Decided it's the right time to downsize? Here are a few benefits!
Generally speaking, when people downsize, they are purchasing a home for less value than their existing property. Many have paid off their mortgage so downsizing allows them to free up extra cash. For others, they are able to pay off their mortgage and save paying interest. Remember, if you’re buying a new property, you’ll need to factor in things like moving expenses and stamp duty.
If it’s your primary residence, there will be no need to pay Capital Gains Tax (CGT). Bear in mind, if you are selling a second property, or your holiday home, this may be classed as a CGT event. Check with your accountant if you’re unsure about whether you’ll need to pay CGT.
Downsizing can be a good way to help lower your household expenses or for retirement. Although there are costs associated with moving homes, there are long-term savings that can be made. Less space usually means less heating, gas, cooling and maintenance costs.
One of the things we hear from many of our downsizing customers is that they are tired of the maintenance that comes with a large home and a big backyard. Instead, they are opting for properties that they can “lock up and leave” which might be a single-story home on a smaller block, or a townhome with a private, low maintenance courtyard.
The Government is also encouraging older people to downsize from their large family homes. Announced in the 2017-18 budget and from July 1, 2018, Australians aged 65 or over can downsize their family home (if they have owned it for more than 10 years) where the contract of sale was exchanged on or after 1 July 2018 and invest up to $300,000 surplus funds into their tax-effective super accounts.
This incentive was bought in to help free up many of Australia’s large family homes for the next generation and to also help retirees. There are a few eligibility requirements so it’s best to check in with your financial advisor to make sure you meet the criteria. You can also read more via the ATO website.
The information provided is meant as a guide only. Porter Davis recommends that all clients seek independent legal, tax and financial advice. Full T&Cs here