Money: Downsizing proceeds into super

SUPER CHOICES: Can we put family home sale proceeds into our super?
SUPER CHOICES: Can we put family home sale proceeds into our super?

AS PART of the 2017-18 Budget, the government announced the Superannuation Downsizer Contribution (SDC) for those looking to sell a family home in retirement and invest the proceeds into Superannuation.

From July 1, 2018 people aged 65 and over will be able to make personal (non-concessional) contributions into their super of up to $300,000 from the sale of their home.

To qualify, the property must have been your current or former principal place of residence.  You must have owned it for a minimum of 10 years, however you are not obliged to have lived in the property for the full 10 years.

For those who are eligible to make the SDC, the existing super contribution rules for people aged 65 and older will not apply.  Therefore, there will be no need to satisfy a work test for those aged 65 and those over age 75 are eligible to contribute. 

Additionally, restrictions on non-concessional contributions for people with balances above $1.6 million will not apply under this new initiative.

While the eligibility rules for contributing to super have been relaxed, the $1.6 million cap on tax free retirement income streams will still apply.

Both members of a couple will be able to take advantage of the SDC 'cap', meaning that a couple could contribute up to $600,000 ($300,000 each) to super provided they are both over age 65.  There is no obligation for both to have been on the property title; just that one of you.

You are eligible to sell any type of property provided it is located in Australia.  However, caravans, houseboats or mobile homes are specifically excluded. There is no obligation to make a subsequent property purchase.

While there is a cap of $300,000 per person, the limit of the super contribution is the value of the property sale. So, if you sold the family home for $570,000 the limit would be $570,000 for the couple provided no more than $300,000 was contributed per person. If an individual was to sell a property for $250,000 then $250,000 would be the limit.

SDCs would be required to be made to a super fund within 90 days of settlement of the property. Extensions to this deadline may be sought from the Australian Taxation Office.

You may make multiple contributions within the 90 days provided that in aggregate the contributions are within the caps and meet all other criteria.  However, the SDC is limited to the sale of one property only, even if you sold a subsequent qualifying property.  Any unused portion of the downsizer contribution cap will not carry forward.

In order to take advantage of the SDC, the contract of sale must be entered into on or after July 1, 2018. Therefore, exchanging contracts on the property prior to July 1, 2018 would void any entitlement to utilise the SDC - so be careful.

The SDC is a non-concessional contribution, therefore, there are no tax deductions for making the contribution.

As to whether using the SDC is of benefit to you will largely depend upon your personal circumstances including; your income needs, your taxable income, the scale of your current Superannuation investments and your Estate Planning needs.

Q&A with The Coach first appeared on Any general advice in this story doesn't take account of personal objectives, financial situation and needs.

Topics:  andrew heaven finance financial advice superannuation wealth partners

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