The start of the 2018/19 financial year brings into force some changes in Government legislation that were announced in the 2017 Federal Budget, such as the “downsizer” contribution.
This Legislation allows home owners over the age of 65 who are “downsizing” their principal home after 10 years of living in that home, to elect to make a personal after-tax contribution to superannuation of up to $300,000 each. This brand-new type of allowable personal superannuation contribution is referred to as the “downsizer” contribution.
The existing voluntary contribution rules for people aged 65 and older will not apply to contributions made under this new special downsizing cap i.e. work test rule for 65-74 year olds, no contribution rule for those aged 75 and over, and restrictions on non-concessional contributions for people with balances above $1.6 million.
The main reason we contribute funds into superannuation, is so the member can obtain a tax-free pension environment in retirement.
The cap for the downsizer contribution is up to $300,000 for each superannuation member. This would enable an eligible couple to contribute an additional $600,000 to super over and above the existing concessional and non-concessional caps. However, there are restrictions on commencing a retirement phase pension if a person’s total superannuation balance exceeds the current $1.6 million transfer balance cap.
This legislation will not suit everyone and there are some complexities, including the potential impact on Centrelink benefits. Those that have significant equity in their home and are selling and downsizing, may be able to make use of the new legislation.
Please contact your Adviser at DJ Carmichael if you have any questions about the legislation and how it could be utilised in your situation.