Budget $30 million over four years.