Could you boost your super with a downsizer contribution?

Looking to downsize your home? Wanting to learn about how this may boost your super? 

Join us as we discuss downsizer contributions into superannuation in the latest edition of Exploring Super.

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This podcast is of a general nature only and does not consider your personal circumstances, financial needs or objectives. Before acting on any advice contained in this podcast, please download and read the relevant Product Disclosure Statement and target market determination, found on our website: esssuper.com.au 

The Board recommends that you seek financial advice before acting upon this information. Benefits in ESSSuper's Accumulation Plan, Income Streams and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper. 

Content was up to date at time of recording and thresholds do change due to federal legislation. 

For more information on eligibility please refer the ATO website, ato.gov.au 

Emergency Services Superannuation Board (ABN 28 161 296 741) (ESSB), is responsible for the administration of the Emergency Services Superannuation Scheme (ABN 85 894 637 037) (ESSSuper).

Transcript

Transcript

00:00:02

You're listening to Exploring Super, the exclusive podcast for ESS Super members.

00:00:10

Welcome to Exploring Super, the exclusive podcast for ESS Super members.

00:00:16

I'm Michelle Guinan, Stakeholder Relationship Manager.

00:00:19

And I'm Christian Kueng, I'm the Manager of Member Education.

00:00:22

And today we're exploring a fantastic opportunity for older Australians to boost their superannuation savings through downsizer contributions.

00:00:29

If you're considering selling your home and want to make the most of your retirement funds, this is the episode for you.

00:00:33

So today we're joined by Ken Doble.

00:00:35

He's the quality coach of member education here at ESS Super.

00:00:38

Welcome, Ken.

00:00:39

Thank you very much for having me here today.

00:00:41

So firstly, we'll start off with what actually is a downsizer contribution.

00:00:45

It's a contribution that allows Australians who are above 55...

00:00:48

to put additional money into super from the sale of their home.

00:00:51

It goes into super and it's also exempt from the normal non-concessional contribution limits.

00:00:55

Since the introduction of the contribution it has allowed more Australians to boost their super than before.

00:01:00

Excellent.

00:01:00

So who's eligible to make these contributions?

00:01:04

Well first we've got a note it is a part of legislation and under the current legislations and we should specify that laws do change.

00:01:11

So please ensure that you check your eligibility before you make this contribution.

00:01:15

There is some key criteria that you need to meet and there's several different rules but firstly members must be 55 years or older at the time of making this contribution.

00:01:23

The home must also have been owned by you or your spouse for at least 10 years prior to the actual sale.

00:01:28

Now the sale of the home must also be exempt or partially exempt from capital gains tax under the main residence exemption.

00:01:35

And it's also important to note that the contribution must be made within 90 days of receiving the sale proceeds from the family home.

00:01:42

It is worth noting that when you pay the money into the accumulation account, there is a maximum amount of $300,000 per individual.

00:01:49

And for couples, this is $600,000 in total.

00:01:52

But again, you must remember it is $300,000 maximum per individual person.

00:01:58

However, when paying money into the accumulation account via BPAY, you can actually do it in multiple smaller transactions.

00:02:04

However, the total per individual cannot exceed $300,000.

00:02:08

That makes sense.

00:02:10

It's also worth noting that those amounts that you pay into this as a downsizer contribution do not go towards the concessional or non-concessional contribution caps.

00:02:19

Excellent.

00:02:20

Thanks, Ken.

00:02:21

So how does a member actually do it?

00:02:22

How do they make a downsizer contribution?

00:02:24

Well, first of all, you need to have an accumulation plan.

00:02:27

Now, for a lot of members, they already have these accumulation accounts open.

00:02:30

However, if you don't, you can open one via the members portal online.

00:02:33

And these are really easy to open and it'll step you through step by step on that online portal.

00:02:39

But it's the only way that you can get the money into the existing accumulation account.

00:02:43

So after you receive the proceeds from the sale of the home, you can pay the money into the accumulation account via BPAY.

00:02:49

Now, as I said earlier, this can be done in multiple smaller transactions.

00:02:54

because some banks will have smaller limits and restrictions of how much you can transfer via BPAY.

00:02:58

Now to be eligible to put money into the scheme, under the downsizer scheme, you need to lodge a downsizer contribution form with AWS Super within 90 days of receiving the proceeds of the sale of your family home.

00:03:10

Now this form can be found on the ATO website, and it stands for the Australian Taxation Office.

00:03:15

They are responsible for validating the eligibility of the downsizer contribution and will notify EWS Super accordingly.

00:03:23

Now, as I said earlier, you can pay the money into EWS Super accumulation account via BPAY.

00:03:28

It is worth noting when you pay the money into the accumulation account, there are unique BPAY details for the downsizer contribution.

00:03:35

These can be shown and are located under the contribution tab on members online and they will be eligible for all the members and they will show these details where you're 55 and over.

00:03:45

But it's important to note that you still need to send in the ATO downsizer contribution form after you've paid the contribution into the accumulation account via BPAY.

00:03:54

Thanks, Ken.

00:03:55

What are some key considerations?

00:03:57

There are some multiple considerations to consider.

00:04:00

The primary big one is basically the investment risk, because when you pay your money into the accumulation account, all your money becomes market exposed.

00:04:07

The other thing you need to be aware of is when you pay and you open that accumulation account, it's really important and critical that you go through

00:04:14

and you read the product disclosure statement in reference to the accumulation account which describes how it works, it'll talk about the different investment options and also the fees that are applicable with that particular product.

00:04:24

And you also need to be aware of the target market determination information.

00:04:29

So it's important to note when you are paying money in, the money is still subject to preservation rules.

00:04:34

So there are conditions that need to be met before the money can be released and you can take money out of the superannuation account.

00:04:40

And also with a downsizer contribution, you need to be aware that this can only be done once in a lifetime.

00:04:46

And also the transfer balance cap of $1.9 million as at 2024 is still applicable.

00:04:54

As I said earlier, the downsizer contribution is excluded, not counted towards the non-concessional contribution caps.

00:05:01

It is worth noting that if you are going to use some of this money that you've paid in from a downsizer contribution and roll it over into an income stream at a later date, there are transfer balance caps rules that are applicable to the income stream.

00:05:13

For further information on these transfer balance caps, you should refer to the income stream product disclosure statement.

00:05:19

The other thing is it may affect the age pension eligibility.

00:05:23

under the asset test and also the income rules because they are basically subject to deeming.

00:05:28

Thanks, Ken.

00:05:28

There's some really important considerations there.

00:05:30

So what are the benefits of doing a downsizer?

00:05:33

Why would members look to do this?

00:05:35

There's multiple benefits, Christian.

00:05:36

One of the main ones is it boosts your overall superannuation balance.

00:05:39

The next one is it provides financial security in retirement because you have a higher account balance.

00:05:45

And it also gives you more flexibility to use the proceeds

00:05:48

from the sale of the home.

00:05:51

But there are also some key considerations and for most members we would suggest that you have at least a general advice conversation with a member education consultant or more importantly at a later date speak to a financial planner.

00:06:03

Now there's also some fact sheets on our website and also it's important that you refer to the ATO website.

00:06:08

That will give you some additional information but if you are keen to do that it'll also give you the

00:06:14

ATO downsizer contribution form that you need to download and send back to ESS Super.

00:06:18

That's excellent.

00:06:18

Well, thank you, Ken.

00:06:19

Thanks very much for coming in today and providing your insights.

00:06:22

We look forward to having you on again soon.

00:06:24

Well, thanks very much for having me.

00:06:25

That wraps up our episode today of Exploring Super, the exclusive podcast for ESS Super members.

00:06:32

We look forward to producing more content for you at ESS Super, proudly serving our members.

00:06:38

If you'd like more information about our investments and products, please go to essuper.com.au.

00:06:47

This podcast is of a general nature only and does not consider your personal circumstances, financial needs or objectives.

00:06:54

Before acting on any advice contained in this podcast, please download and read the relevant product disclosure statement and target market determination found on our website, esssuper.com.au.

00:07:05

The board recommends that you seek financial advice before acting upon this information.

00:07:09

Benefits in ESS Super's accumulation plan, income streams and beneficiary account products are not guaranteed or underwritten by the Victorian Government or ESS Super.

00:07:18

Content was up to date at the time of recording and thresholds do change due to federal legislation.

00:07:23

For more

00:07:24

information on eligibility, please refer to the ATO website, ato.gov.au.