The Federal Government recently announced that, as of 1 July 2018, downsizers aged 65 years or older may opt to contribute proceeds from the sale of their home (up to a total of $300,000 each) toward their super fund(s). Referred to as a downsizer contribution, it is treated as being non-concessional; existing in addition to the current maximum annual non-concessional contribution of $100,000 each (or $300,000, pursuant to the bring-forward rule). Any downsizer contribution will, however, count towards an individual’s transfer balance cap, which is $1.6 million for the 2018-19 financial year.
Those eligible to make downsizer contributions must meet all the following specifications:
- the contract of sale for the home is exchanged on – or after – 1 July 2018;
- be at least 65 years old at the time of making the downsizer contribution;
- a Downsizer contribution into super form (available from the ATO website) has been provided to the relevant super fund(s) before – or at – the time of contribution;
- the home has been owned by the contributor and/or their spouse for at least 10 years prior to the sale (ownership period depends on calculation used);
- the sale proceeds are exempted – either wholly or partially – from CGT under the main residence exemption;
- the home sold is Australian and is not a caravan, houseboat, or other mobile home;
- the downsizer contribution is being made within 90 days of receiving the proceeds of sale (extensions are granted in certain circumstances); and
- a downsizer contribution has not previously been made from the sale of another home
An individual who has made a downsizer contribution toward their super fund is not required to purchase a new home. Multiple downsizer contributions from the proceeds of a single sale are allowed, so long as they do not collectively exceed $300,000 per owner (or, the total proceeds of the sale less any other downsizer contributions made by a spouse). Careful consideration should be given to possible taxation, estate planning, and Centrelink implications.