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 recent government initiative that's meant to free up the housing market for younger buyers, if you're 65 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
Most people who are retired and older than 65 aren't able to put extra funds 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 combined $600,000 into super and start a tax-free pension.
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.
Skylight Financial Solutions can help. Skylight was built by BUSSQ to provide affordable financial solutions for wherever you are in life.
Talk to a Skylight specialist today, the first appointment is always at no cost and obligation free. Visit skylight.com.au for more information or book an obligation free appointment with a Skylight specialist today.
*Source: https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/downsizing-contributions-into-superannuation. This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant 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 seek independent advice from a properly qualified professional. Past performance is no guarantee of future performance. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201). BUSSQ owns Skylight Financial Solutions Pty Ltd (ABN 46 076 835 848, AFSL 450139), the company that provides financial advice to our members.