OverSixty July 2023 Digital

ISSUE 5 | JULY 2023 | OVERSIXTY.COM.AU 18 DOWNSIZING !ere’s lots to think about when downsizing – but ensuring you’re making a smart "nancial decision should be top of mind Photo: Getty Images DOWNSIZING Based in Sydney, KK Interiors specialises in sophisticated interior design services for the over-60s. In-home and e-Design options available. Visit www.kkinteriors.com.au DOWNSIZING OR TRANSITIONING TO RETIREMENT LIVING? 5 key things to consider before you downsize LUKE SMITH DOWNSIZING R etirement is a time of change, and it can mean a change of address too. Many pre-retirees consider making a sea change or a tree change and make the decision to move into a property that bet- ter meets their changing lifestyle needs. Often the move is out of a larger family home into a smaller house, an apart- ment, or a retirement village. Of course it doesn’t need to be a change of suburb, it might be something smaller in the same area. Like all decisions, your own goals about moving homes should be front and centre. !ere is a "nancial planning opportu- nity associated with a decision like this and it’s one that many Australians are making. It’s called the downsizing con- tribution strategy and it allows you to use superannuation to help you fund your retirement lifestyle using proceeds from the property sale. !e good news is that you don’t have to use all of the proceeds from the sale of the family home into a superannuation downsizer contribution. You get to choose howmuch you’d like to contribute, up to $300,000 for singles and $300,000 each for couples. !ere are 5 key things you should con- sider before you make a decision to use the downsizing contribution strategy. 1. What type of property and which suburb will you downsize to? Many people approaching retirement don’t want to be rattling around in a larger family home. So if you do look for something smaller, what type of property and which suburb will you move to? Some key considerations may include: • Proximity to family and friends • !e distance to essential services you use, shopping and medical services • Availability of public transport • Accessibility of lifestyle activities such as golf, tennis courts, swimming • !e type of property itself, perhaps sin- gle level with no stairs Many city dwellers who choose a sea or tree change often take what they have for granted, so if you’re moving to a regional area, be sure to do your homework to en- sure you will have everything you need. 2. Check your eligibility to ensure this strategy is open to you Inaddition to"ndingyournext home, you should also make sure you understand and follow the rules the government has set out about using the downsizer con- tribution strategy. !ere are always rules! Check the eligibility requirements to make sure it’s available to you, including completing the right paperwork at the right time. Originally this was only open to those aged 60 or over from 1 July 2022, however the government has now low- ered the accessibility age to those aged 55 and over from 1 January 2023. Other conditions apply too, so check with them to ensure you’re eligible for this "nancial planning strategy. 3. Make the most of your contribu- tion options !e downsizer contribution allows an individual to make a $300,000 contribu- tion to their super. And if you’re a couple, you each can make a $300,000 contribu- tion. With the focus on getting money into your super to fund your retirement life, remember that you may also make a non-concessional contribution of up to $330,000 (total super balance permit- ting). !is way you can maximise the base fromwhich a tax free income stream may be commenced or equalise the val- ue of accounts if one member is over the transfer balance cap. Remember that you can also make a downsizer contribution if you have reached your transfer balance cap of $1.7 million. 4. Ensure the strategy is considered with Centrelink For many Australians, Centrelink pro- vides an important source of income for their retirement and it makes sense to consider this strategy in the context of your eligibility for that income. !e mon- ey you receive from the sale of your family home will be considered when determin- ing your entitlements. Your new home however, the one you downsize to, be- comes exempt once you have purchased it. !is is because it becomes your prima- ry residence. 5. Don’t forget about the other ways you can contribute to super !e downsizing contribution strategy is just one way you can contribute to super. !ere are other ways you can contribute too. An example is making a personal de- ductible contribution to super. !rough this type of contribution, you make your contribution, and you claim a tax deduc- tion when you get your tax return com- pleted. Downsizer super contributions don’t allow you to claim a tax deduction. Make sure you consider all of your op- tions when making super contributions and assess the pros and cons of each. !ere’s a lot to consider when making the decision to downsize your family home and it’s not just about where to live next.!e downsizer contribution strategy is a great way to get extra money from the sale of your family home to fund your re- tirement lifestyle. Just make sure you un- derstand your "nancial planning options before making a decision, to be con"dent you will achieve the outcomes you’re seeking. No one likes surprises around unexpected outcomes, so do your home- work and seek advice from a licensed "- nancial planner if you need help. Learn more about the rights and rules associated with the downsizing contribution strategy About the author Î Luke Smith is a licensed Australian "nancial planner and author of the new book, Smart Money Strategy – Your Ultimate Guide to Financial Planning (Wiley, $34.95). Luke is also the host of the popular podcast ‘!e Strategy Stacker – Luke Talks Money’ and appears every Friday afternoon on Canberra’s 2CC. Found out more at www.thestrategystacker.com.au