Did you know you might be eligible to make additional contributions to super up to $300,000 per person from the proceeds of the sale of your home?

The newly legislated ‘downsizer contribution’ rules, remove some of the barriers that prevent you being able to contribute extra money to super at the age of 65 or over.

Provided certain other conditions are met (see below) eligible people will be able to contribute up to $300,000 per person (or $600,000 per couple) from the proceeds of selling their home on or after 1 July 2018.

The contributions won’t count towards the concessional (pre-tax) or non-concessional (after-tax) contribution caps and there is no maximum age limit. Also, the ‘work test’ (for people aged 65 to 74) and the ‘total super balance’ test won’t apply.



Key requirements

There are a number of conditions that will need to be met to be eligible to make downsizer contributions, including:

  • The individual must be aged 65 or over at the time the contribution is made.
  • The property must have been owned by the individual or their spouse (but not necessarily both) for at least 10 years prior to the disposal.
  • The contract for sale must be entered into on or after 1 July 2018.
  • The property must qualify for the main residence capital gains tax exemption in whole or part, so properties held purely for investment purposes won’t qualify.
  • The contribution must be made within 90 days of the change of ownership.
  • An election needs to be made to treat the contribution as a downsizer contribution.
  • No tax deduction can be claimed for the contribution.
  • Other conditions may also apply. For more information, please visit the ATO website at www.ato.gov.au

Key considerations

There are some key issues that should be considered when assessing whether making downsizer contributions could be a suitable strategy, including:

  • The property being sold to fund the contributions doesn’t have to be the current home. It can be a former home which meets the requirements. Also, a new home doesn’t need to be purchased.
  • Once contributed, downsizer contributions will count towards the ‘total super balance’ which could impact capacity to make future contributions.
  • Downsizer contributions can’t be transferred into a tax-free ‘retirement phase income stream’ if the ‘transfer balance cap’ has been used up. The transfer balance cap is $1.6 million in 2017/18.
  • If the transfer balance cap has already been used up, the contribution must remain in the ‘accumulation phase’ of super, where investment earnings are taxed at a maximum rate of 15%.
  • Money held in the accumulation or retirement phase of super is assessed for both social security and aged care purposes.

Could you benefit from downsizer contributions?

If you’re thinking about selling your home, or former home after 1 July 2018 and have owned it for at least ten years, we can help you decide whether making downsizer super contributions is a suitable strategy for you and assess other options.

Keep in mind you need to make your downsizer contribution within 90 days of receiving the proceeds of sale to be eligible.

Please contact us on (02) 9816 3444 so we can arrange a review of your circumstances to see if this opportunity may help you achieve a better life style in retirement.
Speak soon,

VJC Wealth Management