What Is Downsizing?
Downsizing is the process of selling your home to move into a smaller or lesser-valued home.What To Consider Before Downsizing A House
The pros of downsizing- You free up the equity in your current home.
- You can stop cleaning and maintaining a home that is bigger than you need.
- Live closer to your friends and family.
- Lower maintenance and upkeep costs.
- Cheaper cost of living.
- Simplified living.
- You can move to your ideal location.
- You can repay debts or have smaller home loans.
- Increased financial cushion
- Reduced carbon footprints.
- Huge cost of selling the house
- It can be hard to find a property you want for your new home.
- Having to adapt to changes
- Clearing out sentimental possessions
- Space constraints
Can You Add Downsizer Contributions To Your Super For Retirement?
If you are 55 years old or older, you can put up to $300,000 – or $600,000 for couples – into your superannuation funds from the sale of the house. The following condiitions have to be met:- The house has to be owned by you or your spouse for at least 10 years before the sale.
- The house must be your primary place of residence and fully or partially exempt from the capital gains tax.
- The house has to be in Australia.
- The house must not be a caravan, houseboat or other mobile home.
- You must not have made a downsizer contribution to super before.
Pros and Cons of Downsizing Contributions To Your Super
The pros:- You are adding money into a tax-effective superannuation fund.
- There are no requirements to purchase a new home.
- Increased retirement savings and a more secure future.
- There is no upper age limit and no work test for a downsizer contribution.
- A downsizer contribution is exempt from contribution caps. So, even if your total super balance is 1.7 million, which is the maximum, you can still add the downsizer contribution to super.
- It may impact your aged pension eligibility.
- It is not tax-deductible.
- You can make only one downsizer contribution in your lifetime.