THE SENIOR
OLDER Australians selling the family home could be sitting on an opportunity to give their retirement savings a major boost, with downsizer contributions allowing eligible homeowners to put hundreds of thousands of dollars into superannuation.
Australians aged 55 and over can contribute up to $300,000 from the proceeds of selling an eligible home directly into super, while couples may be able to contribute as much as $600,000 between them.
New analysis from profit-to-member super fund Rest has highlighted the growing role voluntary contributions are playing as Australians look to strengthen their retirement position.
The analysis found 42 per cent of the total value of voluntary contributions made over the past three years occurred during May and June, with downsizer contributions among the common contribution types.
Downsizer contributions also tend to be considerably larger one-off payments than other voluntary contributions.
Australian Taxation Office figures put the average downsizer contribution at about $260,000 to $265,000 per person.
Queenslanders accounted for almost 23 per cent of contributions, behind New South Wales at 32.76 per cent and Victoria at 24.76 per cent.
Financial adviser James Wrigley said the strategy could make financial sense for some older Australians, but many people selling a larger home did not necessarily walk away with substantial spare cash.
Often downsizers were buying newer properties or moving closer to the coast, city or other desirable locations, meaning their next home could cost almost as much as the property they sold.
However, Mr Wrigley said those who did have money left over could potentially use the downsizer rules to strengthen their retirement savings.
One of the biggest traps was timing.
Eligible contributions generally need to be made within 90 days of receiving the proceeds of the sale, usually from the settlement date.
Mr Wrigley said some people were unaware of the deadline and could miss the opportunity, although extensions may be available through the Australian Taxation Office.
“It can make great financial sense. It can make great lifestyle sense to do it,” he said.
To qualify, a person must be at least 55 years old when making the contribution.
The home must generally have been owned by the person or their spouse for at least 10 years before its sale and must be an Australian residential property.
The sale must also qualify for a full or partial capital gains tax main residence exemption.
Caravans, mobile homes and houseboats are excluded.
Unlike some other superannuation contribution arrangements, the downsizer measure can provide older Australians with an opportunity to move a substantial amount of money into the super system following the sale of their home.
However, it can only be used for the sale of one home during a person’s lifetime.
