What to do with my money when downsizing

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Terry wants to sell his home and has questions about what to do with the money.

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Q. Terry
I am a 69-year-old Disability Support Pensioner. I own my 30-year-old home outright and it is worth about $1.2m. I own a new 2017 Hyundai Tucson worth about $35,000 new and have about $40,000 savings. Can I sell my home and invest half of it ($600,000) in a superannuation fund without any effect on my pension?

A. Australians aged 65 or older can contribute up to $300,000 (or $600,000 if a couple) of the proceeds of the sale of their home into their super fund. The contribution is considered non-concessional, which means it is not taxed.

While it does count towards the transfer balance cap of $1.6 million that individuals are allowed to have in a fund, if you already have this figure, you can still add up to $300,000 to your nest egg and not be taxed extra.

The non-concessional super contributions from downsizing can be placed directly into superannuation accounts as tax has already been paid on them. They are not taxed when they are received by your super fund.

The extra funds are not tax deductible and they will be considered when assessing eligibility for the Age Pension.

If you are considering the downsizing option, you will have to contact your super fund to check that they accept downsizer contributions and complete a Downsizer Contribution Form.

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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 the 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 financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Written by Ben

20 Comments

Total Comments: 20
  1. 0
    0

    I have a question related in a small way. I have a friend who is 85 yrs old living on the full pension. His present assets total $20000.
    He is selling his present home and downsizing so that he should have about $100,000 more when the sale goes through.
    At his age, can he still put some or all of that money into his superannuation account? Does anyone know?
    I seem to remember reading somewhere that it might be possible.
    Thanks in advance if anyone has advice.

  2. 0
    0

    No one seems to add that you will loose your pension if you go over with assests test. EG; if you have assets totaling $860,000 between a couple you will loose your pension totally, different figures for singles. Look very carefully into it before downsizing.

    • 0
      0

      Wow, $860,000 is huge! Who has that anyway!

    • 0
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      It’s not that much Paddington if it’s expected to last your whole life. Probably the same amount that is paid out to a Pensioner couple over their lifetime. You can see why people prefer to receive a small part pension at least because it takes years of saving.

    • 0
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      Tricky
      Agree these people are being deceived as any money in your super is counted as assets and will affect the pension people need to be very careful downsizing

  3. 0
    0

    Superannuation is a tax avoidance scheme whereby those with the most money can avoid the tax system and at the end of the day often get a full pension because superannuation income is exempt of the assets test.
    Tell me about fairness and equity. A good deal of course for those who used the system to maximise their retirement income, but totally unfair.

    • 0
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      It amazes me Mick! I think people need to spend down to just a little in reserve and maybe help them the ones who are freezing or skipping meals or not affording their medicines.

    • 0
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      Mick, since January 2015, Superannuation is counted as an Asset and the income is also deemed.

      The exception is those on Defined Benefit pensions but as there is no residual capital to their estate and they can’t withdraw lump sums, they aren’t assets, just income.

    • 0
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      For retirees; I thought superannuation income was not exempt of the assets test. I actually believe it is unfair to self funded retirees. Couple say on full aged centrelink pension get $36K and allowed $380K in assets before pension starts reducing. If they take the standard $19K in pension from their $380K then their total income would be $55K per annum. A self funded retiree couple would need say $2.75 million in superannuation assets to receive the same $55K per annum. That is invested conservatively (safely) at 2%

    • 0
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      johnp, I know no pensioners with any assets, money, investments, except a small bank account to pay the bills. People keep talking about these huge amounts. Some are also renting. The poorest are the pensioners with no assets or super or investments and singles are worst off.

    • 0
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      Mick
      The income from super might be non taxable but I assure you the full amount of your super is an assets and deemed part of your assets with Centrelink that’s why my super fund must give Centrelink a yearly statement of my super

  4. 0
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    Our combined pensioner wealth (what little there is) is being gutted and guzzled by this government and given to those companies, banks and super rich mates who pay little or no taxes.

    No asset testing ever again.
    It is time for all of us (yes that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even the UK and poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    We all (that means you) need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    • 0
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      Agree Gray. Also the govt doesn’t miss out. With universal pension; all retirees receiving it
      will pay tax according to the normal tax thresholds like all other tax payers. Plus the govt saves all the millions in costs to run the rubbish assets test complexities

    • 0
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      Gray – regarding ‘hiring more Centrelink staff’ – could not agree more. My local Centrelink office is in a huge open plan office. Has just been redecorated. Now has 20 staff stations, all with computers and double, some triple, screens. One third of the floor space is now a ‘lounge’ for waiting customers, I have never seen less than 20 people waiting. I have had to go in to the office 3 times over the past few weeks, and there has never been more than 4 staff at the stations. And they have one reception person, and one roaming assistant. And then wait for over an hour or 2 to get serve. I cannot understand why they upgraded to so many stations when they are never used! I just look at the wasted cost.

    • 0
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      sunnyOz, it makes you wonder if they are planning for more people on welfare in the near future.

    • 0
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      Of course you are right Musicveg. The population of older people is growing all the time and added to that we are living longer.

      And of course we have a growing number of
      under unemployed / unemployed.

  5. 0
    0

    The best advise is don’t down size unless absolutely necessary.

  6. 0
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    I was advised that to contribute to your Super fund you have to be working a certain number of hours in a month, think it was 30 hours but am not sure of that figure. You can, however, invest in annuity which will provide extra income, but this may affect the DSP. Best talk to you financial advisor about your case.

  7. 0
    0

    A lot of advice is to downsize for us oldies BUT in a lot of cases you can not get enough for your home to buy another place or buy a unit in a retirement village at current prices. Is probably ok if your homes is worth 1.5 million or more because it will cost you around 700 thousand for a unit in a retirement village so 700.000 plus estate fees and moving expenses there is not a lot left if your curren home is in the 800.000 or so value..Most smaller dog boxes for sale would probably cost about the same. So downsizing dose not make sense for a lot of us.unless you have a 2milliion dollar house


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