Are you in your retirement years and thinking of downsizing?
The talk of rising house prices recently has led to people feeling it’s a sellers’ market and maybe it’s time to give up the larger home for a cheaper, more manageable dwelling.
Some of the property speculation is fuelled by numbers like the recent 90% clearance rate for Sydney house auctions, but record low interest rates have also led to new levels of media speculation about house prices booming. As to whether house prices will actually up or down is really beyond any individual’s control so if you are thinking about downsizing, rather than wondering whether it’s the right time for someone else to buy your home, is it the right time for you to sell?
If you decide yes, then have you thought about what to do with the sale proceeds?
Three years ago, many retirees would have parked the money in a term deposit because they didn’t really think they could do much with spare money. Of course, at that time, 0% interest rates only existed in the nightmares of the RBA Governor (and a few overseas places like Japan), plus there wasn’t the “Downsizer Contribution” option available for super.
These days, following the introduction of the Downsizer Contribution rules, you may have an opportunity to top up your super (or that of your spouse’s) but the catch is that, if eligible, you only have 90 days from settlement. Therefore, dropping the money in a 3 month term deposit could lead to a missed opportunity…
The criteria includes (but not limited to):
- you must be over 65,
- have owned the home for 10 years or more and
- it must have been your home for part of that 10 years.
You can put in up to $300,000 per person but you can’t put in more than the value of the sale; for instance, if you and your spouse sold a home for $500,000 you can’t put $300,000 each, but you could put $250,000 each (subject to meeting the other criteria).
There are some other nuances people should be aware of (the list is longer than this blog can fit); for instance, receiving a payout from a former spouse who takes ownership of the former home as part of a marital split may not be eligible. This is because the rules require that a CGT exemption (as a domestic dwelling) must be triggered, which it may not as part of a financial settlement following a marital breakdown.
A downsizer contribution is also unique in that it is treated as neither a concessional contribution nor a non-concessional contribution so it is not subject to either of those caps.
Therefore, it is absolutely worth getting the advice as to what your financial options are regarding downsizer contributions. In this ultra low interest rate world, it is best to know all of your possibilities.
This is intended to be general advice only. Goldsborough Financial Services has not taken into account the objectives, financial circumstances or investment needs of any particular person. For specific advice on your situation please contact your Goldsborough Financial Planner.