Guidance on Superannuation measure for downsizer contributions

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The ATO has released a ruling and a guidance note on the measure allowing downsizer contributions to be made into superannuation funds.

The ruling discusses these contributions and how the measure interacts with other income tax and superannuation concepts including:

  • contribution caps
  • superannuation fund acceptance rules, and
  • capital gains tax (CGT).

Generally, a personal contribution that an individual makes on their own behalf is treated as a non-concessional contribution unless a deduction has been claimed for it, or it is subject to an exclusion from treatment as a non-concessional contribution. Downsizer contributions are excluded from the definition of a non-concessional contribution and if an election is made to treat a contribution as a downsizer contribution, and it is reported as such, a deduction cannot be claimed for it.

For a contribution made to a complying superannuation plan to be a downsizer contribution, the following conditions must be satisfied:

  • the individual must be aged 65 years or older at the time the contribution is made
  • the contribution must be an amount equal to all or part of the capital proceeds received from the disposal of an interest in a qualifying dwelling in Australia held by the individual or their spouse just before the disposal
  • the 10-year ownership condition
  • any capital gain or loss from the disposal of the dwelling must have qualified (or would have qualified) for the main residence CGT exemption in whole or part
  • the contribution must have been made within 90 days of disposing of the dwelling, or such longer time as allowed by the Commissioner
  • a choice is made to treat the contribution as a downsizer contribution, and the complying superannuation plan provider is notified in the approved form of this choice at or before the time the contribution is made
  • the individual has not previously made downsizer contributions, or had one made on their behalf, in relation to an earlier disposal, and
  • the maximum amount of the contributions is the lesser of either $300,000, or the proceeds from the sale of the interests in the dwelling.

Individuals are not required to purchase another dwelling following the sale of the relevant dwelling interest to be eligible to make a downsizer contribution. A contribution can only be a downsizer contribution where the contract for the disposal of the relevant dwelling interest is entered into on or after 1 July 2018.

A downsizer contribution is neither a concessional nor a non-concessional contribution and therefore is not counted towards the respective contribution caps. The total superannuation balance of the individual will not affect their eligibility to make a downsizer contribution. Note, however, that any downsizer contribution amount will still be counted towards their total superannuation balance.