Contributing downsizer proceeds to Super

The “downsizer contribution” is proposed to allow individuals to contribute up to $300k of the proceeds from the sale of a residence owned by a person or their spouse to their Super. The property must be located in Australia and have been owned by the individual, their spouse or former spouse for at least a period of 10 years prior to disposal.

The sale of the property must receive at least partial CGT exemption under the main residence CGT rules. This can provide planning opportunities for ‘later in life’ couples who may each have their own home, and are looking to move into a single property, or have an investment property in which they used to live.

The contribution must be made within 90 days of settlement although the ATO does have discretion to extend this window. Presently contributions can only be made by an individual between 65yo and 75yo . A notice must also be provided to the super fund prior to or at the time the contribution is made.

Draft regulations do however provide for downsizer contributions regardless of age and that they not be considered as non-concessional contributions. Only sale contracts entered into on or after 1 July 2018 are eligible for the downsizer contribution.

The maximum contribution is $300k per individual but this is capped in the actual proceeds of the sale – so if a home is sold for $200k the maximum contribution is $200k. The $300k is a fixed amount and is not subject to automatic indexation, meaning future changes in the cap would need to be legislated.

The draft legislation does not require a new home to be purchased, or limit the contribution to the equity released if a second home is purchased. Only a single downsizer contribution can be made per individual in their life.

If you would like further information or advice around this topic, please feel free to contact our team who will be happy to help.