As part of recent reforms to reduce pressure on housing affordability, the Federal Government announced a new ‘Contributing the proceeds of downsizing into superannuation’ measure in the 2017-18 Budget. It’s a way of encouraging older Australians to downsize from larger properties that no longer meet their needs, freeing up housing stock for young families who need a bit more space.
If you’re 65 years old or older and meet the eligibility requirements, you can sell your home, provided you’ve owned it for more than 10 years, and make a downsizer contribution into your superannuation of up to $300,000 – or $600,000 per couple. By doing so, you can invest a lump sum into your super and take advantage of tax benefits.
Downsizing the family home and investing the surplus into super can make financial sense for many Australian retirees. If you own a large family home, but your adult children have flown the coop, you might find it far too big for your needs, or even a burden to maintain. Downsizing is a great opportunity to declutter and simplify your life, as well as boosting your retirement nest egg to fund a more comfortable retirement.
Looking for a slower pace of life in the Southern Highlands, or becoming part of a community in a coastal town like Port Macquarie? Downsizing can also enable you to make the lifestyle or location change that you’ve always dreamt of. Or you may want to move closer to amenities such as shopping centres, public transport and healthcare, particularly as you get older.
While this may sound appealing, it’s important to understand that there are costs associated with selling the family home and buying a new property that need to be taken into account, such as stamp duty, agent’s commission and moving costs. And if you move into an apartment or townhouse, you may need to factor in ongoing costs, such as strata fees, too.
It also pays to be aware of the market and your property’s value, so you can be confident that downsizing and putting the surplus into super is a good investment option. Get a professional valuation from a local real estate agent and talk to them about when might be the best time to sell, particularly if you’re not in a hurry to move.
If property values are high, then it’s an ideal time to sell. But that means it’s likely you’ll need to pay more for your new property. If property prices have decreased, then you may not make as much profit on your sale, but you might be able to negotiate a great price on your new home.
We recommend speaking to a financial adviser to make sure your next move is the right one.