Downsizer Contributions

From 1 July 2018 the new ‘downsizing’ into superannuation rule will be able to be used. For those that meet the criteria, this could be used to top up your super and assist with your retirement plans. 

This ‘downsizer’ rule allows those that are over 65 and sell their main residence to contribute $300,000 of the proceeds into a superannuation fund. Some of the rules: 

  • exchange of contracts must occur on or after 1 July 2018; 
  • you must be 65 years old or older at the time of making the contribution; 
  • Your home must have been owned by you or your spouse for 10 years or more prior to the sale; 
  • Your home is in Australia and is not a caravan, houseboat or other mobile home; 
  • The sale must be either exempt or partially exempt from capital gains tax under the main residence exemption (rule) or would be entitled to such an exemption had your home not been purchased before 20 September 1985. 
  • You have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution. 
  • You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement (unless an extension is granted). 

Some of the benefits of the new rules are: 

  • The contribution does not count towards your contributions caps; 
  • Can still be made if an individual has a total super balance greater than 1.6 million; 
  • you don’t need to purchase another home; 
  • Contributions can be made in several deposits; 
  • You don’t need to meet the work test to make the contribution; 
  • There is no upper age limit. 

You need to keep in mind: 

  • The contribution will count towards your transfer balance cap if moved into retirement phase; 
  • You can only use the rule once; 
  • The contributions are not tax deductible; 
  • The contribution will be taken into account for determining your eligibility for the age pension and superannuation assets are not treated as favourably as a main residence; 
  • There is no requirement for you to purchase another home; 
  • The contribution amount can’t be greater than the total proceeds of the sale of your home. 

**Example 1 A couple sell their home for $800,000. Each spouse can make a contribution of up to $300,000. 

**Example 2 A couple sell their home for $400,000. The maximum contribution both can make cannot exceed $400,000 in total. This means they can choose to contribute half ($200,000) each, or split it – for example, $300,000 for one and $100,000 for the other. 

Before making use of this rule it’s important to take all your circumstances into account. If you want to know more, contact your Roberts & Morrow adviser. 

**From the ATO website 

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