Downsizer contributions prompt flood of queries in first quarter
Downsizer contribution strategies received the most attention from advisers in the September quarter, according to BT, with the measure kicking off at the beginning of the financial year.
Out of the thousands of adviser queries fielded by BT Financial Group’s technical team during the September quarter, downsizer contributions, which enable clients to top up their super from the proceeds of the sale of their home, topped the list.
BTFG Advice technical consultant Tim Howard reminded SMSF professionals that the strategy allows clients aged 65 or older to contribute up to $300,000 each or $600,000 combined for a couple from the proceeds of their main residence into their superannuation.
“One of the key areas to note is timing when considering this strategy. The client must make their downsizer contribution within 90 days of receiving the proceeds from the sale of their home to their super fund. Generally, this would mean 90 days from settlement,” said Mr Howard.
Mr Howard said that clients can make multiple contributions from the sale of the primary residence, provided it doesn’t total more than $300,000 each.
He also reminded practitioners that downsizer contributions form part of a clients’ tax-free component within super and will be taken into account in determining eligibility for the age pension, whereas the value in the main residence is exempt.
“Importantly, a client’s contract of sale must have been entered into from 1 July 2018, and the property must also have been owned by the individual or their spouse for 10 years or more prior to the sale,” he said.
“Interestingly, you don’t have to have lived in the home for the entire ownership period. So long as you are claiming at least a partial exemption from capital gains tax under the main residence exemption, your property meets the main residence criteria for a downsizer contribution.”