Contributions, Regulation

Downsizer timeframe now changed

downsizer contributions

An impending legislative change means individuals do not have to forgo making downsizer contributions even if they are not made at age 60.

An SMSF technical specialist has suggested the change to the downsizer contributions provisions to be implemented on 1 July has potentially altered the time horizon applicable to putting monies into a fund under these rules.

Superannuants will be able to make downsizer contributions from the age of 60 onwards from 1 July and SuperGuardian education manager Tim Miller noted this has opened up the opportunity to strategically make this type of contribution later rather than earlier.

“[If a person sells their home] in the year they turn 60, then [perhaps they shouldn’t] use the downsizer or contemplate not utilising it at that point in time, but rather make a non-concessional contribution or utilise the [unused] concessional [contribution amount] carried forward to offset other income if they’ve got less than that [total super balance] $500,000 [threshold],” Miller said during a technical webinar held today.

He pointed out this would allow an individual in this situation to invoke a strategy allowing them to, for example, take advantage of the amendment to the work test and use the non-concessional contribution bring-forward rules in three-year segments without necessarily sacrificing their ability to make a downsizer contribution in their lifetime.

“Once we hit [age] 70 there is a very strong chance that [the individual] has now been in a new property for that qualifying 10-year period that we have to hold and reside in from a primary residency point of view,” he noted.

“We can [then] say if [the person] is looking to downsize again, because [they] are becoming less active post that early retirement stage, [they] can look to use the downsizer contribution [at that time].”

He reiterated taking advantage of the downsizer rules immediately at age 60 could exclude individuals from using other types of contributions, such as the unused concessional contribution carry-forward rules, should it result in a person’s total super balance exceeding any of the existing contribution thresholds – a situation that can be easily avoided.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital