The federal government has moved to further incentivise retirees to downsize their home through including the former home in its new downsizer contributions rules, meaning many more adviser clients over 65 could be eligible to make additional contributions to superannuation, according to IOOF.
The policy, which is currently before the Senate, allows retirees to use the proceeds of the sale of their main residence to make downsizer contributions of up to $300,000 into super, or $600,000 for a couple.
IOOF senior technical services manager Linda Bruce said the final version of the legislation contained an amendment to include an individual’s former home, meaning any property that was owned by the client or their spouse and had been used as their main residence in the past.
The client no longer had to be using the property as their home, Bruce added, and may have rented it out, left it vacant or allowed it to be used by other family members.
“As long as this property is eligible for at least partial main residence CGT (capital gains tax) exemption when it is sold, this property can be an eligible property for the downsizer contributions,” she said.
She said she believed the government had made the change as the original proposal was not substantial enough to encourage an older Australian to sell their home, given their main residence was currently exempt from the Centrelink means test for the age pension.
“If an age pensioner chooses to sell their current home, they will potentially lose part or all of their age pension,” she said.
As such, the measure had not been expected to be used widely when it was announced, although now it could be used by a larger cohort of clients as a means to boost their retirement funds, she said.
“It is crucial that advisers understand the broadened eligibility requirements to ensure their clients benefit from these incoming changes,” she said.
IOOF has developed a range of briefing tools for advisers that detail the eligibility requirements under the proposed legislation.