Blog Layout

Downsizer contribution measure eligibility has been extended
Liz Gibbs • August 4, 2023

Downsizer contribution measure eligibility has been extended

The downsizer contribution concession was introduced to allow older Australians selling an eligible dwelling to make additional contributions into their superannuation fund. Broadly, the downsizer contribution concession allows eligible individuals to make non-deductible contributions of up to $300,000 (or up to $600,000 per couple) from the sale of an eligible dwelling that was used as their main residence.


Not counted towards standard contribution caps

The downsizer contribution concession is an attractive option for eligible individuals to boost their superannuation entitlements, as it is not counted towards an individual's standard contribution caps. 


Total superannuation balance restriction does not apply re Downsizer contribution

Also, the total superannuation balance restriction does not apply in respect of a downsizer contribution (so an eligible individual can make a downsizer contribution into their super fund, regardless of their total superannuation balance), and it is not included in the assessable income of the receiving fund.


Eligibility requirements

However, there are various eligibility requirements that need to be satisfied in order for a downsizer contribution to be made, and professional advice should be sought in this regard as required.


Importantly, as from 1 January 2023, the Government has broadened access to the downsizer contribution concession by reducing the minimum age requirement for accessing this concession from age 60 to age 55. This means that individuals aged 55 to 59 years who were not previously eligible to make downsizer contributions due to their age are now eligible to make downsizer contributions if they satisfy all the eligibility requirements.


Important considerations for younger clients looking to use the measure


With the eligibility age for downsizer contributions now age 55, the SMSF Association has highlighted some important considerations for younger clients looking to use the measure.


With Treasury Laws Amendment (2022 Measures No. 2) Bill 2022 receiving royal assent in mid December last year, the eligibility age for making downsizer contributions has now been reduced to age 55 as of 1 January this year. The eligibility age was previously 60. This means that eligible individuals aged 55 years and older can now choose to make a downsizer contribution into their super fund of up to $300,000 per person or $600,000 per couple, from the proceeds of selling their home. Speaking to SMSF Adviser, SMSF Association deputy chief executive Peter Burgess said while the downsizer contributions measure has been a popular measure so far, it remains to be seen what the take up will be among those under age 60.


Ms Burgess said its important that younger clients looking to use this measure are aware that there is only one opportunity to use it. “For some clients it may be best to wait until they have another opportunity to use it later in life,” he explained. Given that a downsizer contribution counts against an individual’s total super balance, Mr Burgess warned that making one of these contributions may impact a client’s ability to make contributions in the future. “So, the timing around when you make a downsizer contribution is very important,” he cautioned. Where a client is below the age of 65, Colonial First State senior technical manager Tim Sanderson previously warned that advisers and their clients also need to carefully consider the preservation age with these contributions.


“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,” Mr Sanderson said in a FirstTech podcast. “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 cautioned. Advisers should also 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.”


Other criteria

If you or your spouse are thinking of selling the family home to capture a premium, especially in regional areas, besides the age qualification, other criteria that must be satisfied in order to make a downsizer contribution to super include:

  • the location of the home must be in Australia;
  • the home must have been owned by your or your spouse for at least 10 years;
  • the home must not be a caravan, houseboat, or other mobile home;
  • the disposal must be exempt or partially exempt from CGT under the main residence exemption; and
  • a previous downsizer contribution must not have been made from the sale of another home or from the part sale of the current home.


The downsizer contribution must be made within 90 days of receiving the proceeds of sale (ie from the date of settlement), and your super fund must be provided with the appropriate downsizer contribution form before or at the time of making the contribution.


Each individual is able to make the maximum contribution of $300,000, so for a couple, a total contribution of $600,000 can be made. However, the total contribution amount cannot be greater than the total proceeds from the sale of the home. In instances where a home is owned only by one spouse and is sold, the spouse that did not have ownership is also able to make a downsizer contribution or have one made on their behalf, provided all other requirements are met.


Example

Trevor and Ian are a couple in their late 60s who have lived in their home for 20 years and have decided to downsize. Only Trevor’s name is on the title deed of the home. They meet all the other requirements for the downsizer contribution and sell their home for $500,000. In this scenario, the maximum contribution Trevor and Ian can both make is $500,000. It does not matter that only Trevor’s name is on the title deed. They also have the choice of either splitting the amount (ie $250,000 in each super account) or using another combination (eg $300,000 for Trevor and $200,000 for Ian).


Need help planning?

If you are thinking of selling your home, we can refer you to our independent financial planner to help you work out whether you are eligible to make the downsizer contribution and boost your super for retirement and can also help you and your spouse work out the best split for the contribution, taking into account transfer balance caps. Contact us today.


IMPORTANT: This communication is factual only and does not constitute financial advice. Please consult a licensed financial planner for advice tailored to your financial circumstances.  Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.


Office open
By Liz Gibbs March 10, 2025
With thanks to all Energex and Emergency services Crew, our electricity has been reconnected and our office is open from today 11 March. We hope you and your loved ones are safe and well following cyclone Alfred. These past few days have been challenging for many, and our thoughts are with everyone affected.
By Liz Gibbs March 10, 2025
Due to a power outage affecting the entire Samford area, the RGA Practice will be operating remotely today, 10 March, until electricity is restored. Please be assured that our team remains available and can be reached at 07 3289 1700. We appreciate your understanding and support during this time. Stay safe, and we look forward to seeing you soon.
Cyclone Alfred
By Liz Gibbs March 5, 2025
As Tropical Cyclone Alfred approaches, we want to remind everyone to take necessary precautions and ensure their safety. We have received some important information that we believe is crucial to share with you to help you prepare for the severe weather conditions ahead.
Work Health and Safety (Sexual Harassment) Amendment Regulation 2024
By Liz Gibbs February 26, 2025
In a significant move to combat workplace sexual harassment, Amendments to the Work Health and Safety Regulation 2011 (as per the Work Health and Safety (Sexual Harassment) Amendment Regulation 2024) will soon commence on 1 March 2025.
By Liz Gibbs February 25, 2025
The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.
What happens to your super when you die?
By Liz Gibbs February 25, 2025
The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?
By Liz Gibbs February 25, 2025
If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems?
Babyboomer wealth
By Liz Gibbs February 25, 2025
“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke.
Penalty for False R&D claims
By Liz Gibbs February 25, 2025
A joint investigation involving the ATO found that, between 2014 and 2017, a Sydney business coach promoted unlawful tax schemes encouraging clients to lodge over-inflated, inaccurate or unsubstantiated research and development ('R&D') tax incentive claims
SMSF lodgement due dates
By Liz Gibbs February 25, 2025
All trustees of SMSFs with assets (including super contributions or any other investments) as at 30 June 2024 need to lodge an SMSF annual return ('SAR') for the 2023/24 financial year.
More Posts
Share by: