Federal Budget: Key Details About Downsizer Contribution
One of the announcements in the most recent federal budget was the downsizer contribution. For context, let's say you've got parents whose kids have left the nest, they don't need the five-bedroom house anymore - they want to get into maybe a two or three-bedroom house or apartment. In the process of selling the big one, let's say the price is 2 million for that, and then they buy an apartment for $1.5 million - the difference is $500,000. So the idea of the downsizer contribution is now that couple has $500,000 of cash sitting there, what are they going to do with it? So this is a way where the downsizer contribution says, now you can have $300,000 per person - so $600,000 for a couple - that you can pop into super, and it doesn't count towards any other contribution cap.
The other interesting thing they've changed is, you used to only be able to do this when you're 65 or older. They've dropped the age limit to, if you downsize, from the age 60 or older - so that's pretty cool. You must have held your big house for 10 years or more, and you also must forward the net payment within 90 days of settlement of the big house. Remember, this one applies from 1 July 2022 so don't go and sell your property right now if you want to use this one.
Remember, this contribution doesn't count towards other caps - It's underselling a little bit with that sentence. It’s massive because you're moving one of your biggest assets or wealth portions into super without affecting your other caps, which is your non-concessional and your concessional contribution caps, which means you still can move more of your wealth into super as well as you reach retirement age. So, again, they're wanting you to use more of your own funds to support your retirement and then using the tax tools that they have to ensure that you don't get burdened by that when you do transition to retirement. It's amazing outcome here.