Downsizer Superannuation Contributions
New legislation came into effect from 1 July 2018 which introduced a new category of superannuation contributions, referred to as ‘Downsizer Contributions’.
This new category of superannuation contributions enables individuals age 65 or over who sell their principal residence property to make a superannuation contribution of up to $300,000 (this limit applies to each individual in a couple, so up to $600,000 combined could be contributed to superannuation for couples under this legislation).
Amounts contributed to superannuation as ‘Downsizer Contributions’ will not be included in the existing concessional and non-concessional contribution caps. Downsizer Contributions are even exempt from the new ‘Total Superannuation Balance’ cap of $1,600,000.
There are a range of requirements to be met for an individual to become eligible to make ‘Downsizer Contributions’ to their superannuation savings, which include the following:
- The individual must be 65 years of age or more.
- The property must have been owned for at least 10 years by the individual, or their spouse or former spouse.
- The principal residence capital gains tax exemption must be eligible to be claimed in part or in full in relation to the sale of the property.
- The contract of sale must be dated after 1 July 2018.
- The contribution of funds to superannuation must be made within 90 days of the change of ownership (typically the date of settlement).
- The individual must provide their superannuation fund with a downsizer contribution form before or at the time that the contribution is made.
- An individual can only make downsizer contributions in relation to one property in their lifetime.
There is no requirement for the individual to purchase another home, or move in to a smaller home. Furthermore, these is no specific requirement to use proceeds from the sale of the property to make the superannuation contribution, however the total contributions made cannot exceed the contract sale price of the property.
There are many intricacies to Downsizer Contribution legislation, and your eligibility to make these contributions will depend on your individual circumstances. Consideration will also need to be given to a range of wider items, most significantly the impact to an individual’s social security entitlements (pension payments and concessions) and tax position.
We provide holistic advice in relation to complex financial decisions to our clients. If you would like to discuss your circumstances, please don’t hesitate to get in touch with us on 03 5223 1219 to arrange a meeting.
The above information represents general advice only and has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any general advice you should consider whether or not it is appropriate in regard to your personal objectives, financial situation and needs.