SMSF members can benefit from selling their family home beyond materially boosting their superannuation balance from making a downsizer contribution, according to a superannuation technical specialist.
Smarter SMSF education and technical manager Tim Miller said the lowering of the eligibility age for downsizer contributions had expanded the strategies available to super fund members and it was a particularly useful option for people with balances below $500,000.
Speaking during a recent presentation hosted by SuperGuardian, Miller gave an example of an SMSF member, Helen, who sells a house at age 60 and because she both owned and lived in it, she is able to make a downsizer contribution, as well as using the proceeds for other contributions.
“From Helen’s point of view, she could actually make a personal deductible contribution to offset any capital gains tax liability on the property and because it would qualify for downsizer, she could also utilise $300,000 of the proceeds to enhance her balance,” he said.
“Of course, that is going to knock her out from any carry-forward catch-up in the future, even if she went through a contribution splitting process.
“However, if Helen didn’t use the full carry-forward amount and settlement was late in the financial year, the 90-day period to make the downsizer payment would finish in the new year.
“As such, she might in certain instances make the contribution, get the downsizer contribution in the next year and if her balance was below $500,000, be subject to other strategies such as being able to utilise unused concessional amounts in the 2025/26 year.”
He said while it was possible to stack contribution strategies, there was no requirement to use the proceeds from the sale of a house as a downsizer contribution where a member may sell their home again later in life.
“There’s nothing to suggest we should use downsizer when we sell property between age 55 and 65 if we then purchase another property and could avail ourselves of downsizer at a later point in time,” he said.
“So, in the present, we use downsizer as a top-up strategy once we’ve started using our superannuation from a retirement-phase point of view during our 60s and 70s, then using another downsizer opportunity where we’ve got total super balance space or general transfer balance cap space.
“A lot of us questioned why was downsizer made available for people aged 55 apart from being an election promise at the last election.
“Well, now we have choice and the options to determine whether something should be downsized or turned into non-concessional contributions in pre-retirement years where we’re more likely to have less than $1.9 million in a total super balance.”
