Financial opportunities when downsizing or selling your family home

Selling your family home at any stage of your life can be an emotional experience. You may have watched your kids grown up there, of you may even have built the home yourself. Whatever your story, there are sure to have been many memories made within its walls.

For some, family tensions arise when one or more of your children want to purchase the home from you.

At the end of the day, it could just be time for you to take the next step in your life journey and make the decision that is right for you. Part of making the right decision should be seeking out financial advice and understanding the opportunities you have available to you if you were to sell your family home.

In recent superannuation changes, there was a new incentive put in place to help people with the financial decision of selling their family home. It is called the downsizer contribution.

What is the downsizer contribution?

The downsizer contribution is a one off opportunity to put up to a maximum of $300,000 per person into super provided you meet the eligibility requirements.

If you choose to make a downsizer contribution, but are either not eligible to use, or choose not to use the full $300,000 limit, you cannot top this up in the future.

The amount of the contribution cannot exceed the proceeds of the sale of your property.

[for example, if your property sold for $500,000 you and your spouse between you cannot each make a $300,000 contribution, you would be limited to a combined contribution of $500,000]

Who is eligible?

To be eligible for the downsizer contribution you:

• Must be aged over 65 at the time of making the contribution to super;
• Do not have to meet the Work test which would normally apply to people aged over 65 when contributing to super;
• You can still make a downsizer contribution even if you are over the $1.6 million total super balance test;
• You dont actually need to sell your family home. It must simply be a residential property taht you are claiming a portion of any gain tax free under the main residence exemption and have held the property for more than 10 years
  • Many people own rental properties which at some point have been their main residence. Therefore, if you do not wish to sell the family home, you may still be eligible to use the downsizer contribution on such a property.
• You may be eligible for the downsizer contribution even if the property being sold is held solely in your spouse’s name.

Getting Advice

There are a few requirements and some overarching financial considerations before you make the decision to sell your family home. It is important to seek financial advice specific to you personal situation.

There is also strict timing around when a downsizer contribution can be made to your super fund, so it is important that this advice is sought out prior to signing a sale contract on your property.

Contact the team at Next Stepz today to discuss further.