Government Downsizing Incentive Here Soon
In the budget last year the government announced an incentive for people over 65 to downsize their home. The “downsize incentive” is due to start on 1 July this year (2018) and will allow people over the age of 65 to contribute up to $300,000 from the proceeds of the sale of their home into their superannuation. In the case of a couple this means up to $600,000 could be contributed.
Contributions made to superannuation under the incentive contributions:
- Will not be subject to the age test (over age 75)
- Will not be subject to the work test (age 65-74)
- Will be permitted in excess of the $1.6m cap
- Will be allowed to be made by both members of a couple for the same
To be eligible for the incentive:
- The home must have been owned for at least 10 years
- The contract of sale must be entered into on or after 1 July 2018
- The contribution must be made within 90 days of the property transferring
An important aspect of this incentive is that people can move into another home or apartment, a Granny Flat, Retirement Village, Land Lease Community or Aged Care Facility. In fact they do not have to purchase a new home at all to be eligible they may elect to rent or in the case of aged care pay by daily payment.
Whether or not this incentive is going to produce the best result is going to depend on a range of factors unique to the individual person’s circumstances and will include examining their estate planning wishes, their tax position, their cash flow and the possible impact on their pension entitlement. A key drawback of the strategy is that money invested in superannuation is assessable for both the asset and income test for pension means testing.
Seeking advice from an adviser who specialises in this area will ensure that people understand how such an incentive can benefit them – or whether they should consider an alternative.
Steve Jenkosky trading as Golden Age Advisory is an Authorised Representative of Synchron AFS License No. 243313.
Unless specifically indicated, the information contained in this BLOG post is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.