‘Downsizer’ contributions top adviser queries

The new ‘downsizer’ contributions strategy, allowing clients to top up their superannuation from the proceeds of the sale of their home is the top adviser query according to BT Financial Group’s Technical team in the September quarter. The interest is off the back of the introduction of the downsizer option which has been available since 1 July 2018.

BTFG Advice Technical Consultant, Tim Howard said, “The downsizer strategy has received the most attention in terms of interest from advisers and clients, given its availability as a contribution strategy since 1 July this year.”

This strategy allows clients aged 65 or older to contribute up to $300,000 each or $600,000 combined (if a member of a couple) from the sale proceeds of their main residence into their superannuation.

“One of the key areas to note is timing when considering this strategy. The client must make their downsizer contribution within 90 days of receiving the proceeds from the sale of their home to their super fund. Generally, this would mean 90 days from settlement,” Mr Howard said.

Mr Howard advises that clients can make multiple contributions from the sale of the primary residence, provided it doesn’t total more than $300,000 each.

Downsizer contributions form part of a clients’ tax-free component within super and will be taken into account for determining eligibility for the Age Pension (whereas the value in the main residence is exempt).

Importantly, a client’s contract of sale must have been entered into from 1 July 2018, and the property must also have been owned by the individual or their spouse for 10 years or more prior to the sale.

“Interestingly you don’t have to have lived in the home for the entire ownership period. So long as you are claiming at least a partial exemption from capital gains tax under the main residence exemption, your property meets the main residence criteria for a downsizer contribution,” Mr Howard said.

Mr Howard advises “Given there is some complexity involved in determining eligibility and applying this strategy, it makes sense to seek professional guidance for help and peace of mind.”

BTFG’s Advice Technical team fielded close to 3,000 queries between July and September 2018.

More information

Georgie Hay
M: 0404 892 199