Parliament has passed the legislation allowing older Australians to ‘downsize’ and then contribute the proceeds of the sale of their family home into superannuation.
From 1 July 2018, when Australians aged 65 and over sell a home they have owned for at least 10 years, they may contribute up to $300,000 from the proceeds into their superannuation accounts, over and above existing contribution restrictions, and without having to satisfy the age or gainful employment tests that usually apply. Both members of a couple may take advantage of this measure, together contributing up to $600,000 from the proceeds of the sale into superannuation.
This measure was announced in the 2017/18 Federal Budget, and aims to provide an incentive for older Australians to ‘downsize’ their home. This, in turn, is expected to reduce pressure on housing affordability by freeing up stocks of larger homes for growing families.
No need to actually ‘downsize’ for ‘downsizer contributions’
Importantly, it should be noted that there is no requirement for an individual to actually ‘downsize’ by acquiring a smaller property, or to even acquire another property at all.
In this regard, all that is required is that the individual (or their spouse) ‘downsizes’ by selling their ‘main residence’. The individual can then move into any living situation that suits them, such as aged care, a retirement village, a bigger or smaller dwelling than the one sold, a rental property, or living with family.
Also, the property sold does not need to have been the individual’s (or their spouse’s) main residence during their entire ownership of it, provided the property was owned for at least 10 years and was their main residence at some time during the ownership period. Therefore, the sale of an investment property that at one stage was their main residence may enable an individual (or their spouse) to make downsizer contributions.
Timing of the sale
It is important to note, to be eligible for the downsizer contributions, contracts must exchange on or after 1 July 2018.