From 1 July 2022, if you’re aged 60 years or older you may be eligible to make a downsizer contribution of up to $300,000 to a complying super fund (all BT superannuation funds will accept eligible downsizer contributions, unless you are in a defined benefit fund), from the proceeds of the sale of your primary residence, which is owned for 10 years or more. Prior to 1 July 2022, you had to be 65 years or older to make a downsizer contribution.
A downsizer contribution doesn’t count towards any of the contribution caps – and can still be made even if a person has total super savings greater than $1.7 million, or if they do not meet the work test requirements. It is a once-off option and doesn’t apply to the sale of any residences in the future.
Your spouse, provided they are also aged 60 years or older, can also make downsizer contributions to their own super, of up to $300,000 from the same proceeds, even if they are not an owner of the property. To do this, the sale price is key, as your couple contributions cannot be more than the total sale price of the property.
It doesn’t matter how much you already have in your super – the total super savings test (must be $1.7 million or less to make after-tax contributions) doesn’t apply for downsizer contributions. It is important that the downsizer form is received by the fund either before or at the time the contribution is made for it to be an eligible downsizer contribution.
The downsizer contribution is an after-tax contribution, so no tax is paid on the way in. And because you are over 60, it is returned tax free when you withdraw the funds in the future.
The money you make from the sale doesn’t have to be used to purchase a new home, and there is no need to move to something smaller or cheaper. If it involves the sale of a previous principal residence (that is now an investment property), there is actually no need to move at all.
From 1 July 2022, in addition to the age 60 threshold, there are a number of other important criteria to be met.
Here are some hypothetical examples of how downsizer contributions could work in different situations.
Martin and Sharon are both aged in their 60s, own their home jointly and have lived in it for 25 years.
They sell their home on 1 August 2022 for $550,000 and the settlement date is 13 September 2022. They are exempt from capital gains tax (due to the home having been their primary residence).
Under the downsizer contribution measure, within 90 days, Sharon makes a downsizer contribution to her superannuation of $300,000 while Martin contributes $250,000 to his superannuation.
Though the cap on downsizer contributions is $300,000, Martin only contributed $250,000 because the combined contributions cannot exceed the sale proceeds of their home. They could have also split the contributions evenly, contributing $275,000 each.
Roger is aged 61 and married to Mel who is aged 58, and they live in a home purchased by Mel 20 years ago.
Mel sells the home for $900,000 on 15 July 2022 and the proceeds are exempt from capital gains due to it being their primary residence.
Roger can make a downsizer contribution of up to $300,000 within the 90-day period but as Mel is under age 60, she is unable to make a downsizer contribution.
If you qualify, or are hoping to qualify for the Age Pension, the impact of selling an asset needs to be considered. The value of your main residence is excluded from the assets test, however if it is sold, and some of the proceeds added to your super, that value will then be assessed and may reduce your age pension benefits.
If you are eligible, you’ll need to complete a downsizer contribution form and provide this either before or together with your contribution cheque, to your complying superannuation fund so it can be correctly classified. The form is available from the ATO website.
It’s important to be aware of the timing of your contribution into super. The contribution must be made within 90 days of receiving the proceeds of sale (or longer permitted period), which is usually the date of settlement.
Things you should know
Information current as at 1 July 2022.
The article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website.
BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice.
The tax implications of superannuation can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.
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