Edited version of private advice

Authorisation Number: 1051727307516

Date of advice: 14 August 2020

Ruling

Subject: Superannuation - downsizer contributions

(All legislative references are to the Income Tax Assessment Act 1997 unless otherwise indicated).

Question

Can a member of a superannuation fund make a downsizer contribution under section 292-102, where they have disposed of part of an ownership interest in a dwelling under an equity release arrangement?

Answer

For a contribution to be covered by the section, subparagraph 292-102(1)(b) states that 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.

For the purposes of this subparagraph, we confirm that the disposal of an ownership interest in a dwelling would, as stated in section 118-130, include the disposal of legal or equitable interests.

Please note that section 292-102 requires a number of conditions to be met to enable a contribution to be considered a downsizer contribution.

This advice applies for the following period:

14 August 20XX to 30 June 20XX

The arrangement commences on:

14 August 20XX

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

·   Your entity's fund is an ASIC registered managed investment scheme allowing buyers and sellers to conduct transactions regarding fractional ownership of assets.

·   Your entity's fund has released an investment-based equity release product (the Product).

·   The Product allows property owners to sell an interest in their property to the entity's fund.

·   The ATO have not been asked, nor have we considered, the detailed particulars of the Product contained in the entity's Equity Release Product Disclosure Statement.

·   The ATO have not been asked to consider or make comment on whether the Product is effective in achieving its objectives for participants, including from an income tax, superannuation and/or State based taxation perspective.

Relevant legislative provisions

Acts Interpretation Act 1901 section 15AB

Income Tax Assessment Act 1997 section 118-130

Income Tax Assessment Act 1997 section 292-102

Advice

The Commissioner of Taxation (the Commissioner) has published Law Companion Ruling 2018/9 - Housing affordability measures: contributing the proceeds of downsizing to superannuation (LCR 2018/9) which describes how the Commissioner will apply the downsizer requirements in section 292-102.

Paragraph 8 and 9 of the LCR 2018/9 mirror the legislative requirements. Paragraph 16 which relates to section 118-130 is of significance and clarifies:

16. The meaning of 'ownership interest in a dwelling' includes legal and equitable interests and includes an interest as a joint tenant or an interest as a tenant in common. Other parties may hold interests in the dwelling but this does not prevent the individual or their spouse from making a contribution, or contributions, based on the interests which they dispose of.

Further guidance is provided at paragraph 65 of the LCR 2018/9, stating that a downsizer contribution does not extend to contributions from the proceeds "of ownership interests in the same dwelling that are disposed of at a later time (for example, because of the sale of part of the ownership interests in a dwelling,".

The request for advice has referred to paragraphs 2.5, 2.6, 2.41. 2.45, and 2.69 of the Explanatory Memorandum (EM) to Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017, to highlight policy intent.

Section 15 AB of the Acts Interpretation Act 1901 allows extrinsic material, such as an EM to be used when interpreting an Act to, amongst other things, remove ambiguity or obscurity.

Given the wording of the subparagraph in question and the Commissioner's published LCR 2018/9 setting out his view of the operation of the legislative provisions, we did not identify sufficient ambiguity to have recourse to the EM on this occasion. However, we appreciate the efforts made in bringing the identified EM paragraphs to our attention.