What is Downsizer Contribution?
Downsizer contributions are contributions made by members from the proceeds of selling their home.
The eligible age to make a Downsizer Contribution is as follows:
From 1 July 2018, 65 years old or older
From 1 July 2022, 60 years old or older
From 1 January 2023, 55 years old or older.
If you have reached the eligible age and meet the other 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.
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 to Make a Downsizer Contribution
You will be eligible to make a Downsizer Contribution if you meet ALL of the following criteria:
- You have reached the eligible age (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 (Note: If you signed a contract prior to 1 July 2018 you will not be eligible);
- 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 (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);
- 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 Superfund 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 Superfund from the sale of another home.
The Downsizer Contribution can be made regardless of your Total Superannuation Balance provided you meet all the other eligibility criteria.
If you have any queries in relation to your eligibility, please contact the ATO on 13 10 20 to verify your personal circumstance.
Maximum Downsizer Contribution Allowed
Both members of a couple can contribute under this policy from the proceeds of the sale. 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.
Impact on your SMSF
The Downsizer Contribution will form part of your tax free component held in the SMSF.
It will not count towards your Non-concessional or Concessional Contribution Caps.
Your Downsizer Contribution will not affect your Total Superannuation Balance until your TSB is re-calculated on the following 30 June to include all your Contributions, including your Downsizer Contributions made in the previous Financial Year.
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.
If there is a delay caused by factors outside your control, you can contact the ATO on 13 10 20 to apply for an extension of time.
An extension of time should be requested before the 90-day period from the date of settlement has expired.
How to make a Downsizer Contribution
If you are eligible and you decide to make a Downsizer Contribution from the proceeding of selling your home, please follow the steps detailed below:
Step One: Complete the Downsizer Contribution into Super Form.
When you choose to make a Downsizer Contribution, you will need to complete the Downsizer Contribution into Super form. Please click here to download the sample form.
If you make multiple Downsizer Contributions or downsize Contributions to different Superfunds, you must provide a form for each contribution.
You need to complete and sign this form when making or prior to making your Downsizer Contribution. Please retain the completed form for your own records.
Step Two: Make the Downsizer Contribution within 90 days.
To make a Downsizer Contribution, you simply need to deposit cash into the bank account owned by your SMSF.
The Downsizer Contribution must be deposited into your SMSF bank account within 90 days of receiving the proceeds of sale, usually the date of settlement, unless you have been granted an extension.
Step Three (Optional): Convert the Downsizer Contribution to Retirement Phase.
If you have existing Retirement Phase Pensions (e.g. SABP / R-TRIS), we advise that the Downsizer Contribution will NOT be added to your existing Pension directly. If you wish to convert the Contribution to a Simple Account Based Pension, please contact our office via the Client Portal Inbox after the Contribution has been made.
Step Four: Notify ESUPERFUND via the Annual Checklist.
You will be asked to confirm on whose behalf the Contribution has been made and the Contribution Type using an annual checklist we send to all SMSF clients each year. For more information on the Annual Compliance Process, please click here.
To enable ESUPERFUND to report the contribution type correctly in the SMSF Tax Return, please select the correct contribution type - “Downsizer Contribution” when completing the annual checklist.
Based on the contribution type, we will collect the Downsizer Contribution into Super form as part of the checklist completion process.
Downsizer Contribution Rejected by the ATO
If the ATO becomes aware that your Contribution does not meet the Downsizer Contribution eligibility requirements, they will notify you.
Once notified, you will need to 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 needs to be returned to the Member.
We caution that the ATO may apply false and misleading penalties if you had incorrectly declared that you were eligible to make a Downsizer Contribution.