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Upsize your super with a downsizer contribution

Booming house prices in North West NSW are presenting unique opportunities for retirees looking to cash in and boost their super.

This month’s Budget announcement that the home downsizer provisions are being extended means that younger retirees can benefit with more tax-free super when they need it most.


A local property boom

Record low interest rates, relaxed lending standards, and the pandemic induced tree-change movement are all combining to drive up local house prices like never before. 

And according to the Reserve Bank, low interest rates are here to stay “until at least 2024”.

While rising house prices are bad news for young people trying to break into the market, they can be good news for retirees.


A unique opportunity

In Australia, the family home is exempt from Capital Gains Tax.  That means we can sell our home and pocket the proceeds without paying tax.

Of course, as retirees it’s important that we still own our own home.  The recent Retirement Income Review found that home ownership is the key to feeling secure in retirement.  

And there are substantial transaction costs when we buy and sell property; Stamp Duty, agent commissions, legal fees and removalist’s charges all add up.  

But if we downsize our family home to move into something smaller, like a unit or townhouse, we’re still likely to have some money left over.


Downsizer contributions

That excess money can be contributed into your super tax-free.  You can contribute up to $300,000 into super each.  That’s up to $600,000 per couple.

You can then use your increased super balance to fund a better retirement.  If you’re retired you can draw down the money at any time tax free to pay for a holiday, a caravan, a new car or anything else you desire.  If, like most of us, you have less than $1.6 million in super, you can also use the money to start a higher tax-free income stream paid to you monthly or fortnightly.

You won’t be alone.  Since the downsizer mechanism was introduced about three years ago, more than 22,000 Australian retirees have taken it up.

But there are some conditions.  You must be over 65 and you need to have owned your home for at least ten years.  The Budget proposes that the arrangement be extended to 60 year olds from July next year, but that’s not law yet.

The most important thing, however, is to make sure the numbers stack up.  If you’d like to learn more about whether the downsize contribution is right for you, let us know.  

Because when you deal with us, it’s not a matter of ‘if’ you will make the most of your financial opportunities in retirement, but ‘when’.


Michael Bowman and James McMaster are co-founders of When Financial Solutions.  This article is general and does not consider your personal circumstances so it may not be appropriate to you.  If you would like advice specific to you, please give us a call.



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