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SMSF cohort will use downsizer contributions

While the opportunity to put an additional non-concessional contribution (NCC) of up to $300,000 into super by downsizing the home is not expected to trigger a wave of NCCs by SMSFs, the measure will appeal to and benefit a specific type of trustee, a technical expert has said.

This year’s federal budget contained a measure aimed at encouraging older Australians to free up housing stock by enabling those over the age of 65 who were downsizing their home to make NCCs of up to $300,000 into their super fund from the proceeds of the sale of their principal home.

The legislation covering the downsizing contributions were tabled in Parliament on 7 September.

“We’ve had a bit of feedback recently and we’ve found that there are lots of people who are looking at over-55s accommodation,” Heffron SMSF Solutions technical services manager Leigh Mansell said during the firm’s latest quarterly update.

“So not necessarily aged care – these people are definitely looking at selling their huge houses and shifting into [smaller accommodation] so they’re going to take the opportunity to put $300,000 into their super.

“They’re definitely not aged pension clients.

“But it sounds like there are people at the upper end of the scale who might be looking at it if they did sell their home, they’d be parking their proceeds outside super ordinarily, generating income and paying marginal tax rates on it, where they’d at least be able to stick a slice into super and get 15 per cent.”

She said the new downsizer contribution would not drive people to sell their home but as people reached an age where they consider selling their home and look to place those proceeds somewhere, this is where the industry will likely see an increase in contributions via this opportunity.

Mansell also reminded advisers that SMSFs would need to ensure the trust deed allowed for this type of contribution to be made.

“A lot of deeds are pretty broad nowadays where it says it will allow what the legislation allows but if you’ve got the opposite of one of those deeds where it is quite prescriptive, you might have to look at amending your deed,” she said.

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