Financial Planning, Retirement, Strategy

Downsizer measure tops adviser queries

The new downsizer contribution, allowing clients to top up their super from the proceeds of the sale of their home, has come out as the number one adviser query in the September quarter, BT Financial Group’s (BTFG) technical team has said.

The interest has come off the back of the introduction of the downsizer measure on 1 July.

BTFG’s advice technical team fielded close to 3000 queries between July and September.

“The downsizer strategy has received the most attention in terms of interest from advisers and clients, given its availability as a contribution strategy since 1 July this year,” BTFG advice technical consultant Tim Howard said today.

“One of the key areas to note is timing when considering this strategy – the client must make their downsizer contribution within 90 days of receiving the proceeds from the sale of their home to their super fund.

“Generally, this would be 90 days from settlement.”

Howard said clients can make multiple contributions from the sale of the primary residence, provided they do not total more than $300,000 each.

The downsizer contributions form part of a client’s tax-free component within super and will be taken into account for determining eligibility for the age pension, whereas the value in the main residence is exempt.

“You don’t have to have lived in the home for the entire ownership period. So long as you are claiming at least a partial exemption from capital gains tax under the main residence exemption, your property meets the main residence criteria for a downsizer contribution,” Howard added.

“Given there is some complexity involved in determining eligibility and applying this strategy, it makes sense to seek professional guidance for help and peace of mind.”

The measure allows clients aged 65 or older to contribute up to $300,000 each or $600,000 combined as a couple from the sale proceeds of their main residence into super.

A client’s contract of sale must have been entered into from 1 July 2018, and the property must also have been owned by the individual or their spouse for 10 years or more prior to the sale, Howard noted.

Previously, Heffron SMSF Solutions technical services manager Leigh Mansell said the downsizer measure will appeal to and benefit a specific type of SMSF trustee.

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

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