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ATO update: Super Downsizer errors

December 17th, 2019

The Super Downsizer Measure, which started on 1 July 2018, allows eligible over-65s to sell their homes and contribute up to $300,000 of the proceeds from the sale into their super account.

Recent figures show that more than 5,000 people across Australia have made this type of contribution.

However, the Australian Taxation Office (ATO) has reported some common mistakes people are making around eligibility for this initiative. The top three things to look out for if you are considering taking advantage of this measure are that:

  • you or your spouse must have owned your home for 10 years or more prior to sale
  • the date for contract of sale must be 1 July 2018 or later
  • the proceeds from the sale of the home must be either exempt or partially exempt from capital gains tax under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset.

The SuperDownsizer Measure – what you need to know

You can only make downsizer contributions for the sale of one home; it can’t be used again for the sale of a second home. On a similar note, if you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to buy another home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. And it can still be made even if you have a total super balance above $1.6 million.

A downsizer contribution will not affect your total super balance until this is re-calculated to include all your contributions on 30 June at the end of the financial year.

However, it will count towards your transfer balance cap, which is currently $1.6 million. This cap applies when you move your super savings into retirement phase.

Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the Age Pension.

Eligibility for the Super Downsizer Measure

If eligible, you can make a downsizer contribution up to a maximum of $300,000 (each). The contribution amount can’t be greater than the total proceeds of the sale of your home.

You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
  • your home is in Australia and is not a caravan, houseboat or other 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
  • you have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

Note: If your home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.

For more details, visit the Super Downsizer Measure page on the ATO website.

If you would like to explore your options for your finances after age 65, including downsizer contributions, you can speak to a First Super Financial Planner. You can book an initial call through this online form.