General / May 25, 2020

Downsizer Contributions

Brent Jones
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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/

Download an Expression of Interest Form

If you are interested in outsourcing some or all of your SMSF compliance work, please complete the Expression of Interest form so that we can provide a proposal for your practice.

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

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