by Capt. Mark Phillips

The Downsizer Contribution has been with us since 1 July 2018 and it is now worthwhile reviewing eligibility and the potential strategies that can be implemented with those rules.

Eligibility:

• Members making a contribution must be aged 65 or older;
• The home must have been owned by the member or their spouse for 10 years or more prior to the sale and be exempt or partially exempt from CGT;
• Each member can contribute up to $300,000 as long as the total contributions do not exceed the sale proceeds;
• There is no requirement for the members to purchase another residence;
• The contribution does not count towards the non-concessional cap so can be made even if the member has a Total Super Balance over $1.6 million.

Some strategies that can be implemented with the Downsizer Contribution:

• Provides a method to undertake a withdrawal/re-contribution strategy for people over age 65 that are otherwise ineligible to make further contributions;
• There is no need to sell an entire home, an ownership interest will qualify, and can be sold/transferred to a related party;
• Could sub-divide and build on existing home block, where the sale of the current home would be eligible for the downsizer contribution;
• Can be used as part of a strategy to increase the tax free percentage of existing pension benefits.

Further information can be accessed from the ATO’s website at:

https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Downsizing-contributions-into-superannuation/

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If you have any queries, please call the team on 03 9209 9777, email info@smsfengine.com.au or visit www.smsfengine.com.au.