Individuals who receive proceeds from the sale of a property that qualifies for downsizer contributions provisions, but the amount is under $300,000, should consider delaying putting the money into superannuation to allow them to maximise the benefits of this strategy, a specialist lawyer has suggested.
“If the proceeds are less than $300,000, there is some strategy work that needs to be done. So if we are looking to work out how to maximise our downsizer contributions for our clients, we need [to determine] is there going to be another property potentially that they could claim the downsizer contribution for at a later stage,” Cooper Grace Ward partner Clinton Jackson said during his firm’s Annual Adviser Training Day and SMSF Conference last week.
“If so, we then need to work out should we be triggering the downsizer rules for only one spouse or, if the proceeds from [the sale of] that later are going to be more significant, maybe not claiming the downsizer contributions on this occasion to be able to maximise the downsizer contribution we can make at a later stage.”
Jackson took the opportunity to dispel some of the misconceptions regarding downsizer contributions as well, such as having to allocate money to the SMSF in one lump sum.
“Let’s say we have the cash in smaller amounts, we can have a $200,000 contribution made straight away, and then maybe a couple of days later [transfer the remaining] $100,000 in relation to that one property,” he said.
Further, Cooper Grace Ward partner Scott Hay-Bartlem clarified how the downsizer contribution can be funded.
“You don’t have to make the contribution from the sale proceeds. So you can have other money sitting around [to make the contribution],” Hay-Bartlem said.
“We’re not going to have to trace the sale proceeds went here and then off into the super fund. It doesn’t matter where the money has come from.”
One year after the introduction of the downsizer contributions provisions, $1 billion had been added to superannuation funds by around 4250 with many contributing less than the $300,000 limit.