HomeFinanceWhat evidence do you need to make downsizer contributions?

What evidence do you need to make downsizer contributions?

Downsizer rules changed as the government explored strategies to improve housing market problems.

In a nutshell, the downsizer to super contribution means eligible Australians can contribute up to $300,000 from the proceeds of the sale (or part sale) of the home into their fund without being taxed. That is $300,000 for each member of a couple.

In an effort to free up more housing stock, the federal government lowered the age of eligibility from 65 to 55 and bridging loan experts Bridgit say that while uptake of the scheme had been low, economic pressures are accelerating the program.

Bridgit chief executive and co-founder Aaron Bassin says many older Australians are asset rich and income poor, so the availability of more income via the downsizer to super strategy may tip the balance.

“With the current economic environment I believe we will see a large cohort choose to make their downsize sooner than planned, to free up their equity in order to support them with the rising cost of living, avoid the requirements to pay an increasing mortgage and live the lifestyle they are looking for,” Mr Bassin says.

“The pension age, which was 65 just five years ago, is now 67, suggesting that Australians are working for longer to build up their super and to support the higher cost of living.

“But not everyone will be able to or want to work for longer.

“Instead, we’ll see older homeowners downsize sooner and take advantage of the financial incentives available to them, such as tax exemptions and recent changes to superannuation benefits.”

Age limits

With the change in age eligibility, probably one of the most important requirements to be eligible for the scheme is proof of age, which can include a copy of a driver’s licence, age card or passport.

According to the Australian Taxation Office, some of the other eligibility criteria you must satisfy are:

  • The home must be in Australia, have been owned by you or your spouse for at least 10 years and the disposal must be exempt or partially exempt from capital gains tax (CGT).
  • You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.
  • Prior to (or at the same time as) making your contribution you must provide your fund with the downsizer contributions into super form.

You will also need to provide proof that you have provided you tax file number (TFN) to your superannuation fund.

If you make multiple downsizer contributions or contributions to different super funds, you must provide a form for each contribution.

You must submit your form within 90 days of receiving the proceeds of sale unless you have an approved extension of time.

What is a home?

The scheme does not cover caravans, houseboats or other mobile homes.

The total amount of downsizer contributions you (each individual) can make is your share of the total proceeds received from the sale of your home up to a maximum of $300,000 each (so $600,000 in total for a couple).

If the amount exceeds $300,000, the excess above $300,000 will be treated as a personal contribution.

Downsizer contributions will count towards your transfer balance cap. This cap applies when you move your super savings into the retirement phase and will be considered for determining eligibility for the Age Pension.

Have you considered downsizing to take advantage of the downsizer contribution into super? Why not share your thoughts in the comments section below?

Also read: Retirees using reverse mortgages to make ends meet

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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