The eligibility age for downsizer contributions reduced from 60 to 55 years from 1 January 2023. This means if you are age 55 or older, you
could invest the proceeds of the sale of your family home to your superannuation outside of your standard contribution caps.
From 1 January 2023, if you’re aged 55 years or older you may be eligible to make a downsizer contribution of up to $300,000 (or $600,000 fora couple) to your superannuation fund from the proceeds of the sale of your home where specific requirements are met. Downsizer contributions can be a great way of boosting your superannuation after retirement. As well as the extra capital they introduce, the contributions can also earn investment income that is either tax-free if you commence an income stream with the funds or be taxed at a concessional tax rate of as low as 15% whilst in accumulation phase.
To be eligible to make a downsizer contribution, you must answer ‘yes’ to all of the following conditions:
Provided that the above conditions are met:
DOWNSIZER CONTRIBUTIONS COUNTTOWARDS YOUR SUPER BALANCE
While downsizer contributions can be made regardless of what your TSB is, once the downsizer contribution is made to superannuation it forms part of your TSB.
At this point, the downsizer contribution will increase your TSB which may impact your eligibility to:
Similarly, a downsizer contribution will also count towards your transfer balance cap (TBC), which applies when you move your
superannuation into retirement phase to commence an income stream.
So if you intend to use your sale proceeds to commence a superannuation income stream in retirement, it’s important to note that you have a personal TBC of up to $1.7 million on the total amount that can be transferred from a superannuation account into a tax-free superannuation income stream. You can find out your personal TBC by contacting the ATO or logging myGov.
Although the age to make a downsizer contribution has reduced to age 55, you should be aware that the contribution will be preserved until you satisfy a condition of release, such as retirement after reaching your preservation age (currently age 59) or ceasing a gainful employment arrangement after reaching age 60.
However, if you have retired or met another condition of release that frees up your superannuation, the downsizer contribution could still be accessed to provide an income stream but it will have to be by way of a transition to retirement income stream, which is slightly more restrictive than a regular income stream, such as an account-based pension.
Although making a downsizer contribution may seem to be a straight forward strategy, there are anumber of eligibility requirements and nuances that you must be aware of when utilising these rules. If you’re thinking about downsizing and contributing to superannuation but want more information, we can help explain the rules in further detail and discuss how you may benefit from this scheme, based on your particular circumstances.
“The information in this newsletter is factual information only, and is not financial, legal or tax advice. The information is objectively ascertainable information and is not tailored to your personal circumstances. You should consider obtaining professional advice before making a decision in relation to this information.”