Upsize your retirement savings with downsizer contributions
You may be eligible to make additional contributions to super of up to $300,000 (or $600,000 per couple) from the proceeds of the sale of your home.
What are the possible benefits of making a downsizer contribution?
The benefits of making a downsizer contribution vary depending on individual circumstances but may include:
- Increasing your retirement savings
- Increasing your savings without the need to satisfy normal eligibility criteria (including total super balance test and being under age 75)
- The contribution is not assessed against any of your other contribution caps, meaning that you could contribute even more to super
- If the amount remains in the accumulation phase of superannuation, investment earnings are taxed at a maximum of 15% rather than your marginal tax rate (which could be higher, if you invested the proceeds outside super)
- If the amount is used to commence a superannuation income stream, earnings on this amount are taxed at 0% rather than your marginal tax rate (if you invested the proceeds outside super)
- The amount forms part of the tax-free component which is not taxable when you withdraw it, or if paid to a non- tax dependant (such as an adult child) after death.
How does it work?
Downsizer contributions are superannuation contributions that have been sourced from the sale proceeds of your current home, or a property that you sell that you’ve treated as your main residence at some point since you’ve owned it.
The maximum downsizer contribution that you can make is the lesser of $300,000 or the total proceeds received from the sale. As this is an individual limit, this means that for couples, it may be possible to contribute a combined amount of up to $600,000. However, the total downsizer each person is limited to a maximum of $300,000, and the total combined downsizer contributions for a couple cannot exceed the total proceeds from the sale.
Multiple contributions can be made, however, the contributions can only be made from the sale proceeds of one eligible dwelling. This means that if you don’t fully utilise your $300,000 downsizer cap, you can’t make additional downsizer contributions if you later sell another property which qualifies.
Want to learn more about downsizer contributions? Contact your Tempus Wealth financial planner to see if this could benefit you.