Government statistics shared at the recent SMSF Association National Conference 2022 have shown the ability to make downsizer contribution into superannuation remains extremely popular among older Australians.
As part of her video address at the Adelaide event, Superannuation, Financial Services and the Digital Economy Minister Jane Hume revealed since the introduction of the downsizer contribution provisions on 1 July 2018, Australians had channelled $9.4 billion into their retirement savings vehicles using this measure.
This has increased from the $1 billion of downsizer contributions made in the initial 2019 income year, with 55 per cent of participants being female and 45 per cent male.
“These are much higher numbers than what I expected,” Accurium head of education Mark Ellem told attendees during a technical webinar last week.
Further, Ellem pointed out the parameters contained within the downsizer contribution rules suggest they are being made with a specific reason in mind.
“Given super is not an exempt asset for the age pension, a downsizer contribution effectively moves capital from an asset test exempt asset, the family home, to an asset that is included in the asset test,” he said.
To this end, he noted the individuals who have taken advantage of the downsizer contribution rules to date were likely to be people who were not receiving the age pension at the time.
“I think it continues to be predominantly a tax strategy. The sale of a qualifying home provides the opportunity to move capital from outside [the retirement saving system] into super – a concessionally taxed environment,” he said.
“Also with the [impending] removal of the work test [for individuals up to the age of 75 to make non-concessional contributions] there’s even a greater opportunity to get more [money] into super for older Australians.”
He took the opportunity to remind advisers the actual downsizer contribution does not have to be sourced from the proceeds of the sale of the family home and instead can be funded from any other available capital.
