In this blog we talk about the superannuation downsizer contribution and explain how our Certified Financial Planner® is helping one couple maximise the proceeds of their house sale in a tax-effective way.
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DISCLAIMER – The information provided in this blog is general and does not consider your individual financial needs or objectives. It does not constitute personal advice. We recommend seeking out professional and independent financial, legal and tax advice which has been designed for your individual situation before acting on any information contained below.
Superannuation Downsizer Contribution
Older Australians who are 65 and above (soon to be 60 and above), can invest up to $300,000 from the proceeds of the sale of their principal residence into their super fund if they meet a range of eligibility criteria.
Having the ability to add such a large sum of money into superannuation in a such a tax-effective manner provides relief for many Australians and sets them up for a comfortable retirement.
In saying that, everyone’s financial situations are different and it is best to seek personalised financial advice so you can make the most of your money for retirement.
Below, we share one example of how a married couple utilised the downsizer contribution.
Downsizer Contribution| A Case Study
A married couple from Sydney in their mid-60s recently sold their family home and purchased a home for retirement. They had a significant amount of money left over after the purchase.
The wife has retired, but the husband will work for another year or two.
In terms of the eligibility criteria, this couple had lived in the home for more than ten years, however the wife nearly missed out on the contribution due to the age threshold. (Australians over 65 are currently eligible for the contribution but this is decreasing to 60 on July 1, 2022)
When the contract was signed the wife was 64-years-old however she was turning 65-years-old 81 days after settlement.
As a downsizer contribution must be made within 90 days of settlement we had to wait until she turned 65, which meant we only had a 9-day window to make the contribution.
In this instance, we:
- Made the downsizer contribution for the wife of $300,000.
- Were also able to make a $110,000 non-concessional contribution into her super.
- Plus, in July of this year, we will also make an additional $330,000 contribution (triggering the bring forward rule).
As a consequence, we will be able to add a total of $740,000 ($300,000 + $110,000 + $330,000) into the wife’s superannuation account to begin an account-based pension.
This means all this money is now invested in a zero-tax environment and will provide tax-free pension payments to fund their living expenses through retirement, together with the husband’s super, which he is salary sacrificing up to the cap, when he retires in about a year or so.
Precision Wealth Management is a local, privately-owned financial planning firm based on Brisbane’s northside.
Our certified advisors work with each individual client to determine the best wealth creation strategy based on their unique situation.
We strive to stay at the forefront of the industry, and our investment approach is based on decades of research.
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