Edited version of administratively binding advice

Authorisation Number: 1051737175144

Date of advice: 22 October 2020

Advice:

Subject: Downsizer contributions

Question

Will the proposed contribution meet the criteria for a downsizer contribution in subsection 292-102(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This advice applies for the following period:

Year ending 30 June 2021

The arrangement commences on:

1 July 2020

Relevant facts and circumstances

In the 2009-10 income year you and your spouse purchased a property (the property). You and your spouse both held an ownership interest in the property.

The property is a strata titled unit and not a caravan, houseboat or other mobile home.

The property has been your principal place of residence.

You sold the property in the 2019-20 income year.

The proceeds from the sale of the property are exempt from capital gains tax (CGT) under the principal place of residence exemption.

You and your spouse are both over 65 years old.

You and your spouse intend to make a total downsizer contribution into a complying superannuation fund.

You have not previously made a downsizer contribution to a complying superannuation plan from the sale of another home.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 118-B

Income Tax Assessment Act 1997 Section 290-167

Income Tax Assessment Act 1997 Subsection 292-90(2)

Income Tax Assessment Act 1997 Subsection 292-102(1)

Income Tax Assessment Act 1997 Subsection 292-102(2)

All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision

Summary

The proposed contribution will not be covered under subsection 292-102(1) (about downsizer contributions), as the necessary conditions in relation to that provision have not been satisfied.

Detailed reasoning

From 1 July 2018, individuals aged 65 years and older may be eligible to make a downsizer contribution into their superannuation of up to $300,000 from the proceeds of selling their property.

Both members of a couple may be able to contribute to superannuation under this measure from the proceeds of the sale.

Downsizer contributions are excluded from being non-concessional contributions in accordance with subsection 292-90(2).

Further, an election made to treat a contribution as a downsizer contribution, and reported as such, cannot be claimed as a deduction in accordance with section 290-167.

Eligibility for Downsizer Contributions

Subsection 292-102(1) provides that the following conditions must be met in order to be eligible to make a downsizer contribution:

(1)  A contribution is covered under this section if:

(a)          the contribution is made to a complying superannuation plan in respect of you when you are aged 65 years or over; and

(b)          the contribution is an amount equal to all or part of the *capital proceeds received from the *disposal of an *ownership interest (the old interest) in a *dwelling; and

(c)           you or your *spouse held the old interest just before the disposal; and

(d)          any *capital gain or *capital loss from the disposal of the old interest:

                            (i)             for the case where you held it just before the disposal-is wholly or partially disregarded under Subdivision 118-B (or would have been if you had *acquired it on or after 20 September 1985); or

                           (ii)             otherwise-would have been wholly or partially disregarded under Subdivision 118-B had you *acquired the old interest on or after 20 September 1985 and held it for a period before the disposal; and

(e)          the condition in subsection (2) is met for the disposal; and

(f)            the dwelling is located in *Australia, and is not a caravan, houseboat or other mobile home; and

(g)          the contribution is made within 90 days, or such longer period as the Commissioner allows, after the time the change of ownership occurs as a result of the disposal; and

(h)          you choose, in accordance with subsection (8), to apply this section to the contribution; and

(i)            there is not already a contribution covered under this section, and made to a complying superannuation plan in respect of you, from an earlier choice you made in relation to the disposal of:

(i)            another ownership interest in the dwelling that was not a related spousal interest to the old interest; or

(ii)           an ownership interest in another dwelling.

Ownership Interest

Subsection 292-102(2) states:

The condition in this subsection is met for the *disposal of the old interest if either or both of the following paragraphs applies:

(a) at all times during the 10 years ending just before the disposal:

(i) the old interest was held by you, your *spouse or your former spouse; or

(ii) an *ownership interest in the land on which the *dwelling is situated was held by you, your spouse or your former spouse;

(b) if subsection 118-147(1):

(i) applies because the old interest was a substitute property interest (within the meaning of that subsection) for an old dwelling referred to in paragraph 118-147(1)(a); or

(ii) would have applied as described in subparagraph (i) if paragraph 118-147(1)(a) were modified to refer to a dwelling (the old dwelling) that was your main residence;

you, your spouse or your former spouse *acquired an ownership interest in that old dwelling at least 10 years before the disposal.

Note: Section 118-147 deals with a dwelling replacing an earlier dwelling that was compulsorily acquired or destroyed etc.

For the purposes of subsection 292-102(2), generally, the 10-year ownership condition requires that at all times during the 10 years ending prior to the disposal, the old interest, or ownership interest was held by you, your spouse or your former spouse. Ownership interest includes legal and equitable interests and includes an interest as a joint tenant or an interest as a tenant in common.

A disposal occurs when ownership of the interest changes from the individual to another entity by an act or event, or by operation of law. Accordingly, the ownership period is calculated from the day the ownership interest in the dwelling commenced to the day it ceased. That is, from the date of settlement of the original purchase to the date of settlement of the sale.

In this case, based on the date of settlement of the original purchase to the date of settlement of the sale, you do not satisfy the 10-year ownership test.

Accordingly, as you do not satisfy the 10-year ownership test, the proposed contribution does not meet the eligibility criteria for a downsizer contribution under subsection 292-102(1).