The DownSizer Contribution moves from the eligible age of 60 to 55.
What is the downsizer rule? Downsizer Contributions are a one-off opportunity to contribute to superannuation.
It is when a client sells the family home that they have owned for at least 10 years and has been the principle place of residence for most of the time, they can contribute up to $300,000 to their super fund within 90 days. The 90 day rule does not provide a lot of time in the planning of receipt of settlement funds, so initial discussions with The Intelligent Financial Group Pty Ltd are important.
The original rule commenced in 2018 from the age of 65. This has now been reduced to age 55 onwards from the 1st of January 2023.
The benefit of making downsizer contributions to super is more of your wealth will be invested within the tax-effective superannuation environment, and you are not restricted by upper-age limits in making the contribution.
It becomes a strategy that many homeowners who are thinking of selling can use once they reach age 55. Clients aged 55 can now make up to $630,000 in after-tax contributions at one time ($300,000 downsizer and $330,000 non-concessional contributions under the bring forward rule.
Couples that are both aged 55 and over are now able to make up to $1.26 million in aftertax contributions at one time ($300,000 downsizer and $330,000 non-concessional contributions under bring forward rule each).
It is important to consider when is the best time to use the strategy? It can only be used once and may impact social security from age 67 onwards.
An example of this is Simon is aged 67 and Susan(age 59) are a couple and Simon receives an age pension of $622pf. They then sell their principal home for $800,000 and use $500,000 of the proceeds to purchase their new home. Simon or Susan could make a downsizer contribution of up to $300,000.
If Simon makes the downsizer contribution it will be fully asset tested and deemed under the income test as he has reached aged pension. This will reduce Simons’ fortnightly pension. If Susan makes the downsizer contribution, it is exempt from both the assets and income tests (until she reaches age 67) and Simon’s age pension remains at the same level of $622pf.
Please contact us if you would like further information.