Downsizer bill enters the Senate
A bill to further reduce the eligibility age for downsizer contributions to age 55 is now before the Senate.
Treasury Laws Amendment (2022 Measures No. 2) Bill 2022 has passed the House of Representatives this week and is now before the Senate.
If enacted, the bill will enable individuals aged 55 to make the downsizer contributions to their superannuation plan from the proceeds of selling their main residence.
The eligibility age for downsizer contributions dropped from 65 to 60 on 1 July this year. In the lead up to the Federal Election, both Labor and the Coalition stated they would support a further reduction to 55 years.
The measure is set to commence the start of the first quarter after the bill receives Royal Assent.
Speaking in a recent podcast, Colonial First State senior technical manager Tim Sanderson said this means at the earliest the bill could start 1 October this year.
Mr Sanderson said there are a number of things that advisers need to consider with downsizer contributions, particularly for younger clients.
Advisers should consider how much cash the client has to contribute to super and whether making a downsizer contribution is actually a viable strategy, he said.
“For many people, utilising the bring-forward rule and contributing up to $330,000 may be sufficient and allows clients to save their once off ability to make a downsizer contribution for the future,” he explained.
“On the other hand if a couple has a lot of cash available, it may be advantageous to make a downsizer contribution in addition to a non-concessional contribution. This can be particularly tax effective for individuals who are still working and on a higher marginal tax rate.”
However, Mr Sanderson cautioned that its also very important to consider the preservation age.
“They won’t have access to the funds till after they meet a condition of release such as retirement which may not be until age 65,” said Mr Sanderson.
“You need to be very careful when considering whether or not they may need access to the funds because they may not be able to for up to 10 years,” he warned.
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.