The rules allow the contribution of $300,000 a person into superannuation, irrespective of the balance of their superannuation.

There were several guidelines, including a requirement that you had to be at least 65, have owned the house for at least 10 years, and make the contribution within 90 days of settlement.

Since then, the minimum age requirement has been dropped to 60, with indications it may soon drop as low as age 55. Unlike other types of contributions, there is no maximum age.

As with every investment decision, downsizing has its advantages and disadvantages.

There can be cost savings if moving from an expensive home to a smaller home or an apartment, but the costs involved in selling, buying and moving are normally at least $100,000, and the capital you free up can adversely affect your age pension.

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Case study: Jack and Jill are in their late 60s, live in a home worth $1 million, and have $410,000 in assessable assets, including super of $350,000.

They qualify for the full pension of $38,700 a year. They move to a property worth $600,000, freeing up $300,000, which they add to their superannuation under the downsizer rules.

Because they have converted part of an exempt asset (their existing home) into superannuation, their assessable assets rise to $710,000 and their pension drops to $17,500 a year. Moving house has cost them $100,000 in capital costs, and $21,200 a year.

Of course, they could invest the $300,000 surplus in various ways. A lifetime pension, for example, could provide an indexed income for life, plus a bigger age pension, because only 60 per cent of the value of a lifetime pension is counted for the assets test.

The government has just announced that legislation is in hand for a two-year pension exemption for downsizer contributions, which means their existing age pension would be unaffected for that time. This gives them two years to rearrange their affairs.

There are many issues at play. Given that it's now possible to make non-concessional contributions to super until age 75, a retiree may decide to keep the downsizer concession to use for a future move, and simply put their home sale proceeds into super.

If one partner was under pensionable age, holding the maximum amount in their super would enable the other partner to maximise their pension, because money in superannuation is not assessed until the member reaches pensionable age.

There are other issues to consider when thinking about downsizing. If you are in a home which is requiring increasing maintenance, moving sooner rather than later could be your best option. If you let the costs of maintenance build up, it could become very difficult to sell.

Furthermore, a major contributing factor to happiness and health in retirement is your social network. Far too often, couples in a big old house keep intending to move but never get around to doing it. Suddenly, one of them dies - usually the male - leaving the surviving partner alone, with no social network, and reliant on outside care for health assistance as well as social interaction.

If they had moved years earlier to a retirement village, where a vibrant community exists, and social activities are ongoing, the surviving partner would have a much easier transition to becoming the sole spouse. Also, all the maintenance would be taken care of and there should be no unexpected bills.

Downsizing is a major life event, and there are many personal and financial aspects to be thought through. It's important to get expert advice on ways to optimise your own financial position, as well as thinking about how you intend to live your life in the final years.

Question

I'm 58 and my husband is 62. We own our home and have an investment property we bought five years ago for $436,000 on which we owe $282,000.

Unfortunately, the investment property is only in my name and because it is positively geared, we don't get any tax benefit from it.

Should I keep topping up the repayments on the investment loan, thinking if we paid if off quicker I will be debt free by the time I finish work. Or should I just make a contribution to my super? His super balance is $110,000 and mine is $237,000.

Answer

Having a positively geared property is an asset as you no longer have to make up any shortfall. The simple solution is for you to contribute a total $27,500 a year to superannuation as a tax deduction - this will soak up any excess income from the rental property.

This will boost your superannuation to enable pay off the rental property when you stop work. Just keep in mind that the $27,500 a year includes any employer contribution.

Question

We are a married couple who live in different homes, each of which we own separately. We are financially independent from one another, but a couple in all other ways. How would this be viewed by Centrelink as we approach retirement age.

Answer

A Centrelink spokesman tells me that generally speaking, they consider a person to be a member of a couple if they're in a relationship and committed to the other person on a permanent or indefinite basis, and are either legally married, in a registered relationship or in a de facto relationship.

A person may still be a member of a couple if they are not physically living with their partner. For example, the partner may fly-in fly-out or live away for work.

As a member of a couple, the Age Pension amount is based on their combined income and assets. The principal home and the private land adjoining the home is not an asset under the asset test. There is one further issue which may be a problem for you - a couple can only have one principal home exempt under the assets test.

Question

I have been working on my estate planning and am keen to keep things as simple as possible for my executors. My major concern is handling capital gains tax on the death of the asset holder. Fortunately, or unfortunately, I do have some capital losses.

Answer

There are two major issues. First, death does not trigger capital gains tax, it passes the liability to the beneficiaries who will pay CGT (or benefit from a capital loss) when they dispose of the bequeathed assets. Second, carried forward capital losses from assets you sold within your lifetime are lost on death.

You should discuss with your accountant the possibility of selling some assets now in order to offset any realised capital losses you have been carrying forward in your tax return.

Otherwise, if your estate or beneficiaries inherit shares and sell them at a loss they can utilise those losses against other capital gains they make on other shares. It is important that they make sure they realise the loss before they realise a capital gain, at least in the same financial year.

Question

I have read your columns about recontributing $330,000 using the three year bring forward rule to boost the non-taxable component of super. My wife, being the younger partner, has most of our super in her account. I receive a part age pension as a result. However, if she withdrew funds to recontribute wouldn't that affect my pension, even though the funds will be soon recontributed?

Answer

You have 14 days to advise Centrelink of any material changes in your circumstances. In this case, if your spouse withdrew the money (assuming she is eligible to do so) and then made the re-contribution within a fortnight, your circumstances should not have changed and I can see no reason why Centrelink would have any objection.