The Federal Government announced in its May 2017 Budget, a measure to allow individuals over the age of 65 to make an additional “non-concessional” contribution to super, provided they sell their principal place of residence. The legislation has been passed and is expected receive Royal Assent soon.
Individuals who are home owners will have the option of using some proceeds from the sale of their principal place of residence, to make a “non-concessional” contribution to superannuation. These contributions referred to as “downsizer contributions”, can be up to $300,000 (or $600,000 for a couple).
There are a number of pre-conditions which are as follows:
- Sale of the principal place of residence must occur after 1 July 2018 i.e contract of sale is entered into on or after 1 July 2018.
- The member making the contribution must be aged 65 or more.
- The principal place of residence must have been held for 10 or more years.
- The contribution must be made to the superfund within 90 days of settlement.
- The contribution must not exceed the lesser of: $300,000 and the sum of the capital proceeds.
- The home is located in Australia and is not a caravan, houseboat or other mobile home.
- The concession can only be applied once.
Tim and Mary are both retired and aged 76 and 70 respectively. They sell their family home in which they have lived for the past 40 years in order to move into more appropriate accommodation. The sale proceeds total $1.2 million. They can both make a “non-concessional” contribution into superannuation of $300,000 ($600,000 in total), even though Mary no longer satisfies the standard contribution work test and Tim is over 75. They can make these “downsizer contributions”, regardless of how much they already have in their superannuation accounts.
Please note any change in a person’s superannuation balance as a result of this measure will count towards the Age Pension assets test and may result in reduced Government pension payments.