I am 80 and my wife is 75. We have been retired for about 14 years, living comfortably off super, a few shares and the pension. We downsized 10 years ago and now live in a three bedroom freehold condo recently valued at $2.9 million in an area and community we love. We are both reasonably healthy and find that our lifestyle expenses have not slowed down. As a result, we have to bite into our capital for various expenses.
Our current remaining combined super is $300,000 plus shares and cash deposits of $14,000. We are considering tapping the value of our condo if we need it in the next few years for a new car, redecorating and travel.
A reducing super contribution can be made regardless of your total super balance.Credit: Simon Letch
One option is to downsize again to the same area. That could free up about $500,000. If we go with this option, could we put this amount into our super accounts without affecting our pensions or tax?
An alternative would be a reverse mortgage from which we can gradually draw down to a maximum of $400,000 when and if necessary. In this sense, what options are there?
Thank you for your question. It's great to think about how you can use some of your home equity to continue living a full and happy life.
With the downsizing limit, you can contribute up to $300,000 each in super with the proceeds from the sale of your home, so the amount you love could be fully invested if you wanted to. There is no age limit for this type of contribution. Note that to be eligible for the downsizing provision you must have owned the home for 10 years and not previously made a downsizing contribution.
Since this is the sale of your primary residence, there are no tax consequences to the sale. There is also no tax payable when the downsizing contribution reaches your super fund.
The pension, however, is something else. Money in super is included in means tests, while your household is not. It is therefore possible that downsizing may adversely affect your pension entitlement.
Currently, you can have up to $451,500 in assets, excluding your home, before your pension is reduced. Note that this limit includes your cars and furniture as well as normal financial assets.
