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Downsizer scheme

Under the super downsizer scheme a person aged 65 or over could sell their primary residence and make a contribution of up to $300,000 of the sale proceeds into their super.

It has previously been thought that the entire home must be sold to qualify. However, the ATO has since confirmed that even a part disposal of an interest in a primary residence is eligible for making a super downsizer contribution.

This article will explain the situation and how the ATO confirmation came about.

Josh Montebello, Maddocks Lawyers

Downsizer scheme

Under the 2017-2018 Budget, the Australian Government announced that from 1 July 2018, eligible people aged 65 or over (eligible people) can contribute up to $300,000 from the proceeds of selling their home (Scheme). Such a contribution has not been subject to concessional or non-concessional contribution caps and therefore can be made when the member's balance is in excess of $1.6 million. Our earlier article on downsizer contributions can be found here.

Nevertheless, a large proportion of retirees have expressed a desire to access the Scheme but still remain in their home. Further, COVID-19 has decreased the retirement incomes of many eligible people due to reduced investment returns, lower interest rates and lower dividend yields.

The ATO has clarified the position in response to an application for advice from a taxpayer, concerning the Scheme's parameters. It was previously considered that eligible people had to sell or dispose of their entire home to be eligible for the Scheme.

However, in a media release, a taxpayer has confirmed that it received ATO Administrative Binding Advice confirming that eligible people may make a part disposal of their home and be eligible for the Scheme.

This means that SMSF retirees can sell a part interest in their home and make a downsizer contribution while remaining in their home (under arrangements agreed with the purchaser of the part interest).

As the ATO's Administrative Binding Advice is not publicly available, and until the ATO publishes guidance which can be relied upon by SMSFs, it would be advisable for SMSF trustees and their advisors to seek a ruling or SMSF advice in relation to their own circumstances.

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

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