Did you know you could save BIG when downsizing your home? Here's how ATO can help you
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If your family home feels too big now that your kids have flown the nest, you might want to downsize and use the extra money to help fund your golden years.
The Australian Taxation Office's (ATO) home downsizer superannuation scheme makes it easy for you to do just that, and even get a super boost. And good news, folks - recently, the scheme has gotten even better!
Since the scheme's conception in July 2018, the age of eligibility was set at 65 years or older. This was changed in July 2022 to 60 years or older.
Starting from the first of January 2023 (so it's already kicked in), though, if you're 55 or older, you and your partner can put up to $300,000 each ($600,000 as a couple) from the sale of your main home into your super, tax-free. Plus, this amount is in addition to what you're already allowed to contribute.
To take advantage of the home downsizer superannuation scheme, here's what you need to know:
And here's the thing - you don't actually have to downsize by buying a smaller home. Instead, you can choose whatever living situation works best for you, be it a retirement village, aged care, renting, living with family, or anything else.
The important thing is to make sure your contribution meets the requirements, so it doesn't get counted against your cap.
When making a downsizer contribution, either one or both partners in a couple can do so, even if only one of them held ownership of the property.
If the ownership of the property changes between spouses or former spouses during the 10 years leading up to the sale, like due to death or divorce, the time the former spouse held ownership still counts towards the 10-year requirement for the other spouse who makes the contribution.
Keep in mind, this is a one-time-only opportunity.
Members, just a quick word of caution: this is a once-in-a-lifetime opportunity.
So, eligible Australians, especially those who became eligible in their late fifties due to the change in the law on January 1 2023, should carefully consider if making a downsizer contribution is the right decision for them, as they cannot make another contribution later in life.
You must also understand that you might not be able to access your superannuation until you meet certain conditions, like reaching 60 years of age or even later (in some cases). This means the funds from downsizing will be 'locked away' in your super fund for several years, so you should think about your current financial needs before making the contribution (if you are not yet superannuation access age).
Lastly, making a downsizer contribution may also have implications on your Centrelink benefits.
If you're already 67 years old and receiving the Age Pension, the government generally checks your assets and income to see if you're eligible to keep receiving benefits. However, your primary home is not counted in these tests.
Making a contribution to your superannuation under the 'downsizing' rule does not have any special exemptions from the means test for Centrelink benefits. So, if you sell your home and use some or all of the proceeds to make a super contribution, it could lower your payments.
Are you curious about salary sacrifice and superannuation? Get all your questions answered with H&R Block's easy-to-read FAQs.
And if you're interested in exploring the world of downsizing contributions into superannuation, check out ATO's website for all the information you need. Simply click the link for all the details.
Are you thinking about downsizing your home as you approach retirement age in Australia? It's a smart move that can help you reduce your assets and potentially increase your eligibility for the age pension and Centrelink payments.
But, before you make any decisions, it's important to know that the rules and eligibility criteria for the age pension and Centrelink can be complex and depend on your income, assets, and personal circumstances.
We've written more information about reducing your assets to be eligible for the Age Pension here in this previous article. Feel free to have a read!
We hope you found this article helpful and informative, folks! But don't forget, the information in this article is just a starting point. Your personal financial situation is unique and there may be other important considerations to take into account.
If you're considering making changes to your finances, it's always wise to seek the expertise of a professional financial advisor or connect with Centrelink for personalised guidance and support. They'll be able to help you make the best financial decisions for your specific circumstances.
What are your thoughts about this? Let us know in the comments!
The Australian Taxation Office's (ATO) home downsizer superannuation scheme makes it easy for you to do just that, and even get a super boost. And good news, folks - recently, the scheme has gotten even better!
Since the scheme's conception in July 2018, the age of eligibility was set at 65 years or older. This was changed in July 2022 to 60 years or older.
Starting from the first of January 2023 (so it's already kicked in), though, if you're 55 or older, you and your partner can put up to $300,000 each ($600,000 as a couple) from the sale of your main home into your super, tax-free. Plus, this amount is in addition to what you're already allowed to contribute.
The ATO's home downsizer superannuation scheme allows you to free up some equity from your home to fund your retirement. Credit: Pexels/Kelly.
To take advantage of the home downsizer superannuation scheme, here's what you need to know:
- You must be 55 or older
- You must have owned your home for at least 10 years
- The home must be in Australia and can't be a houseboat, caravan, or other mobile home
- The proceeds from selling your home must be eligible for the Capital Gains Tax main residence exemption (or would have been if the CGT came into effect before you bought the home)
- You need to make the contribution within 90 days of selling your home (or the tax commissioner may give you more time)
- You can only use the scheme once and can't claim it for another home
- Before or at the time of making the contribution, you must provide your super fund with the downsizer contribution form.
And here's the thing - you don't actually have to downsize by buying a smaller home. Instead, you can choose whatever living situation works best for you, be it a retirement village, aged care, renting, living with family, or anything else.
The important thing is to make sure your contribution meets the requirements, so it doesn't get counted against your cap.
When making a downsizer contribution, either one or both partners in a couple can do so, even if only one of them held ownership of the property.
If the ownership of the property changes between spouses or former spouses during the 10 years leading up to the sale, like due to death or divorce, the time the former spouse held ownership still counts towards the 10-year requirement for the other spouse who makes the contribution.
There's no need to downsize your current home by purchasing a smaller one. Credit: Pexels/Pixabay.
Keep in mind, this is a one-time-only opportunity.
Members, just a quick word of caution: this is a once-in-a-lifetime opportunity.
So, eligible Australians, especially those who became eligible in their late fifties due to the change in the law on January 1 2023, should carefully consider if making a downsizer contribution is the right decision for them, as they cannot make another contribution later in life.
You must also understand that you might not be able to access your superannuation until you meet certain conditions, like reaching 60 years of age or even later (in some cases). This means the funds from downsizing will be 'locked away' in your super fund for several years, so you should think about your current financial needs before making the contribution (if you are not yet superannuation access age).
Lastly, making a downsizer contribution may also have implications on your Centrelink benefits.
If you're already 67 years old and receiving the Age Pension, the government generally checks your assets and income to see if you're eligible to keep receiving benefits. However, your primary home is not counted in these tests.
Making a contribution to your superannuation under the 'downsizing' rule does not have any special exemptions from the means test for Centrelink benefits. So, if you sell your home and use some or all of the proceeds to make a super contribution, it could lower your payments.
Are you curious about salary sacrifice and superannuation? Get all your questions answered with H&R Block's easy-to-read FAQs.
And if you're interested in exploring the world of downsizing contributions into superannuation, check out ATO's website for all the information you need. Simply click the link for all the details.
Are you thinking about downsizing your home as you approach retirement age in Australia? It's a smart move that can help you reduce your assets and potentially increase your eligibility for the age pension and Centrelink payments.
But, before you make any decisions, it's important to know that the rules and eligibility criteria for the age pension and Centrelink can be complex and depend on your income, assets, and personal circumstances.
We've written more information about reducing your assets to be eligible for the Age Pension here in this previous article. Feel free to have a read!
Downsizer contributions can be a great way to boost your retirement savings. Credit: Andre Taissin.
We hope you found this article helpful and informative, folks! But don't forget, the information in this article is just a starting point. Your personal financial situation is unique and there may be other important considerations to take into account.
If you're considering making changes to your finances, it's always wise to seek the expertise of a professional financial advisor or connect with Centrelink for personalised guidance and support. They'll be able to help you make the best financial decisions for your specific circumstances.
What are your thoughts about this? Let us know in the comments!
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I promptly withdrew all my funds and put them in a high interest savings account. And to think Centrelink recommended this to me….
