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Downsizer Superannuation Contribution Explained

Prior to Christmas, legislation was passed that effectively introduced a new category of superannuation contribution – the downsizer superannuation contribution (DSC). The DSC is designed to encourage older Australians to vacate larger properties for smaller, easier to maintain homes while taking advantage of the opportunity to contribute more to their superannuation funds. The DSC will not count towards contributions caps or be affected by the total superannuation balance test in the year the contribution is made. It will, however, count towards the total superannuation balance and transfer balance cap (currently $1.6 million). Eligibility for the DSC is subject to the following conditions:

  • The person is 65 years or older at the time the DSC is made

  • The home must have been owned by the person or their spouse for 10 years or more, prior to the sale

  • The home must be located in Australia and cannot be a caravan, houseboat or another mobile home

  • The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset

  • The super fund has been notified of the contribution via the completion of the DSC form either before or at the time the contribution is made

  • The contribution is made within 90 days of the receipt of the proceeds of sale

  • The person has not previously made a DSC to their super from the sale of another home.

Further, you should also be sure to conduct a full analysis of your financial position as undertaking this strategy may mean you may become ineligible for the age pension, contact our office and we will be able to help. But before you get too excited, it is important to note that the new measure will only apply for the proceeds of the sale of a home exchanged on or after 1 July 2018. So be sure you do not intend to undertake the sale prior to next financial year. Multiple contributions can be made from the proceeds of a single sale, and contributions can be made to different superannuation funds. However, the total contribution amount per person cannot be greater than $300,000 or the total proceeds of the sale of the home less any DSC made by the spouse. All contributions must be made within 90 days of the receipt of proceeds.full analysis of your clients’ financial position as undertaking this strategy may mean your clients become ineligible for the age pension.

For more information, visit the ATO’s website. Source: CLICK HERE

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