Retirees with large superannuation balances will be able to make good use of the Government’s new measure to encourage people to downsize from large family homes, but those who expect to rely on an aged pension or part-pension in addition to super may run into trouble with the asset test.
From July 1 next year, a person aged 65 or over will be able to make a non-concessional superannuation contribution of up to $300,000 from the proceeds of selling their home.
These contributions will be in addition to those currently permitted under existing rules and caps, as well as the age test, work test and $1.6 million total superannuation balance test for making non-concessional contributions
The measure will apply to the sale of a principal residence owned for the 10 years or more.
Both members of a couple will be able to take advantage of this measure for the same home.
The Government is hoping to remove the barriers to downsizing for older people and facilitate more effective use of the housing stock by freeing up larger homes.
Wealthdigital says anyone who uses this option will need to understand that the proceeds will count towards their Centrelink and Department of Veterans’ Affairs income and assets test.
Consultant Rice Warner says that for most retirees the new measure will be unattractive.
“A couple owning a home and with other assets, including superannuation, of $350,000 would be eligible for a full age pension of $34,800 a year,” Rice Warner says in a Budget commentary.
“If they capitalise $600,000 and put it into superannuation they lose the whole pension.”
Mark Beveridge, a director of Superfund Partners, says: “The Government should have created a special class of annuity asset that is exempt from the asset test, just like current home equity, if they really want to encourage downsizing.”
Rice Warner says: “This is great news for wealthy people. It makes a pension transfer cap of $1.9 million for each of them if they sell their home.”