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How the NSW downsizing incentive can set your super for life

Date Posted: Aug, 2017

By Rich Harvey, CEO, propertybuyer.com.au

Downsize your Sydney home, and up-size your super. That's the message from the NSW Government, who have announced that vendors aged 65 and above can put $300,000 of a property sale's proceeds into their superannuation – with all the tax benefits that accompany it.

Exempt from many other measures, including the $1.6 million transfer balance cap, this incentive is a huge carrot for older Australians thinking about moving into a new property for retirement. However, there are a few ways that everyone else can benefit too.

Benefits for all house hunters from the downsizing scheme

The first (and clearest) benefit of the downsizing incentive is boosting super balances. Association for Superannuation Funds of Australia data shows that the average super balance at retirement is just under $300,000 for men, but only $138,500 for women. For either gender, there could be a big shortfall that an extra $300,000 boosts to a massive degree. Remember that couples selling a large home can transfer $300,000 each as well (making a total of $600,000).

Downsizing could be the key to boosting superannuation.Downsizing could be the key to boosting superannuation.

Beyond this, the downsizing incentive has a massive impact on people struggling to find a family home. As retirees downsize, it frees up larger housing stock – especially in well-established, tightly-held areas like the Northern Beaches, Eastern Suburbs, North Shore and Inner West – which are full of great schools and big blocks for growing younger families.

It'll also drive up demand for units and smaller homes in Sydney, which fits nicely with ongoing growth in developments of this size. Between the downsizing incentive and the stamp duty cuts for those buying homes at the lower end of the price scale, there are changes to benefit everyone's price bracket.

What to watch when you downsize with Australian property

Retirees will see these changes and likely be itching to make a sale, but it's important to take some time to think about it. For example – if you have other family members at home and moving house isn't likely to free up a lot of cash, it may not make sense to switch.

Financial advice will be a must.

Likewise, CoreLogic's Cameron Kusher argues that extra proceeds from a sale could end up counting against your pension, and that's before factoring in stamp duty payments on a new home purchase. I don't want to discourage anyone from buying property in Sydney – there's some amazing stock on the market at the moment – but it's important to weigh up the kind of purchase you can make and where it leaves your retirement planning.

Financial advice will be a must – please ask us if you'd like a referral to a quality financial planner. And when you're ready to downsize, our team of buyers' agents can find you the perfect new home.