From 1 July 2018, people aged 65 and over will be able to sell their main residence and then make a ‘downsizer’ contribution into superannuation of up to $300,000 from the sale proceeds of their main residence.
Both members of a couple can take advantage of this measure, allowing a total amount of $600,000 to be contributed to superannuation per couple.
This new rule trumps other current rules which prevent many over-65s from making contributions to superannuation (such as the work test, the age 75 limit, and the $1.6 million balance test).
Why is this a good initiative for these people?
Because being allowed to contribute this money into superannuation means it can be invested and then earn income with little or no tax liability.
For example, if $600,000 was invested inside superannuation and earned, say, 5% p.a., that $30,000 income would be tax free for most people aged 65+ (assuming their finances were correctly set up).
Some points to be aware of: