An SMSF technical specialist has alerted advisers to the relevance of the 90-day rule with regard to downsizer contributions and the benefit their clients might be able to enjoy from the looming legislation change to take effect in this area from 1 July 2022.
During a technical seminar today, Smarter SMSF chief executive Aaron Dunn specifically referred to a situation whereby a fund member is currently 61 years old and the settlement of the sale of their primary residence has only occurred on 12 May to illustrate this point.
In this situation, the person in question is not currently eligible to make a downsizer contribution as they are under 65, but the rules governing the timing of when this type of contribution must be made can work in their favour, Dunn said.
The law dictates a downsizer contribution is required to be made within 90 days of the change of ownership of the property.
“[In this case] settlement has taken us through to early May and therefore we are going to get to the 1 July prior to the 90-day timeframe, which would then allow them to make an additional contribution into super under the downsizer contribution rules,” Dunn said.
“If you have clients in this situation thinking about their ability to make [a downsizer] contribution, this timing window has been presented to you [so strategically it is something to consider].”
According to Dunn, there are other legal considerations that make holding off making a downsizer contribution until the new financial year easier to do.
“If an individual qualifies [for this type of] contribution, there are a few things to note here. The contribution does not need to come from the proceeds of sale,” he noted.
“So if we meet all the qualifying conditions and … the disposal allows us to make that contribution, it doesn’t mean that we actually have to use the specific cash from the proceeds of that sale.”