Downsizer Contributions
From the 1st of July 2018, if you are at least 65 years old and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your Superannuation fund of up to $300,000 from the proceeds of selling your home. Normally after age 65 you would need to meet a work test in order to contribute into Super, the great thing about this is that you don’t need to meet the work test to be eligible.
The contribution will not be counted as a Non-Concessional Contribution and will not count towards any contributions caps. The downsizer contribution can still be made even if you have a total super balance greater than $1.6 million, however if your balance is above $1.6 million you are still restricted to having $1.6 million in the pension phase.
The contribution is only able to be made once on the sale of one home, therefore if you sell a second home you can’t make the contribution again. There is also no requirement that you have to purchase another home or actually downsize your home as the name may suggest. In order to be eligible you must tick all of the following criteria:
– You are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
– The amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1st of July 2018
– Your home was owned by you or your spouse for 10 years or more prior to the sale. The ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
– Your home is in Australia and is not a caravan, houseboat or other mobile home
– The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset (acquired before 20th of September 1985)
– You have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
– You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
– You have not previously made a downsizer contribution to your super from the sale of another home.
It is important to note that if your home was owned by just the one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, provided they meet all of the other requirements.
The maximum contribution you can make under the downsizer rules is $300,000, or $300,000 each if a member of a couple. However, the contribution can’t be greater than the total proceeds of the sale of your home. For example if you and your partner sell your home for $400,000 you’re only eligible to make contributions of $200,000 each, or it can be split in another way such as $300,000 and $100,000.
You must also make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement. In some circumstances the ATO may at their discretion extend this 90 day period, but you will need to apply for it. It is also possible to make the contributions in multiple batches, but the total amount can’t exceed $300,000, and all contributions must be made within the 90 day period.
If you’re thinking of downsizing your home and wish to explore your options in relation to making downsizer contributions, please don’t hesitate to contact JBS and we can assess your options and eligibility. It is a really great opportunity to help build your wealth in a tax effective manner.