If you are thinking of selling your main residence whilst also looking to boost your superannuation balance, then this tip is for you.
In the 2017 Federal Budget, the Government introduced a new type of contribution that allows contributions to be made for some home owners who have sold their main residence.
The contribution has come to be known as the “Downsizer Contribution” which is somewhat misleading as the disposal of the asset does not actually require “downsizing” to occur. In fact, if conditions are met, the contribution may still be made despite the seller subsequently going on to buy a more expensive or larger main residence. Importantly, the downsize contribution does not impact or count towards your concessional or non-concessional contribution cap nor does it require work tests to be met.
Broadly, you may be eligible to make a contribution of up to $300,000 per person if :
- the disposal takes place after 1 July 2018;
- you are over 65 years old at the time of the sale;
- the disposal would be exempt or partially exempt from Capital Gains Tax by virtue of the main residence exemption;
- the property had been owned by you for at least 10 years prior to disposal; and
- you have not made a downsizer contribution previously.
Timing is important as the contribution needs to be made within 90 days of receipt of the proceeds of the sale. Further, appropriate documentation needs to be lodged with the complying superannuation fund at the time of the contribution.
The contribution is limited to a maximum of $300,000 per person or the proceeds of the sale. So, for a single owner to make the maximum contribution, the proceeds of sale would need to exceed $300,000. Further, if the property disposed was jointly owned, then the proceeds would need to exceed $600,000 for each of the owners to make the maximum contribution.
Often the sale of a main residence will not prompt a call to your advisor due to the absence of tax consequences associated with the disposal, however making the call may be worthwhile as it may just identify an opportunity to boost your retirement savings.
If you are thinking of selling your main residence and using the proceeds to increase your superannuation, please call your advisors at Brentnalls NSW for further advice on 02 82525555.