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QSuper members contribute over $69m by downsizing
More than 320 QSuper members have contributed over $69 million to their superannuation by utilising the downsizer measure.
The super fund said since the introduction of the downsizer measure on 1 July, 2018, the average contribution was $220,000 – with 52% of contributions made by females and 48% by males. The average age of the member was 72 years old, with the oldest aged 97.
The measure allows Australians aged 65 and over to sell their primary residence (which they have held for 10 years or more) and contribute up to $300,000 (or $600,000 as a couple) into their superannuation.
QSuper chief of QInvest, Kim Hughes, said the measure could be a logical step for some older baby boomers as it could provide for a smaller lower maintenance property and free up some capital for retirement.
Hughes noted that a 65-year-old adding $220,000 to their super would be able to draw an additional tax-free income of $15,000 per year until age 88.
“This initiative allows them to invest some of that surplus in a tax-effective environment… [and] allows eligible older Australians to make a significant boost to their super balance outside of the normal restrictions such as the age and work tests and the annual contribution caps,” she said.
However, Hughes warned that it was not suitable for everyone as the family home was no counted in the assets test for the Age Pension, downsizing and contributing some of the sale proceeds into super or other assets could result in a reduction in an individual’s Age Pension payments or it cancelled.
“While the downsizer contribution is exempt from a lot of the normal limits, the amount you can hold tax-free in a retirement account still applies. There is a cap of $1.6 million and there are penalties for going above that amount, so it could pay to get financial advice before using this measure,” she said.
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What about doing the opposite. An example in the case of a self funded retiree couple over 66. Sell the home, say $600K, add say another $900K (or whatever in each case) by withdrawing from super. Buy a luxury home even if its is smaller. Then have less than $380K in super meaning then eligible for full aged govt pension. Due to the perverse outcomes from the asset taper test this is a better strategy.