From 1 July 2018, the Federal Government is allowing ‘Downsizer contributions’ of up to $300,000 per individual who sells their eligible current or former family home after age 65.
What are the considerations? Mainly Centrelink and taxable income.
What can adding up to $600,000 ‘downsizer’ contribution into super achieve? | |
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Centrelink Clients Under $1.6m limit | Centrelink clients will not thank you for materially reducing their pensions or terminating their entitlement to the age pension or pensioner card |
For non-Centrelink clients below TBC (Transfer Balance Cap) | May be some benefit where highly invested in principal place of residence, have other investment properties and low super account balances (i.e. have TBC space for entire contribution) If excluded from Age Pension, then may be beneficial to transfer value released from downsizing into super as reallocation of value will not alter their Centrelink status |
For non-Centrelink clients Above $1.6m | Choice between: holding value in accumulation phase (taxed at 15%) or personally (taxed within zero rate or low rate thresholds due to tax offsets) |
Conclusion
The Downsizer contribution is beneficial if the Client has no age pension entitlement and is not above the $1.6mn pension limit.
However, if the Client has no age pension entitlement and no TSB space – better off retaining downsizer “dividend” outside of super and relying on zero rate/low rate thresholds.
Michael Hallinan
Special Counsel Superannuation
SUPERCentral
t: 02 8296 6222
Twitter: @SUPERCentralAU
michael@townsendslaw.com.au