Downsizing Contributions Into Superannuation

There is an incentive for Trustees to invest their super when downsizing their main residence. The Government introduced this incentive in the 2018 Budget called the Contributing Proceeds of Downsizing into Superannuation.

Under this arrangement, Trustees over the age of 65 years old may be able to make a Downsizer contribution into their SMSF of up to $300,000 from the proceeds of selling their home.

Treatment of the downsizer contributions

The Downsizer contribution is neither a non-concessional contribution nor a concessional contribution. Therefore, it does not count towards either contribution caps. As it is not considered a non-concessional contribution, Members with a pension balance over $1.6 million may also be able to make downsizer contributions into the Fund.

However, the amount will still count towards the Member’s transfer balance cap, currently set at $1.6 million. For more information on the Transfer Balance Cap, please see here:

Our understanding is that Members do not need to meet the work test in order to make the downsizer contribution into their respective SMSFs. This is good news for Members who are over the age of 65 and retired.

Eligibility for the downsizer contribution measure

Trustees may be eligible for the downsizer measures if all of the following conditions are met:

  • You are over 65 years of age at the time of the contribution
  • The amount that you are contributing is composed solely of the proceeds from selling your home
  • Your home is owned by you or your partner for more than 10 years prior to sale
  • Your home is located in Australia and is not a caravan, boat or other mobile homes
  • Proceeds from the sale of your home are either exempt or partially exempt from Capital Gains Tax (CGT)
  • Downsizer contributions are made within 90 days of receiving the proceeds of the sale, which is generally at the date of settlement
  • You have not made a prior downsizer contribution from the sale of another home

In order to be eligible, the contract of the sale of your home must be signed post 1 July 2018. For more guidance, please click on the button below:

In order to make the contributions, you must complete the Downsizer Contribution into Super Form. You can download a copy of the form here:

The downsizer contribution may be a way for Members who do not meet the work test to increase their retirement benefits. If you are between the age of 65 and 75 and you are able to meet the work test, you may be able to make the regular non-concessional contributions into the Fund. For more information on making non-concessional contributions, please see here:

 

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Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.