Natalie Scott, superannuation specialist for Accurium, says the downsizer contribution is a “great way” of getting cash into super, with the only downside that clients need to sell their main residence to access it.
“We could have members with millions of dollars in super, and they can still chuck in $300,000 as a one-off amount,” Scott said.
“The requirements are that the home needs to be owned for 10 years. The proceeds from the sale need to be either fully or partially exempt on the main residence exemption. We get a lot of questions about this. It’s not necessary for the property to be the individual’s main residence at the time of sale, as long as it was at some point in time.”
If using a downsizer contribution, there is a form which needs to be completed and provided to the super fund on or before making the contribution.
“If you have clients looking at using a downsizer contribution there is some timing in relation to making the contribution as well. It needs to be made within 90 days of the client receiving the proceeds. That’s generally looking at the settlement date,” Scott said.
“Once your client has settled on that property, they have 90 days to provide the form to the fund and make the contribution. You can only get one access to these rules so if you’ve got clients who have already accessed it, they don’t get another bite of the cherry.”
The downsizer contribution allows for $300,000 to be contributed for each spouse, however, it can’t be greater than the contribution proceeds from the sale.
“If living in any of the major capital cities in Australia, you probably don’t need to worry about that, but if it’s a regional area, you might just need to keep that in mind,” Scott said.
She gave an example of Sylvia, 61, who owned a recently sold house. Her husband, Simon, 64, was never on the title.
“When you’ve got a downsizer contribution and you’ve got spouses involved, it just has to have one of the spouses with an eligible interest in the property for more than 10 years. In this scenario, Sylvia held the property in her name as a main residence, so even though Simon wasn’t on the title, because he’s a spouse of Sylvia, he can also make a $300,000 contribution.”
“Assuming that the proceeds from the sale of that property were more than $600,000, both of them could make a $300,000 contribution each. If the house sold for only $500,000, they could only make a $250,000 contribution each, or $300,000 and $200,000.”
