We asked WCH Investor Services Financial Planner, Craig McKenzie, to give some insight into the effective management of downsizer super contributions. To benefit from Craig’s advice, please read on:

By now most people are familiar with the benefits of having money in super. It’s a low tax environment and when you retire you can draw an income from your super account. If you’re over sixty, the income is potentially tax free and you don’t need to pay the Medicare levy either. Pretty good stuff!

Unfortunately for some people, the ability to put money into super over the years has been restricted; maybe because of time out of the workforce or perhaps compulsory super was only available towards the end of their working life. For a lot of people in this situation, their primary wealth accumulation plan was to buy a home and pay it off, and now they have a home that has gone up in value significantly. As a result, many people are considering downsizing their home to free up some of that equity, or the property is no longer suitable for their needs and they need to buy something else.

New legislation that came into effect on 1st July this year allows those people who do choose to downsize their home to make a contribution into super using some or all of the proceeds. The amount that can be contributed is $300,000 per person (or $600,000 for a couple). The contributions don’t count towards the concessional or non-concessional caps and there is no maximum age limit. Also, the work test and total super balance test won’t apply, and you don’t need to purchase another home either.

As usual, there are a number of conditions that need to be met including:

Key conditions
• You must be aged 65 or over at the time you make the contribution.
• The property must have been owned by you or your spouse (but not necessarily
both) for at least 10 years prior to the disposal.
• The contract for sale must be entered into on or after 1 July 2018.
• The property must qualify for the main residence capital gains tax exemption in whole or part, so properties held purely for investment purposes won’t qualify.
• You must make the contribution within 90 days of the change of ownership.
• You need to make an election to treat the contribution as a downsizer contribution.
• You cannot claim the contribution as a tax deduction.

There are other things to be aware of before deciding to make a downsizer super contribution, so, as always, please seek advice before taking any action.

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.