Navigating Downsizing: The Financial Benefits
In Melbourne’s dynamic real estate landscape, the concept of downsizing has evolved from a practical necessity to a lifestyle choice embraced by many. As homeowners embark on the journey of rightsizing their living spaces, the Melbourne market offers a wealth of opportunities tailored to their changing needs. This article explores the nuances of downsizing in Melbourne and offers insights for those considering this transition.
Downsizing can offer significant financial benefits for homeowners. By selling a larger property and purchasing a smaller, more manageable one, homeowners can free up equity for retirement, travel, or other lifestyle pursuits.
For example:
If you are aged 55 or over, you can contribute up to $300,000 to super under the ‘downsizer’ rules. If you are a member of a couple, you can both do this, so $600,000 in total. To be eligible you, or your spouse, must have owned the home for at least 10 years, and for at least part of that period, it must have been your main residence. There is no upper age limit on making downsizer contributions. So yes, those over age 75 can make this type of contribution.
In what is somewhat of an anomaly and misconception, you don’t actually need to ‘downsize’ your home. You could sell your home, buy a bigger and/or more expensive one, and still make a downsizer contribution if you have other available funds lying around. Downsizer contributions are a special type of contribution. They don’t count either as a concessional or non-concessional contribution, so they can be made regardless of the other contributions caps and restrictions that might apply to making voluntary contributions. However, you cannot claim a tax deduction on these contributions like you can with a concessional contribution. To make it even more generous, downsizer contributions form part of the tax-free component of your super fund. (Source: Craig Sankey – The New Daily). Please note: this is not financial advice and we advise you seek professional advice from a professional advisor.
Navigating the downsizing process can be complex, requiring careful planning and expert guidance. Working with experienced real estate professionals like Nicole at Bayside Real Estate Advocates, can streamline the process and ensure a successful outcome. We can provide valuable insights, assist with property searches, negotiations, and marketing, and help homeowners achieve their downsizing goals with confidence.