Proposed Downsizer Super Contributions
Is it now an option for retirees to contribute sale proceeds from the sale of their home to superannuation?
There was a proposed measure publicised in the 2018 budget which would allow super contributions to be made from downsizing the family home. This measure has not yet been passed and is currently not available to be utilised.
At this stage, what we can advise is the policy is in draft and if passed would take effect from 1 July 2018. Under the drafted legislation the following applies to qualify to make this type of contribution:
- A person must be over age 65 to make the superannuation contribution.
- A person must have held the property that is sold for at least 10 years.
- The home must be a property and cannot be a mobile home.
- The sale contract must be entered on or after 1 July 2018.
- The available contribution per person (homeowner) under this measure is the lessor of $300,000 or total home sale proceeds received if less.
- The contribution must be made within 90 days of the home changing ownership (settlement date).
- It does not matter if the new home purchased costs more, or less than the previous home or is smaller or larger (there is no downsizer requirement under the measure even though it may be assumed by the name).
- A home can qualify under this measure even if a person does not currently live in the home but has lived in the home in the past as their primary residence. Note; if this has been held for investment purposes the same capital gains rules still apply to the individuals.
- This contribution does not count towards the concessional or non-concessional limits and is not taxed when deposited into their superannuation account and forms part of their tax-free benefits in their member balance.
- A person is not required to pass any work tests to qualify to make the contribution.
- The new $1.6 million-member balance contribution limits do not apply to this contribution meaning it can still be made into superannuation accounts for members whose total member entitlements exceed $1.6 million.
With all the above in mind it is important to wait and see what is legislated as this may change again.
There are other types of contributions that may also be considered before this type of contribution is made as they are restricted under the new $1.6 million-member balance contribution limits and as such should be explored first.
This is just a brief overview and there are many factors that should be managed and considered to ensure no superannuation legislation is breached. It cannot be stressed enough the importance of obtaining advice before entering into any transactions. This article is not intended to be advice that should be solely relied upon as it in no way considers your individual circumstances.
If you wish to discuss your own SMSF strategies, contact the specialist PKF Superannuation team (02) 4962 2688 or (02) 8346 6000.