Australian citizens aged 55 and over can now take advantage of downsizer contributions with the passage of the Treasury Laws Amendment (2022 Measures No. 2) Bill 2022. This means that from January 1st, 2023, eligible submissions will be accepted from those meeting criteria along with any other established eligibility qualifications.
What is the downsizer super scheme?
The downsizer super scheme was introduced by the Australian government in 2017 as a way to help Australians over the age of 65 sell their family home and downsize to a smaller property. The aim of the scheme is to free up housing stock for younger Australians and to boost retirement savings. Under the scheme, eligible Australians can make a one-off contribution of up to $300,000 from the proceeds of selling their home into their superannuation fund. The contribution is tax-free and does not count toward the contribution caps.
However, downsizer contributions will count towards your transfer balance cap. This cap applies when you move your super savings into the retirement phase and will be considered for determining eligibility for the age pension.
Who does the downsizer super scheme apply to?
In order to be eligible for the downsizer super scheme, you must meet the following criteria:
✔️ From 1 January 2023, you must be 55 years or older to make a downsizer contribution. There is no maximum age limit.
✔️ Your home must have been owned by you or your spouse for 10 years or more prior to the sale in order for the ownership period to be calculated from the date of settlement of purchase to the date of settlement of sale.
✔️Your home must be located in Australia and cannot be a caravan, houseboat, or other mobile homes.
✔️ 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 asset (acquired before 20 September 1985).
✔️ You make your downsizer contribution within 90 days of receiving the proceeds of the sale, which is usually at the date of settlement.
✔️ You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making your downsizer contribution.
✔️ You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.
Importantly, you can only use the downsizer super scheme once – so it’s important to get it right!
Are there any other conditions I need to be aware of?
Yes, if you purchase a replacement home using some of the sale proceeds, you may need to pay capital gains tax on any profit you make from selling your home (although there are some exemptions that may apply). You should speak to your accountant or financial advisor for more information about this.
Conclusion
The recent amendment to the Treasury Laws is good news for those looking to take advantage of downsizer contributions. From January 1st, 2023, eligible submissions will be accepted from those meeting criteria along with any other established eligibility qualifications. If you think you may be eligible and would like help taking advantage of this opportunity, please contact us. Our team of experts is ready and waiting to partner with you to create a solid plan that takes advantage of the current legislation.
Not sure where to start? Contact Wardle Partners Accountants & Advisors today and let our team help you boost your retirement savings.
