WEEKLY E-MAIL

15 January 2018

DOWNSIZER CONTRIBUTIONS:

NEW LEGISLATION THAT WAS PASSED ON 7 DECEMBER 2017

By Nicola Beswick

One of the most important pieces of legislation introduced towards the end of last year was the Downsizer Contribution Bill.

Previously, a person who was over the age of 65 years had to meet various conditions before they could make superannuation contributions. Most who were over this age, may have surplus funds when they sell their principle place of residence and downsize. If an individual was not working, this money could not be contributed to superannuation.

Following the introduction of this legislation, an eligible person can now contribute up to $300,000, into superannuation regardless of their age, work status or total superannuation balance. If you are a member of a couple, this means up to $600,000 can be contributed into superannuation.

The contribution will be classified as a downsizer contribution. It will not be considered a concessional (pre-tax) or non-concessional (after-tax) contribution.

No more than $300,000 can be contributed as a downsizer contribution, but the contribution amount cannot exceed the amount received from the sale of the dwelling.

While this legislation makes it a little easier for people to get the money into superannuation, there are some conditions that need to be met.

Downsizer contributions can only be made where the contract for sale is entered into on or after July 1, 2018. If you sign the contract before this date, you do not qualify for the downsizer contribution.

Further, the contributions must be made within 90 days of settlement (which is when the change in ownership occurs). For example, if the property is sold at auction on the 1st of August, 2018 and settlement occurs 90 days later on the 1st of November 2018. Therefore, the contribution must be made 90 days from the 1st of November 2018 being the 1st of February 2019.

Who can make these contributions?

These contributions also only apply to individuals who meet the following conditions:

• The contributing individual must be 65 years of age or older.
• The proceeds must come from the sale of an interest in a dwelling owned by the contributing individual or their spouse.
• The individual, spouse or ex-spouse must have held the interest in the dwelling, at all times in the ten years immediately before the sale.
• The dwelling must qualify for full or partial CGT main residence exemption.

Other points of note:

• The downsizer contribution does not relate to the sale proceeds following the sale of a caravan, houseboat or another form of mobile home.
• The downsizer contribution can only be used once, in relation one dwelling. It cannot be used again, following the sale of another dwelling.
• The $300,000 can be made up of multiple contributions, over the 90 day period.
• The Funds are an assessable asset under both Centrelink’s and DVA’s assets and income tests.

There are many useful situations this legislation brings to individuals who are considering downsizing. We will explore these in detail, using specific Case Studies, in our next Edition of Trade Secrets.

Nicola Beswick
Financial Planner
SMSF Specialist Advisor™
Authorised Representative No. 459008

If you have any questions or comments, please email me at nicola@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution. The information here is of a generic nature, and does not take into account your investment objectives or financial needs. No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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