A new proposal that was put forward in the 2021/22 Federal Budget to reduce the eligibility age for downsizer contributions from 65 to 60 will come into effect on 1st July 2022. We think this information is SUPER valuable especially to our clients aged 60 and over that are thinking about downsizing. This provides a tax-free contribution of up to $300,000. As always there are a few eligibility requirements:
- The house you have sold must have been your primary residence
- You must have owned the property for at least 10 years
- Downsizer contributions for an individual can only be sourced from the sale proceeds of one designated dwelling and they cannot exceed the sale proceeds arising from the sale of that designated dwelling
- The contribution must be made within 90 days of the sale.
What you don’t have to worry about with Downsizer contributions:
- No work test or age limits apply. Usually, to make contributions these tests must be satisfied, for example the work test requires people aged 67 to 74 to have worked more than 40 hours in 30 consecutive days.
- There are no annual concessional and non-concessional contribution caps. Downsizer contributions are made in addition to these caps.
- No partnership losses. Both members of a couple can take advantage, this means you can contribute up to $600,000!
- There are no requirements to actually buy a new home.
So why is it important to boost your super, instead of storing that extra cash in a bank account you ask? Holding funds in super may be beneficial because super in accumulation phase is an exempt asset for social security purposes until the person has reached Age Pension Age. Also, savings can grow in a concessionally taxed environment up to 15% in accumulation phase.
This is a brief explanation of the changes but there are also many other factors to consider, and every single individual’s financial situation is vastly different so if you would like to find out what is the best move for your retirement, get in touch with one of our Financial Planners today. www.sfadvisory.com.au