Downsizer contributions surge to over $10 billion
The ATO has revealed that downsizer contributions had climbed to over $10 billion before eligibility changes took place on 1 July.
Based on figures from the end of the March quarter this year, over 41,000 Australians have sold their home and collectively contributed over $10 billion into superannuation, according to the ATO.
This is an increase from the $9.4 billion in total downsizer contributions announced by Senator Jane Hume at the SMSF Association National Conference earlier this year.
Downsizer contributions allow eligible individuals to make a contribution of up to $300,000 to their super from the proceeds of the sale or partial sale of their home without it counting towards their contribution caps.
In order to be eligible, the individual or their spouse must have owned their home for 10 years of more prior to the sake.
The home must be in Australia and cannot be a caravan, houseboat or other mobile home.
The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset (acquired before 20 September 1985).
The downsizer contribution must also be made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
The ATO noted that on 1 July the law was changed so that members aged 60 years and over could make downsizer contributions if they met all of the eligibility requirements. Prior to this, the eligibility age was 65 and over.
It also reminded individuals that while the government made an announcement that it would support a further reduction to downsizer eligibility age to 55 years, this is not yet law.
“If you are considering making a downsizer contribution you may wish to seek financial advice as downsizer contributions will count as an asset for the age pension assets test,” the ATO cautioned.
“You should also check that you meet all of the eligibility conditions listed on the ATO website and contact your super fund to check if they accept downsizer contributions.”
It is also important that members making these contributions provide their fund with the Downsizer contribution into superannuation form either before or at the same time they make their contribution, the ATO added.
“If you don’t, your fund may not be able to accept your contribution as a downsizer contribution.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
