16 Jan 2018
LEGISLATIVE UPDATE: Downsizing for Seniors legislation has finally PASSED
In what can best be described as an early Christmas present and as part of its 2017 Federal Budget and “housing affordability” theme, the Federal government is incentivising older Australians to downsize their family home by allowing them to invest the proceeds in Superannuation. The good news is that the bill passed through parliament in December 2017.
The legislation allows Individuals aged 65 and over to make a personal contribution of up to $300,000 using proceeds from the sale of the family home, which has been owned for at least 10 years, into their superannuation. These new contributions can be over and above any other voluntary contributions the person is able to make under the existing contribution rules and concessional and non-concessional caps. This measure only applies in relation to contracts entered into on or after 1 July 2018. It is a once-only application and cannot be used for any future sale of another main residence.
Currently, voluntary contribution rules for people aged 65 and older are quite restrictive. For 65 - 74 year olds, a 40 hour work test must be met and no contributions are allowed for those over age 75 regardless of work arrangements. Additionally, from 1 July 2017 after tax personal contributions for people with total super balances above $1.6 million cannot be made.
Under rules proposed and now legislated for the new downsizing measures, these contribution restrictions have been lifted. Individuals over age 65 will be able to contribute up to $300,000 regardless of their age or work situation as long as the home has been owned for a minimum of 10 years. It means a couple can contribute up to $600,000 into super (to access a tax-free pension) for the same home via the downsizing cap. The contribution must be made within 90 days of the disposal of the dwelling, or such longer time as allowed by the Commissioner.
If you would like to learn more, attend one of our information seminars or discuss how this could work for you, family or friends, please don’t hesitate to contact us