24 September 2019

Australian couples are typically giving their retirement savings a $200,000 boost as a result of downsizing from the family home, new research has found.

In September, QSuper released data which shows that more than 320 of its members have contributed over $69 million to their superannuation by utilising the Australian Government’s downsizing superannuation incentive.

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.

QSuper chief of QInvest, Kim Hughes said 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.

$200,000 super boost is the downsizing ‘sweet spot’

The QSuper research comes amid a range of other new reports, which appear to show that retirees are willing to sell the family home and move into a retirement or downsizing community, if they can collect $200,000 in the process.

In its 2018-19 results presentation, Victorian land lease community developer Lifestyle Communities stated that its incoming residents, on average, stash away $215,000 as a result of the downsizing process. Lifestyle Communities said its homes were typically priced at 70-80 per cent of the median house price. 

Perhaps the ultimate source of information is the Australian Government itself, which found that the average downsizer contribution reported to the Australian Tax Office was $235,000. 

The government’s Assistant Treasurer Michael Sukkar announced in July 2019 that people from every State and Territory have made contribution, with the top three States being NSW (31%), Victoria (26%) and Queensland (24%).

About the government’s superannuation downsizing incentive

The Australian Government's downsizing incentive, introduced from July 2018, allows individuals aged 65 and over to release up to $300,000 into their super, while couples can release up to $600,000, from selling the family home and buying a new home. Find out more at the official government website here.

To access the initiative, the home would need to have been owned by at least one member of a couple, or by an individual, for at least ten years, and be considered a family home under capital gains tax law. 

Caravans, houseboats or other mobile homes are not eligible under the scheme.

There is no requirement that individuals or couples need to move into a smaller dwelling to access the initiative, despite it being called a ‘downsizing contribution’.

In addition, contributors do not need to meet the usual work test to use the initiative, and once inside the fund, the downsizing contributions are tax-free. 

Downsizing.com.au has recently revealed that, from July 2020, it may be possible for couples to combine the downsizing incentive and other new superannuation incentives announced in the 2019/20 Budget to release up to $1.2 million from the sale of the family home to their superannuation fund.

Given that contributions under the initiative may impact on age pension eligibility, the initiative is best suited to self-funded retirees who have less reliance on the pension.

Downsizing allowed couple to raise money for travel

Neil and Shirley Meagher are an example of a couple that have been able to utilise the downsizing process to support their retirement lifestyle.

They decided to downsize and purchase a home in an Ingenia Lifestyle village in NSW’s South Coast in 2018, to free up enough capital to give them the freedom to travel. 

“We’ve visited Lake Conjola in our caravan for the past few years – why wouldn’t we want to live in a holiday destination and free up our finances to go on further adventures?” Mr Meagher said.

 “We wanted to live somewhere that suited our goals for our retirement and spend precious time and money on things we enjoy and have always wanted to do.”

By Mark Skelsey, Editor at Downsizing.com.au