An opportunity for those over age 55 to boost their superannuation by making a $300,000 contribution each into superannuation.
If you’re considering selling your house and wondering whether it’s a good time to do so or if you should wait, it’s essential to consider your personal circumstances, the current market conditions and factors that may impact the real estate landscape.
Most locations around Australia still have higher median prices than pre-COVID. Whilst 2022 was a challenging year for property, following a historically fast rise during COVID, property prices in 2023 have been rising once again. Data from property consultancy CoreLogic show that the Sydney housing market still leads other major cities with a cumulative increase since the January trough of 6.7 per cent. A lack of supply has been the main driver of the increased prices, as well as high population growth.
The Sydney housing market increased 1.7 per cent in June, a slower rate than previous months, a sign that the market is slowing with expectations of more rate rises to come. Mortgage stress is a big risk for homeowners who have a large level of debt, and some households are struggling to keep up with their monthly repayments. We are seeing more mortgagees considered at risk and many mortgages are due to come off fixed rates in the next few months, and this might start to show increased supply in the market.
So, as a seller it could be a good time to take advantage of the current conditions while supply is still tight and auction clearance rates remain high. If you do sell, you might be able to make a downsizer contribution.
What is the downsizer contribution?
In essence it’s an opportunity to invest and boost your superannuation.
From 1 January 2023, you may be eligible to make a maximum non-taxable contribution of $300k for each spouse if you are over age 55 and make the deposit within 90 days of settlement of a sale (or part sale). To qualify, you and/or your spouse have owned your home for at least 10 years and lived in it as your main residence at some point.
The main reason you would want to put an extra $300,000 each into super is because super is the most tax effective structure for your retirement savings, with a balance of up to $1.9 million each currently allowed to be used to start a tax-free pension, i.e. no tax on earnings or on pension payments.
Unlike other contributions, it doesn’t matter if you are retired or what your super balance is to be able to make downsizer contributions. This may be the last large contribution you can make to boost your balance for retirement.
We have previously outlined the pros and cons of making a downsizer contribution which would be worthwhile reading as there is a lot to think about when considering if you should make a downsizer contribution.
Superannuation contribution rules are complex. It is a good idea to speak to your adviser.