New tax incentives for downsizers kicked in at the beginning of the year, allowing owners to contribute up to $300,000 to their superannuation from the proceeds of a residential property sale.
The one-off contribution from a property sale will not count against any pre-existing contribution cap and will not be subject to any additional tax or levy.
If you own a property with your partner or spouse, you are both allowed to make this contribution.
Potential downsizers should be aware that any additional contribution will count in their “transfer balance cap”: the calculation made when your funds move into the retirement phase and the government determines your pension eligibility.
As an experienced agency in your area, we believe this is a great incentive to sell the family home if it has become a burden to you. Too often, we find older couples remain in the property because there’s insufficient incentive to downsize.
The new rules, announced by the Australian Taxation Office last year, should encourage more transactions, freeing up family homes that might otherwise have remained off the market.
Specific criteria must be met to qualify for the downsizer contribution scheme, including age and the time you’ve lived in the property.
- To be eligible, you should be 55 or older on January 1; 60+ from July 1 last year; or 65+ from July 1, 2018. There is no maximum age limit.
- The home must be in Australia and owned by you or your spouse for at least 10 years.
- The sale proceeds (capital gain or loss) are either exempt or partially exempt from capital gains tax (CGT) under the principal residence exemption.
- Any property subject to Capital Gains Tax, either partially or entirely, will not qualify. So, if you once rented your primary residence, this opportunity is not available.
- You have not previously made a downsizer contribution to your super from the sale of another home or part-sale of a home.
- When making your contribution, you must provide your fund with the official form called the “Downsizer contributions into super form” (NAT 75073).
- Your home is not a caravan, houseboat, or other mobile home.
- If one spouse owns the home, the spouse who did not have an ownership share may also make a downsizer contribution or have one made on their behalf, provided they meet all other requirements.