Edited version of administratively binding advice

Authorisation number: 1052339332344

Date of advice: 23 January 2025

Subject: Downsizer superannuation contribution

Question

Upon the sale of your property will you be able to contribute $300,000 to your superannuation fund as a downsizer contribution under section 292-102 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This advice applies for the following period:

Period ended DD MM YYYY

Relevant facts and circumstances

You are xx years of age.

Your spouse and you purchased a property at xx in 20YY. The property is in your spouse's name only.

The property is just under xx acres. You built a house on 2 hectares which is your principal place of residence.

The property was a market garden at the time which was closing down and you intended to turn it into a xx business.

You now wish to sell the property including the xx business.

You have owned the property outright for xx years and lived there for xx years.

You entered a contract to sell the property on DDMMYYYY for $xx and settlement date is DDMMYYYY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 292-102

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

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

Income Tax Assessment Act 1997 subsection 292-102(3)

Other relevant documents

Law Companion Ruling LCR 2018/9: Housing affordability measures: contributing the proceeds of downsizing to superannuation

Question 1

Summary

Based on the information provided, it is considered that upon settlement of your property you will be able to contribute $300,000 to your superannuation fund as a downsizer contribution under section 209-102 of the ITAA 1997.

Detailed reasoning

Criteria for a downsizer contribution

A contribution is covered under subsection 292-102(1) of the ITAA 1997 if:

(a)           the contribution is made to a complying superannuation plan in respect of when you are aged 55m 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 in a dwelling; and

(c)           you or your spouse held the 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 interest on or after 20 September 1985 and held it for a period before the disposal; and

(e)           the condition for 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 in another dwelling.

10-year ownership condition

Subsection 292-102(2) of the ITAA 1997 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 before the disposal

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

(k)           an ownership interest in the land on which the dwelling is situated was held by you or your spouse or former spouse.

Cap on the amount of contribution

Subsection 292-102(3) states that despite subsection (1), the contribution is covered under this section only to the extent that it does not exceed the lesser of:

(a)          $300,000, less any contribution that is already covered under this section and made to a complying superannuation plan in respect of you; and

(b)          the sum of the capital proceeds from the disposals of:

           (i)           the old interest; and

           (ii)           any related spousal interest to the old interest;

Less the sum of all other contributions that are already covered under this section in relation to the disposal of the old interest or any related spousal interest to the old interest and made to complying superannuation plans in respect of you or your spouse.

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.

Capital gains tax and main residence exemption

Paragraph 44 of the LCR 2018/9 states that to be eligible for the downsizer contribution, the property must be the individual's main residence for the purposes of the main residence exemption. The capital gain or loss incurred upon disposal of the property must be wholly or partially disregarded because the property has been treated as their main residence.

Paragraph 50 of LCR 2018/9 states for the purposes of making a downsizer contribution, it is not relevant how the main residence exemption is calculated or apportioned. The downsizer contribution amount available related to the proceeds from the disposal of the interest in a dwelling and does not depend on the extent to which the amount is exempt as a main residence for CGT.