In an election campaign speech on Sunday (15 May), Scott Morrison announced plans to reduce the eligibility age for downsizer contributions to age 55 from 1 July 2022, if elected this weekend.
The eligibility age for downsizer contributions was already set to be reduced to age 60 from 1 July this year, down from the current 65.
Downsizer contributions allow individuals to contribute up to $300,000 from the proceeds of the sale or part sale of their home into their superannuation fund, where they meet the eligibility criteria.
Mr Morrison also announced plans to extend the period that pensioners have to structure their assets following the sale of their home without impacting their pension.
Under the announced measure, which would commence 1 January, pensioners would have two years to structure their assets following a sale of their family home, without their pension being impacted by the assets test, where they intend to buy another property.
Under the current rules, where individuals sell their main residence and intend to buy a new home within 12 months, the portion of the sale proceeds that will be put towards the purchase of the new home is exempted under the assets test for up to 12 months.
SMSF Association deputy chief executive Peter Burgess said the association supported the measure, which would provide greater flexibility for individuals over the age of 55 to make contributions and sell their home and contribute the proceeds into super.
Mr Burgess reminded SMSF professionals that downsizer contributions don’t count towards the contributions caps but do count towards a member’s total super balance.
This means that making a downsizer contribution could potentially impact their ability to make non-concessional contributions in the next income year, including catch-up concessional contributions.
“It’s very important [therefore], to consider the timing of these contributions,” he noted.
“If someone has the capacity to make large non-concessional contributions then you’d want to get them out of the way before you make your downsizer contribution in order to maximise the amounts you can get in.”
The Association of Superannuation Funds of Australia also welcomed the announcement.
“ASFA supports the downsizer measure announced earlier today as it will help increase the housing stock for families and the retirement balances of older Australians,” said ASFA deputy chief executive Glen McCrea.
Not a downsized I would have thought!
There should be an added criteria that people are downsizing to allow younger individuals to purchase their family home. People are making downsizer contributions, but are moving from one family home to another of equal or larger size.