Homeowners aged 65 years or more who sell their home, which is not subject to capital gains tax, provided they have lived in their home for 10 years or more will be able to make a non-concessional contribution of up to $300,000.00 into their superannuation from the proceeds of the sale of their home. Both members of a couple are allowed to take advantage of this measure for the same home.
The aim is to reduce the barrier to downsizing for the baby boomer generation, many of whom are living in homes with extra bedrooms and sizeable maintenance costs.
If these downsizers sell, it would free up larger homes and housing for younger families upgrading into more suitable real estate. However, it would mean downsizers would be required to find new homes to move into – be it a tree or sea change.
Typically, older home owners have been reluctant to sell for both sentimental and financial reasons. Often selling property is costly and funds left over after buying a smaller home could then be considered in the means test.
The move comes into effect after 1 July 2018 and could significantly boost the retirement savings of baby boomers with most of their wealth tied up in their primary residence.
The new incentive is in addition to concessions already permitted and will be exempt from the age and work tests. Typically, a person must have reached “preservation age” and if over the age of 65, must be working before they could contribute to super.
However, the new downsizing strategy avoids these requirements and does not add to the $1.6 million cap on superannuation. For example, if you are a retired 66 year old with $1.5 million in super, you may be able to sell your house and plug an extra $300,000.00 into retirement savings.