An SMSF technical specialist has confirmed the rules requiring a person to prove a particular property was their main residence at some stage during the ownership period before a downsizer contribution can be made are uncompromising in nature in some circumstances.
To illustrate this point, Accurium senior SMSF educator Anthony Cullen provided an example where a child wanted to make a downsizer contribution from the proceeds of sale from an inherited property they had not lived in.
“[We had a situation] that came across our desk not too long ago where a client, who was old enough to potentially make a downsizer contribution, inherited a property from their parents once the parents had deceased. There was [also] a right to occupy the property by the step-parent,” Cullen explained.
“When the step-parent passed away, the adult child then looked to sell the property and so the question came up that there was a right to occupy by the step-parent, they were in [the property] for over 10 years, so my client, the adult child, has owned the property for over 10 years, can they make a downsizer contribution.”
However, he revealed the situation did not allow his client to make this type of contribution.
“Where that particular scenario fell down was that even though [the client] might have lived with their parents in that house in their late 20s or early 30s, at no stage during the ownership period of the adult child did they live in the property and could have called it their main residence,” he told attendees of a technical webinar he hosted for practitioners today.
“You have to be able to identify that it is your main residence at some stage through your ownership period [before you can be eligible to make a downsizer contribution].”
