A variety of factors come into play when determining if you should downsize the family home.

The downsizer superannuation rules came into effect in July 2018. They were designed to allow people to sell their home which they have owned for over ten years and contribute the money to their super account. 

The idea was to encourage people to realise equity in their homes to support their living expenses in retirement. Historically, people were always able to downsize and realise the equity in their house. However, the remaining capital once invested generally resulted in having to pay additional taxes on the returns. Now, the downsizer rules allow people to place the leftover equity from the sale of their home into the tax effective environment of a super fund. For most people, this means having a tax free retirement. This is important as it extends how long your money lasts in retirement.

The downsizer rules open up a range of other opportunities that we believe were not considered when the rules were put together. These include:

  • Downsizing does not actually mean buying a cheaper property. People can sell their primary residence, buy an equal or greater value property and still place money into super.
  • Strategies to contribute additional capital into super.
  • Estate planning opportunities such as ensuring unequal distribution of your estate between family members.
  • Ability to improve the components with your super, so that there is less tax paid upon your death and transfer of super

The way these rules have been written are complex. There are many checks that need to be done prior to deciding if this is a good idea. But there are many opportunities to use these rules to improve your overall financial wellbeing.

If you are considering downsizing your home you should seek professional advice. Please contact your local RSM office.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282. This article does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and speak to a financial adviser before making a decision in relation to superannuation contributions.

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