The Federal Government passed legislation in December 2017 which allows people aged 65 and over who have sold their Principal Place of Residence (their home) to contribute all or part of the sale proceeds to Superannuation. The rationale is to allow people to downsize, free up capital to live on and invest in a tax advantaged environment. This ruling is irrespective of their age-based eligibility and other restrictions which might otherwise prevent such a contribution but, as expected, there are certain criteria which need to be met.
Overview of the Rules
- The property is the person’s main residence, or is eligible for at least a part main residence capital gains tax (CGT) exemption
- The contribution to superannuation has to be made within 90 days of receiving the sale proceeds and person is aged 65 and above (no upper age limit)
- Up to $300,000 each of the sale proceeds of the property and an election form must accompany the contribution(s)
- There is no tax deduction for a “downsizing” contribution.
- This superannuation contributions will form part of the tax-free component.
- The pension transfer balance cap of $1.6 million continues to apply.
- Centrelink or (DVA) means testing will remain the same.
- Property has to be in Australia
- Cannot be a caravan, mobile home, or houseboat`
- The property must have been owned by the person, and/or their spouse, for at least 10 years prior to disposal
- Even if only one member of a couple was the property owner, both will be eligible to contribute up to $300,000 each (limited by the actual sale proceeds)
- The property must be eligible for at least a partial capital gains tax (CGT) main residence exemption.
- Sales proceeds refers to the gross sale price
- Cannot contribute more than the sale price
- Legislation refers to ‘capital proceeds received from the disposal…’ as being eligible.
Making a Contribution
- ONE down-sizing contribution (aggregate) from ONE property in a lifetime
- Total Super Balance (TSB) Cap of $1.6m is ignored.
- TSB relates to Non-Concessional Contributions – Downsizing Contribution is a separate ‘type’ of contribution.
- This measure may not allow the contribution to move to the tax exempt Pension phase – The Transfer Balance Cap of $1.6m still applies.
As there are other conditions that do apply, we would strongly recommend that appropriate advice is taken before embarking on this process.
This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.