Honey I shrunk the house
09 September 2020
The kids have flown the nest and you're rattling around in the family home. What do you do with all those spare rooms? You don't really feel like renting them out on Airbnb. You might even wonder whether you've got too much house and not enough super.
Now, you've got a chance to change that. Thanks to a government initiative that's meant to free up the housing market for younger buyers, if you're 55 or over you can sell your house and put the money into super.
It's called the 'Reducing barriers to downsizing' scheme and it started on 1 July 2018
Downsize your house
First up, you don't actually need to be downsizing because there's nothing in the rules that says you have to buy a smaller place (the tax office won't be sending someone out with a tape measure). You can move to the country and buy a bigger place if you want, or even rent for a while.
There are a few boxes you have to tick before you can take advantage of the scheme.
You need to have owned your home for at least ten years. You don't qualify if you've previously made a downsizer contribution to super from the sale of another home and you don't qualify if you've been living in a boat, caravan or mobile home either. And your home has to be in Australia (so you can't flog off your condo in Nice and use the proceeds to make a super contribution).
Oh, and you need to sell your home after 1 July 2018. If you've signed a contract before then you won't qualify, even if the property settles after that date.*
Upsize your super
Many people who are retired don't have extra funds available to put into super. That's where this scheme comes in handy. You can put up to $300,000 from the sale of your home into super – if you're a couple, that's $300,000 each. You could get a total of $600,000 into super and start tax-free pensions.
Again, there are restrictions. You can't contribute more than the sale price, or for a couple, their individual share of the sale price.
And in most cases, you've got just 90 days from settlement to make the contribution.
Careful with your Age Pension
You'll need to remember that for Age Pension purposes, your home isn't counted under the assets test. If you sell it and make a downsizer contribution, the amount you pay into super is considered an asset.
That means upsizing your super could reduce, or even cancel your Age Pension. Check with the government's Financial Information Service before you act and consider getting financial advice to help you decide what's best for you.
Honey, I shrunk the house
If you're retired and thinking about downsizing your house, then there's plenty to consider – including the best way to look after your money in retirement and whether you want to leave a legacy.
If you would like to know more about making a downsizer contribution we can help. As a BUSSQ member you have access to personal financial advice on contributions and retirement at no extra cost^. Find out more or call us on 1800 692 877.
*Source: https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/downsizing-contributions-into-superannuation. ^Personal advice is limited to BUSSQ products and is advice on insurance, investment choice, contributions and retirement. The cost of this advice is included in the administration fees and costs and this advice is provided by Link Advice Pty Ltd (ABN 36 105 811 836 AFSL 258145). This article provides general information only and does not take into account your personal financial situation or needs. Before acting, you should review the Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or obtain financial advice tailored for your personal circumstances. The Target Market Determinations for BUSSQ products can be found at bussq.com.au/forms-and-resources. Prepared by BUSS(Queensland) Pty Ltd ABN 15 065 081 281, AFSL 237860, Trustee of Building Unions Superannuation Scheme (Queensland) (BUSSQ) ABN 85 571 332 201.