Can I Use Downsizer Contributions When Divorcing? Absolutely!

Divorce is often one of the most challenging times in a person’s life, not only emotionally but also financially. For many, the prospect of dividing assets, starting over, and ensuring long-term financial security can feel overwhelming. But did you know that leveraging certain superannuation strategies, like the Downsizer Contribution rule, can help you build a super balance of potentially up to $1 million almost overnight?

Case Study: From Zero to Over $1 Million in Super

Let’s share the inspiring story of a recent client who faced significant financial uncertainty during her divorce. When she came to us, she had no superannuation, a reality that isn’t uncommon for many individuals going through family law matters. However, through smart financial strategies and the right advice, we helped her achieve financial independence. Here’s how it happened:

1. Selling the Family Home and Downsizer Contributions
   The client, who was over 55, was preparing to sell the family home as part of the divorce settlement. Thanks to the Downsizer Contribution rule, we were able to direct $300,000 from the proceeds of the home sale into her superannuation account. The Downsizer Contribution is a powerful tool for individuals over 55 who are selling their primary residence, allowing them to boost their retirement savings significantly.

2. Superannuation Split
   As part of the divorce settlement, we facilitated a superannuation split from her husband’s account. This added another $400,000 to her super balance. Superannuation splitting during divorce is a key aspect of family law settlements and ensures that retirement savings are divided fairly.

3. Non-Concessional Contribution
   Finally, we maximised her contributions by adding an additional $360,000 as a non-concessional contribution, further boosting her super balance.

The Outcome: Financial Independence

In a remarkably short period, this client went from having zero superannuation to over $1.06 million in her account. This not only set her up for a financially secure retirement but also gave her peace of mind during an otherwise stressful time.

The outcome wasn’t just about the numbers. It was about transforming her financial future! With this newfound security, she’s now confidently stepping into the next chapter of her life, free from the financial stress that often accompanies divorce.

Key Lessons

• Don’t Overlook Superannuation
  Superannuation can be one of the most significant assets in a divorce settlement. Many overlook its potential, focusing instead on immediate assets like the family home or savings accounts.

• Use the Downsizer Rule to Your Advantage
  If you’re over 55 and selling your primary residence, the Downsizer Contribution rule can give your super a major boost.

• Education Is Empowerment
  This case was a prime example of starting from scratch. We guided our client through every step, ensuring she understood her options and felt confident in her decisions.

Final Thoughts

Divorce is undoubtedly challenging, but with the right strategies, you can emerge from it with financial stability and independence. The combination of Downsizer Contributions, superannuation splits, and non-concessional contributions can transform your financial future in ways you may not have thought possible.

If you’re navigating a divorce and unsure of how to optimise your financial position, don’t dismiss superannuation. With the right advice and planning, you can set yourself up for a secure and prosperous future.

For more information and personalised advice, contact us at the Financial Wellness Hub. Let’s work together to help you achieve financial independence and peace of mind.

By Brett Tarlington