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.