Superannuation Contributions Update

Contributing the proceeds of downsizing to superannuation

Author: Shelly Johal

The information for this article was sourced from the Client Impact Statement, “Contributing the proceeds of downsizing to superannuation” by Ben Miller from CCH

From 1 July 2018, proceeds from downsizing the family home will become available as a new type of superannuation contribution for individuals who are over 65. This was announced in the 2017/18 General Budget and is limited to $300 000 per person.

For the contribution to be valid:

  • The contract exchange needs to occur after 1 July 2018
  • The individual needs to be over 65 years of age on the date of the contribution
  • The property must have been owned for at least 10 years (where the ownership period is calculated from settlement date to settlement date).
    • The property remains eligible even if it would only get a partial main residence exemption.

Source: Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017Budget Paper No 2, p 28.​

Other concessions to the 10-year ownership condition include where:

  • a main residence was compulsorily acquired and a new residence purchased
  • the sale is of a business premises which includes a main residence component, and
  • there is a change in ownership of the main residence due to factors such as relationship breakdown or death.

It is required that the contribution is made within 90 days of the settlement date. Much like making a CGT cap contribution, when making the contribution, the super fund must be notified with an approved form.

Exemptions

These contributions will be exempt from the:

  • Age test
  • Work test
  • $1.6m total superannuation balance test

Example:

Mary and Steve are 64 and 66 years old respectively, and have superannuation balances of $1m and $1.2m. They have owned and lived in their family home for 20 years and have owned a Gold Coast holiday home for 8 years.
Coming up to December 2018, they are heading towards retirement and they decide to sell the house and move into the holiday home permanently. The family home sells for $1m.
Mary and Steven both decide to make the maximum non-concessional contribution allowable for that particular year (being ineligible for the “bring forward rule”) and each contribute $100 000 in March 2019. They meet the work test in the 2018/19 financial year and are eligible to make this contribution. After making the non-concessional contribution, they decide to make a further contribution on downsizing for the maximum amount of $300 000 per person in May 2019. There are no restrictions on making this contribution.
This leaves $200 000 in cash left over to invest in their own name, $1.4m in super for Mary and $1.6m in super for Steven.

 

For more information about these changes, please talk to your financial adviser and if you do not have one, feel free to contact us. Our advisers are more than happy to talk you through the details.

 


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