Downsizer Contributions - ATO Rules - Grow SMSF

Downsizer contributions enable the proceeds of an eligible principal residence sale to be made into super. $300,000 per individual applies. Contributing the proceeds of downsizing into superannuation measure was one of several announced in the 2017–18 Budget as part of the government’s package of reforms to reduce pressure on housing affordability in Australia.

Note: If you signed a contract before 1 July 2018 you will not be eligible.

About the measure

From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The contribution can still be made even if you have a total super balance greater than $1.6 million.

This type of contribution will not affect your total super balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of the financial year.

The downsizer contribution will count towards your transfer balance cap, currently set at $1.6 million. This cap applies when you move your super savings into retirement phase.

You can only make downsizing contributions for the sale of one home. You can’t access it again for the sale of a second home.

Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

Eligibility for the downsizer contribution measure

You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
  • your home is in Australia and is not 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 (acquired before 20 September 1985) asset
  • you have provided your super fund with the Downsizer contribution into super 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 at the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

Note: If your home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.

Downsizer contribution amounts

If eligible, you can make a downsizer contribution up to a maximum of $300,000 (each). The contribution amount can’t be greater than the total proceeds of the sale of your home.

The downsizer contribution would form part of the member’s tax free component held in the fund.

Note: If you sign a contract prior to 1 July 2018 you will not be eligible.

Downsizer examples

Downsizer contributions

Main residence exemption

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
  • would be entitled to such an exemption if your home was a CGT rather than a pre-CGT asset (that is, you acquired it before 20 September 1985).

Timing of your contribution

You must make your contribution within 90 days of receiving the proceeds of sale. This is usually at the date of settlement.

We can allow for a longer period if required because of circumstances outside your control. You will need to apply for an extension of time.

Making multiple contributions

You may make multiple contributions from the proceeds of a single sale. However, the total of all your contributions must not exceed $300,000 or the total proceeds of the sale less any other downsizer contributions that have been made by your spouse. You need to make all contributions within 90 days of receiving the proceeds of sale, usually the date of settlement, unless you have been granted an extension.

Contributions found not to be downsizer contributions

If we become aware that your contribution does not meet the downsizer contribution eligibility requirements, your fund will need to assess whether your contribution could have been made as a personal contribution under the contributions acceptance rules.

If your contribution can be accepted, the amount will count towards your non-concessional contributions cap.

If your contribution can’t be accepted, the contribution amount will be returned to you by your super fund.

False and misleading penalties may be applied if we identify that your downsizer contribution was not eligible and you had incorrectly declared that you were eligible to make such a contribution.

How to make a downsizer contribution

Before you decide to make a downsizer contribution, you should:

  • check the eligibility requirements
  • contact your super fund (or funds) to check that they accept these types of contributions. If you don’t currently have an open account with a super fund, you will need to open a new super account to make your contribution.

You may also wish to seek independent financial advice in relation to the age pension asset tests.

Completing the downsizer into super contribution form

When you choose to make this type of contribution, you will need to complete the Downsizer contribution into super (NAT 75073) form. You need to provide this to your super fund when making – or prior to making – your contribution.

If you make multiple contributions or contributions to different super funds, you must provide a form for each contribution.

Remember that all downsizer contributions must be made to your super fund within 90 days of receiving the proceeds of sale, usually the date of settlement.

Next step:

Extension of time

You may be able to request a longer period for making a downsizer contribution in some circumstances, for example, where a delay has been caused by factors outside your control. An extension of time will not be granted to allow you to meet the age requirement.

An extension of time should be requested before the 90-day period from the date of settlement has expired.

However, if you have overlooked the 90-day time frame, an extension of time may be granted due to but not limited to:

  • ill health
  • death in the family
  • moving house.

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