Housing affordability has been a persistent problem in Australia for years now, and to combat this, new rules for downsizer superannuation contributions have been implemented. The main purpose of downsizer contributions is to encourage older Australians to downsize, and in doing so, make more homes available for younger families.
These new rules, essentially, allow Australians over the age of 65 to make non-concessional superannuation contributions of up to $300,000 from the sale of their home. This exempts individuals from restrictions previously in place for superannuation contributions made by those over 65, provided they meet a specific set of requirements:
- The individual (homeowner) must be over 65 years old
Current superannuation contribution rules differ depending on the fund. However, some have restrictions for people over 65. The law, therefore, exempts the individuals who meet the requirements from those restrictions.
For example, most contributions made by individuals 65 years old and over require them to satisfy the work test, which essentially requires those over 65 to be "gainfully employed" on at least a part-time basis. For those over 75, only mandated employer contributions may be made.
A downsizer contribution allows individuals to be exempt from these restrictions.
- The dwelling must have been owned for more than 10 years
Excepting caravans, houseboats and mobile homes, any Australian dwelling is eligible if it has been owned for more than 10 years by the vendor and/or the vendor's spouse. While homeowners don't need to have lived in the dwelling for the entirety of the last 10 years, the dwelling must be considered a 'main residence' under CGT rules.
- Superannuation fund non-concessional contributions of up to $300,000 may be made
The amount that may be contributed is capped at $300,000 or the sale price of the dwelling, whichever is less. More than one contribution can be made (provided that the total does not exceed $300,000), and the contributions may be made by a spouse even if the spouse is not on the title of the home.
Contributions can be made over the 90 days following the sale of the home, and if necessary, an extension may be requested from the Australian Taxation Office (ATO).
Following the sale of the home, any subsequent home purchase or residential arrangement does not affect eligibility. This means that despite the term, downsizer superannuation contribution, there is no need for homeowners to downsize. Whether homeowners choose to purchase a larger home or move into aged care, they are eligible provided that the other requirements are met.
However, a caveat of the downsizer superannuation contribution is that it is not exempt from the Age Pension means test. While houses are exempt, amounts in the super fund are deemed under the income/assets test, which means that a downsizer contribution could reduce, even eliminate, any means-tested social security/DVA income support payments. (ET)