THE idea of selling the family home and moving to a smaller home that is more easily maintained and suited to your lifestyle has been around for a long time.
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Nowadays, it is often referred to as downsizing, and has become a buzzword since the federal government announced initiatives to encourage more people to do just that. Property advisor Ben Reid, managing director of Ian Reid Vendor Advocates explains what the changes could mean for you.
Changes for downsizers
The changes announced in the 2017-18 budget mean that from July 1, 2018, people aged 65-plus who have owned their primary residence for more than 10 years will be able to sell it and contribute up to $300,000 from the proceeds of the sale into their superannuation.
Each member of a couple can take advantage of this measure from the same home sale, meaning a couple can contribute up to $600,000.
The idea behind this new policy is to reduce barriers to downsizing, thereby freeing up housing for younger buyers and helping to address concerns about housing affordability.
Of course, this assumption ignores the fact that downsizers will be moving to smaller homes, which are often the target of those first home buyers who have the biggest housing affordability concerns!
Financial advice is vital
One of the reasons they recommend seeking professional financial advice before taking up this incentive is that superannuation is included in means testing for the age pension.
This could mean that by downsizing, many age pension recipients could leave themselves open to a reduction or cancellation of what may be their primary income, not to mention factoring in the costs involved in buying and selling.
Yes, downsizing could be an excellent move for many people as they approach retirement, but like so many things in life, it’s rarely a simple decision.
Whether you are downsizing or not, when it comes to experienced and independent advice on actually selling your property, vendor advocates are always happy to provide you with up-to-date advice and assistance at any time.
Seek professional advice before making any decisions in this area.
Downsizing changes explained
Under this downsizing proposal, effective from July 1, 2017:
Members aged 65 and over would be able to make a non-concessional (after-tax) contribution into their super of up to $300,000 from selling their home.
Existing contribution rules for members aged 65 and older and restrictions on balances above $1.6 million will not apply to contributions made under this new downsizing cap.
Both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to super through the downsizing cap.
These contributions will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions and will also not be subject to other voluntary non-concessional contributions.
Source: The Senior