Residential Property

Part sales of property eligible for downsizer

downsizer partial sale

Retirees can make downsizer contributions with the partial sale of property after an investing firm sought clarity on the issue from the ATO.

Retirees looking to make use of downsizer contributions into superannuation will be able to do so even if make a partial sale of their home, but will be unable to access the downsizer provisions again when selling the remainder of the property, according to an SMSF legal expert.

DBA Lawyers principal Dan Butler said efforts by fractional property investment firm DomaCom to seek ATO guidance in regards to its Seniors Equity Release Platform, which allows a retiree to sell part of their home for cash, had clarified the regulator’s stance and created new opportunities for retirees and their advisers.

“DomaCom applied to the ATO for administratively binding advice (ABA) on the basis that people might be prepared to sell part of their home and questioned if that would qualify for downsizer,” Butler said as part of a recent webinar presented by the legal firm.

“There was no formal recognition of this issue before the ABA was issued by the ATO. The explanatory memorandum [to the legislation that introduced the provisions] did confirm that would be the case, but we had no confirmation from the ATO.

“We now have a position from the ATO that a downsizer contribution does apply for a part disposal of a home, which might provide people with more flexibility to use these types of products or transferring property between spouse to spouse.

“You can, however, only make one disposal of an interest in a property, so if you only dispose of a part interest, that is the only disposal allowed and you cannot have a second bite of the cherry here.”

He said the part disposal would have no impact on other aspects of the downsizer contribution provisions and any contributions made from a part disposal would still not be counted to concessional or non-concessional contribution caps.

The contributions would still be capped at $300,000 per spouse and tested in a superannuant’s total superannuation balance, and could be made as several contributions over a period of 90 days from settlement of the property.

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