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Understanding home downsizing and super contributions

 

The Federal Government announced in the May Budget that it is widening the scope of the scheme allowing eligible Australians to sell their home and put extra money into their superannuation. Here's what you need to know.

 

         
First introduced in the 2018-19 financial year, the “downsizer measure” has provided an opportunity for individuals 65 years and older to add up to $300,000, and couples up to $600,000, into their super from the proceeds of their home.
 
Data from the Australian Tax Office shows that, as of 30 April 2021, just over 23,000 older Australians had collectively made $5.46 billion in downsizer contributions to their super fund.
 
But those numbers are set to increase significantly over time.
 
From 1 July 2022 the minimum age limit for participation will be reduced to 60, which will open the superannuation door for more people wanting to build up their superannuation account balance.
 

Here's what you need to know

 
The downsizer scheme is administered by the Australian Tax Office (ATO) and has a range of eligibility criteria in addition to the minimum age requirements.
 
The ATO will only permit additional super contributions if they are made using the proceeds from selling your principal place of residence.
 
You or your spouse must have owned your home for 10 years or more prior to the sale, with your ownership calculated from the date of settlement when you bought your home.
 
Your home needs to be exempt or partially exempt from capital gains tax under the main residence exemption.
 
There's also a strict definition of what constitutes a home. It must be in Australia and cannot be a caravan, houseboat, or a mobile home.
 
You're unable to use the downsizer scheme to deposit funds from the sale of an investment property. These can only be done through a non-concessional (tax-paid) super contribution.
 
Downsizer super contributions must be made within 90 days after you receive the proceeds of your home sale. The ATO will allow for a longer period if the delay is due to circumstances beyond your control.
 
The downsizer measure is a one-off, so once you've made a super contribution you're unable to do so again by using the proceeds from another home in the future.
 
However, if the home that is sold is only owned by one spouse, the spouse that does not have an ownership interest is able to make a downsizer contribution or have one made on their behalf, provided they meet the other eligibility requirements.
 
Downsizer contributions form part of the tax-free component in your super fund. They can be made in addition to non-concessional super contributions and do not count towards your personal super contribution limit.
 
They can also be made even if you have a total super balance of more than $1.6 million.
 
Your downsizer contribution will not affect your total superannuation balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of each financial year.
 
Ultimately any downsizer contributions you make however will count towards your tax-free transfer balance limit when you move into pension phase at retirement.
 
You'll need to make sure your super fund (or funds) accepts downsizer contributions. If you don't currently have an open account with a super fund, you'll need to open a new super account to make your downsizer contribution.
 
You'll also need to provide your fund with a completed Downsizer contribution into super form, which can be downloaded from the ATO's website, either before or at the time of making your downsizer contribution.
 

Be mindful of the pension assets test

 
People considering making a home downsizer contribution into super – especially those already receiving a partial or full government Age Pension – should do proper due diligence.
 
Because the Age Pension is calculated on the value of all assets outside of your family home, including the amount you have in your super accumulation or pension account, a large cash injection from your home proceeds may result in a breach of assets test rules.
 
Under what's known as the taper rate, Age Pension entitlements are reduced by $3 per fortnight for every $1,000 in assets over the Government's asset test thresholds.
 

The current assets test limits are shown in the table below.

Full Age PensionHomeownerNon Homeowner
Single$268,000$482,500
Couple$401,500$616,000
 
Part Age PensionHomeownerNon Homeowner
Single$585,750$800,250
Couple$880,500$1,095,000

Source: Department of Human Services, limits effective 20 March 2021

 
Once an individual or couple breach the limits for the full Age Pension, their fortnightly payments will gradually reduce using the taper rate. Those on a part pension could find their payments cease altogether if they move above the maximum thresholds.
 
So, even with a higher superannuation balance because of your home sale contribution, your total income stream could be less than what you received from a full or part Age Pension.
 
It's therefore essential to seek out professional financial advice before proceeding, especially with respect to social security means testing.
 
 
 

By Tony Kaye
Senior Personal Finance Writer, Vanguard Australia
25 May, 2021
vanguard.com.au

 

 

 

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Tess Uncle

B.Sc, M.Com, CA, DipFP

Tess has over 22-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

Over the last seven-years, Tess has turned her attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.

Tess’s mission is to bring the ethics and integrity of her Chartered Accounting background to the area of wealth management.

As a woman in a male dominated field, Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities.

Using her depth of knowledge and experience in tax and accounting Tess is able to demonstrate a level of competence that is unique in the Financial Planning sector.

  • 2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2004 – Graduated Masters of Commerce from the University of New South Wales
  • 2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2007 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

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Adam Roberts

B.Bus, B.Sc, CA, DipFP

Adam has over 18-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

Over the last seven-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.

Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.

Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.

Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.

  • 2005 – Graduated Bachelor of Science from the University of Western Sydney
  • 2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2007 – Graduated Bachelor of Business from the University of Western Sydney
  • 2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2010 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

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What is an Advisory Cadetship?
An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.

How does it work?
Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.

The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.

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What are the benefits of an Advisory Cadetship with Wybenga Financial?
Our cadets benefit from the following:

  • Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
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There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.

Who should apply?
Current Year 12 students or first/second year University Students who:

  • want to commence their career in financial advisory;
  • are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
  • want to gain valuable hands-on experience while completing their qualifications;
  • are looking for a friendly working environment;
  • are team players who display initiative;
  • have a commitment to self-development;
  • possess excellent personal presentation and communication skills; and
  • are motivated and mature minded.

How do I apply for an Advisory Cadetship?
To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.

Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).

What if I have more questions?
For further information about our Cadetship program, please send your enquiry to .