How to Make Downsizer Contributions to Super: A Guide
As individuals approach retirement, downsizing becomes a popular option for many. Downsizing not only allows for a more manageable living situation but can also provide financial benefits. One such benefit is the ability to make downsizer contributions to superannuation, which can help boost retirement savings. In this guide, we will explore what downsizer contributions are, who is eligible to make them, and how to go about making these contributions.
What are Downsizer Contributions?
Downsizer contributions are a type of superannuation contribution that individuals can make after selling their home. Introduced by the Australian government in 2018, this initiative aims to encourage older Australians to downsize their homes and contribute the proceeds into their superannuation accounts.
Who is Eligible?
To be eligible to make downsizer contributions, individuals must meet the following criteria:
1. Age: You must be 65 years or older at the time of making the contribution.
2. Property Sale: The contribution must come from the proceeds of selling your primary residence in Australia. It is important to note that investment properties or holiday homes are not eligible.
3. Timing: The contribution must be made within 90 days of receiving the sale proceeds.
It is worth mentioning that there is no requirement for individuals to purchase a new property after downsizing. This means that individuals can choose to rent or move into a smaller property without affecting their eligibility for downsizer contributions.
Contribution Limits and Tax Considerations
Downsizer contributions have a unique set of rules when it comes to contribution limits and tax considerations. Here are some key points to keep in mind:
1. Contribution Limit: The maximum downsizer contribution allowed is $300,000 per individual. If you are a couple, both partners can contribute up to $300,000 each, resulting in a combined total of $600,000.
2. Non-Concessional Contributions: Downsizer contributions are considered non-concessional contributions, meaning they are made with after-tax money. These contributions do not count towards the non-concessional contribution cap.
3. Age Limit: Unlike regular super contributions, there is no upper age limit for making downsizer contributions. This means that individuals over the age of 75 can still take advantage of this initiative.
4. Tax Considerations: Downsizer contributions are not tax-deductible and are not subject to the usual contribution tax of 15%. However, it is essential to consider the impact these contributions may have on your eligibility for the Age Pension or other government benefits.
How to Make Downsizer Contributions
To make downsizer contributions to your superannuation, follow these steps:
1. Consult a Financial Advisor: Before making any decisions, it is advisable to seek professional advice from a financial advisor who can guide you through the process and help you understand the potential implications.
2. Notify Your Super Fund: Inform your superannuation fund about your intention to make downsizer contributions. They will provide you with the necessary forms and guidance on how to proceed.
3. Complete the Downsizer Contribution Form: Fill out the downsizer contribution form provided by your super fund. This form will require details about the property sale and the amount you wish to contribute.
4. Submit the Form: Once completed, submit the form to your super fund within the 90-day timeframe.
5. Keep Records: It is crucial to keep records of all relevant documents, including the contract of sale, settlement statement, and any other supporting documentation.
Conclusion
Downsizer contributions to superannuation can be a valuable strategy for individuals looking to boost their retirement savings while downsizing their homes. By understanding the eligibility criteria, contribution limits, and tax considerations, individuals can make informed decisions and take advantage of this initiative. Remember to consult a financial advisor and notify your super fund to ensure a smooth and successful downsizer contribution process.
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