Further snares identified with downsizer contributions
An industry lawyer has raised further concerns about the impact of contributions made through the government’s home downsizing scheme on a client’s eligibility for certain entitlements.
Townsends Business and Corporate Lawyers special counsel Michael Hallinan said that while a lot of SMSF practitioners are aware of the risk that contributions made through the home downsizing scheme have on the level of Centrelink pension received by clients, it could also result in the loss of other benefits.
“Downsizer contributions will be counted as part of the assets test and will either exclude or reduce the client’s entitlement to the age pension and potentially the Commonwealth Seniors Health Card also,” said Mr Hallinan.
“It's wonderful to be able to put more money into superannuation but if the end result is that your client no longer has an age pension or is no longer entitled to the seniors health benefits card, they're not going to thank you in any way, shape or form — they may even contact their lawyer.”
If the client was only on a part pension before making the contribution, then afterwards they may be receiving no pension, he said.
“This has tremendous impact. Even if the pension entitlement falls to zero for just a fortnight then any pre-1 January grandfathering that applied to the pension will be lost in relation to the income test purposes,” he warned.
“Your client may be able to make these contributions, but they're transferring [money] from their prior principal residence which is a tax-free, low regulatory environment so exempt from the assets test environment, into an environment which is now highly regulated and subject to political change and it will now be counted for Centrelink purposes.”