06 Mar The New Downsizer Contribution Cap: How You Can Take Advantage
The Australian Government has introduced a new contribution cap – the downsizer contributions cap, which will come into effect as of the 1 July 2018. Whilst this new contribution cap is primarily for people downsizing their main residence, it can be beneficial for many other situations, such as selling an investment property. Let’s take a look at how you can take advantage of the downsizer contribution cap, especially when planning for your retirement, which can give your nest egg the boost it needs.
The downsizer contribution cap isn’t a replacement for other caps, but an additional element to the existing superannuation caps, which is available to everyone, regardless of their current super balance. The downsizer cap can only be used once and the maximum contribution is the lesser value of either $300,000 or the actual sale proceeds from the property.
Downsizer contribution cap eligibility conditions:
- The contributor must be over the age of 65 years and must have owned an interest in the property for at least 10 years prior to the sale.
- The contribution must be all or part of the capital proceeds from the sale of your property.
- The property must be a dwelling in Australia, and does not include other accommodation means such as a caravans, houseboats or other mobile homes.
- The contributor (or their spouse) must own interest just prior to the sale of the property and the cap contribution must be made within 90 days of change of ownership.
- Some capital gains must have been disregarded, under the main residence Capital Gains Tax rules.
Interestingly, there is no requirement to actually ‘downsize’, or purchase other property. The property sold also need not have been the main residence of the contributor immediately before the sale, so there is an opportunity to benefit from the sale of an investment property. As long as the property was used as the main residence at some stage during ownership, the downsizer cap can be applied.
Because the property can be owned by the spouse of the member for whom the contribution is made, a potential contribution of up to $600,000 could be contributed for a couple under this cap.
While any contributions made must be all or part of the capital proceeds, there is no requirement that the proceeds of the sale are used to fund the superannuation contribution. For example, the proceeds can be used to pay out a debt. This makes the downsizer contributions cap highly versatile and strategic when applied to your own circumstances.
Downsizer contributions are well worth looking into when planning for your future retirement prospects. They provide an additional opportunity for people aged over 65 to make contributions to their superannuation, in a variety of different applications.
If you would like more information on what super or investment strategy is suitable for your situation, get in touch with the friendly team at Conrad Carlile on (07) 3871 1522 or send an online enquiry here.