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    Downsizing contributions into superannuation

    The Contributing the proceeds of downsizing into superannuation measure was one of several announced in the 2017–18 Budget as part of the government's package of reforms to reduce pressure on housing affordability in Australia.

     Note: If you sign a contract before 1 July 2018 you will not be eligible.

    If you have questions about making a downsizer contribution, ask our CommunityExternal Link for help.

     On this page:

     About the downsizer measure

    From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

    Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made even if you have a total super balance greater than $1.6 million.

    Your downsizer contribution will not affect your total super balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of the financial year.

    The downsizer contribution will count towards your transfer balance cap, currently set at $1.6 million. This cap applies when you move your super savings into retirement phase.

    You can only make downsizing contributions for the sale of one home. You can't access it again for the sale of a second home.

    Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.

    If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

     Eligibility for the downsizer measure

    You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:

    • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
    • the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
    • your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
    • your home is in Australia and is not a caravan, houseboat or other mobile home
    • 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 (acquired before 20 September 1985) asset
    • you have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
    • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
    • you have not previously made a downsizer contribution to your super from the sale of another home.

    Note: If your home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.

    Downsizer contribution amounts

    If eligible, you can make a downsizer contribution up to a maximum of $300,000 (each). The contribution amount can't be greater than the total proceeds of the sale of your home.

     Note: If you sign a contract prior to 1 July 2018 you will not be eligible.

     Example 1

    A couple, George and Jane, sell their home for $800,000. Each spouse can make a contribution of up to $300,000.

    End of example

     

     Example 2

    A couple, Bruce and Betty, sell their home for $400,000. The maximum contribution both can make cannot exceed $400,000 in total. This means they can choose to contribute half ($200,000) each, or split it – for example, $300,000 for Betty and $100,000 for Bruce.

    End of example

     

     Example 3

    A couple, John and Fatima, sell their home for $600,000. Only John is on the title. Both John and Fatima meet all the other requirements, therefore both John and Fatima can made a downsizer contribution of up to $300,000 each.

    End of example

    Main residence exemption

    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
    • would be entitled to such an exemption if your home was a CGT rather than a pre-CGT asset (that is, you acquired it before 20 September 1985).

    Timing of your contribution

    You must make your downsizer contribution within 90 days of receiving the proceeds of sale. This is usually at the date of settlement.

    We can allow for a longer period if required because of circumstances outside your control. You will need to apply for an extension of time.

    Making multiple contributions

    You may make multiple downsizer contributions from the proceeds of a single sale.

    However, the total of all your contributions must not exceed $300,000 or the total proceeds of the sale less any other downsizer contributions that have been made by your spouse.

    You need to make all contributions within 90 days of receiving the proceeds of sale, usually the date of settlement, unless you have been granted an extension.

    Contributions found not to be downsizer contributions

    If we become aware that your contribution does not meet the downsizer contribution eligibility requirements, we will notify you and your super fund.

    Once notified, your fund will assess whether your contribution could have been made as a personal contribution under the contributions acceptance rules.

    If your contribution could be accepted, the amount will count towards the relevant contribution cap.

    If your contribution can't be accepted, the contribution amount will be returned to you by your super fund.

    False and misleading penalties may be applied if we identify that your downsizer contribution was not eligible and you had incorrectly declared that you were eligible to make such a contribution.

     How to make a downsizer contribution

    Before you decide to make a downsizer contribution, you should:

    • check the eligibility requirements for making a downsizer contribution
    • contact your super fund/s to check that they accept downsizer contributions. If you don't currently have an open account with a super fund, you will need to open a new super account to make your downsizer contribution.

    You may also wish to seek independent financial advice in relation to the age pension asset tests.

    Completing the downsizer into super contribution form

    When you choose to make a downsizer contribution, you will need to complete the Downsizer contribution into super form. You need to provide this to your super fund when making – or prior to making – your contribution.

    If you make multiple downsizer contributions or downsizer contributions to different super funds, you must provide a form for each contribution.

    Remember that all downsizer contributions must be made to your super fund within 90 days of receiving the proceeds of sale, usually the date of settlement.

    Next step:

     Extension of time

    You may be able to request a longer period for making a downsizer contribution in some circumstances, for example, where a delay has been caused by factors outside your control. An extension of time will not be granted to allow you to meet the age requirement.

    An extension of time should be requested before the 90-day period from the date of settlement has expired.

    However, if you have overlooked the 90-day time frame, an extension of time may be granted due to but not limited to:

    • ill health
    • death in the family
    • moving house.

    To apply for an extension of time, you can either:

    • phone us on 13 10 20
    • write to us at  
      •  Australian Taxation Office
        PO Box 3006
        PENRITH NSW 2740
      • Provide your name, contact details, the subject: Downsizer EOT request, and the reason for your request.
       

    Examples of extension requests

     Example 1: Ben – extension granted

    Ben is 77 and decides to sell his family home of 15 years. Settlement occurs on 1 August 2018. He purchases a new home in a retirement village which is due to settle on 1 October 2018.

    The retirement village has only just been built and Ben’s settlement is delayed until 1 December 2018 while final council approvals are obtained.

    Ben does not want to contribute funds from the sale to his super until after the settlement of his new property to ensure he has enough money to purchase and move into the property.

    Upon his request, we give Ben an extension of time to contribute until 1 February 2019. This extension allows Ben enough time to settle on the new property and make a contribution of the remaining money from his sale.

    Ben can afford to contribute $200,000 to his super fund after the sale and makes this on 25 January 2019.

    End of example

     

     Example 2: Rebecca – extension not granted

    Rebecca has just turned 64 and decides to sell her family home which she has lived in for 30 years with her husband James, who is 70. After the sale Rebecca requests an extension of time to make a downsizer contribution, as it is more than 90 days from the date of settlement until she turns 65.

    We do not extend the timeframe on the basis that the timing of the sale was within Rebecca's control and is far in excess of the 90 days allowed to make the contribution.

    Instead, Rebecca decides to make a non-concessional contribution to her superannuation from the sale proceeds which counts towards her non-concessional contributions cap.

    Her husband James is eligible to make a downsizer contribution and contributes $300,000 to his super fund.

    End of example

    Review of decision

    You will also be able to seek a review of any decision we make in allowing a longer period. For example, if you are dissatisfied with the length of the extension, or a decision not to allow a longer period.

     Next step:

     More information

    A fact sheet is available on the ATO Publication Ordering Service:

     

    Last modified: 10 Oct 2018QC 54086