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BIS Cosgrove Accountants Gold Coast & Brisbane

Superannuation Legislation Update – Changes to Downsizer Contribution Eligibility

At the beginning of February 2022, the Australian Government passed The Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021.

The aim of the Bill is to increase flexibility for individuals preparing for retirement, increase superannuation support for low income earners and provide assistance to first home buyers.

Changes to Downsizer Contribution Eligibility

As part of the Bill, changes have been made to the eligibility criteria for Downsizer contributions.

Currently, to be eligible to make superannuation contributions under the Downsizer Scheme, you must be aged 65 or over, in addition to a list of other requirements. This scheme allows individuals who may not meet other contribution scheme eligibility requirements (such as the Work Test) to make superannuation contributions even after turning 65.

The Scheme allows eligible individuals to contribute up to $300,000 from the proceeds of a sale of their residential property into their superannuation fund.*

Additional requirements that individuals MUST meet to be eligible for Downsizer contributions include:

  • The property must be in Australia,
  • The property must have been nominated as your Primary Place of Residence (PPR) at least at some point since owning it (making it exempt or partially exempt from Capital Gains Tax [CGT]),
  • You or your spouse must have owned the property for more than 10 years (from purchase settlement date to sale settlement date),
  • Within 90 days of receiving the proceeds from the settlement, you must contribute (up to $300,000 for an individual and $600,000 for a couple) to your superannuation fund (this can be an SMSF or Industry Super Fund),
  • You have not made a Downsizer contribution previously.

*Note: The funds being contributed are not required to come from the property sale itself, but cannot exceed the dollar amount of the sales proceeds (up to $300,000).

As of 1 July 2022, these requirements are changing to allow individuals aged 60 and above to be permitted to access the Downsizer contribution measures.

Benefits of taking advantage of the Downsizer Scheme include:

  • There is no maximum age restriction, you can be any age over 65 (60 as of 1/07/2022).
  • There are no caps to restrict your contribution – No concessional cap, no non-concessional cap, no Total Super Balance cap.
  • You are not required to be purchasing another property.
  • It has no relation to the profit on sale, nor the net funds after repaying the mortgage – Just the proceeds of sale.

Important things to consider before making the decision to utilise the Downsizer Scheme:

  • Have you considered the selling cost of the property (CGT? Stamp duty? Commission?)
  • Is the property a good asset that should be maintained in the family group?
  • What will the cash contribution be invested in when in Super?

As always, it is important to talk to your adviser to see if you may need financial advice before making any decisions regarding the Scheme.

Speak to your adviser, or arrange a Discovery Meeting with our team to discover if and how you could potentially benefit from the Downsizer Scheme.

Alternatively, get in touch with us here.