Super incentive for Empty-Nesters to downsize

The 2017 budget speech was delivered to parliament by the Treasurer on Tuesday, 9 May 2017. This Budget contains a feast of policy announcements across a range of areas including housing affordability, health, education and social welfare. The great news is that, homeowners living in properties with empty rooms will be encouraged to sell up and move into smaller accommodation.

If you’ve owned your home for a minimum of 10 years, new rules will allow you to contribute an extra $300,000 from property sales to their superannuation accounts, on top of the current $100,000-a-year cap. This will allow people to put some or all of the earnings from a property sale into their super account and take advantage of the discounted tax rate.

This is a great opportunity to top up a Self-Managed Super Fund (SMSF) to purchase cash flow positive self-funding property. There are several advantages of buying property in a SMSF:

• the property becomes an income producing asset that will pay for itself over time
• once the property is paid it becomes a cash cow that can be used as an income source in retirement
• the property will grow in value over time
• when the property is sold there is no Capital Gains Tax to pay

Downsizing is a chance to make the most out of life, simply by detaching yourself from the past and creating a new future. Naturally, the prospect of downsizing can cause you to be overwhelmed. Any home move is hard work because there is a lot to organise and consider. Getting out of your comfort zone is generally the main hurdle to jump. For those that have done it, their only regret is that they didn’t do it sooner.

The benefits of downsizing compared to doing nothing are enormous, especially now that the Government is offering this extra Super incentive. If you want to downsize then you need a plan on how to do it or how to derive the best outcome. It may not be simply selling for a good price and then buying something smaller then hoping that there is something left over after paying off all your loans.

There are a few things you may wish to consider:

1. Creating a SMSF to invest in property with the added $300,000 contribution
2. Staying in the neighbourhood you love,
3. Being debt free
4. Have money in the bank
5. Have an income earning investment
6. Living in a smaller, more manageable home.

Downsizing also provides the chance to take stock of a lifetime of collected possessions and connections to the family home. If you approach downsizing as a time to de-clutter and embark on a fresh new chapter in life, any emotional ties associated with the past turn out to be very short lived, especially when the joys of a more relaxed, unburdened lifestyle take over.

Downsizing allows you to create a comfortable retirement free from worry, giving you more time to live life and spend your time doing the things you love. Property and Finance Solutions can help you through all facets of the downsizing process. This is how we can help: