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Timing of Downsizer contributions

Updated: Jan 13

Downsizer contributions have a number timing considerations to factor into your planning.

In summary, the 5 main Downsizer Contribution rules are:

  1. The home is a qualifying dwelling such as a home, unit or apartment. It must meet the CGT main residence exemption.

  2. You are aged 55 or over from 1 Jan 2023

  3. The home was owned by you or your spouse for at least 10 years prior to sale

  4. The downsizer contribution is made within 90 days of change of ownership.

  5. The contribution is made using the required ATO form.

Other than the rules outlined above, there are a few things to be aware of:

Once only opportunity: You can only use the downsizer contribution once off for one downsize event. The ATO has one of the conditions of a downsizer as "You have not previously made a downsizer contribution to your super from the sale of another or from the part sale of your home." So if you don't use up all of the Downsizer Contribution limit, then it expires. Under the current rules, you can not use the balance in a later property sale.

Time is ticking: Once you settle your home sale, you only have 90 days to make the downsizer contribution. Fail to meet those dates and penalities could apply if you have also maxed out your non-concessional contributions. It is important to understand the relevant dates and to comply with them.

Timing of contributions: If you are close to the Total Super Balance cap of $1.7m each then timing your contributions could be beneficial. The Total Super Balance cap is calculated at the end of the financial year for the next year so contributing before 1 July could restrict your ability to contribute using non-concessional contributions the following year. Looking at your whole picture is important and could provide significant benefits.

Turning 75? You may be over 75 years old and make a downsizer contribution. This is not the case with the non-concessional contributions. So if you are approaching your 75th birthday, combining non-concessional and downsizer contributions could be an effective strategy to maximise your super balance.

55 but not retired? If you are 55 years old but not yet retired, you will be subject to the preservation rules and will have limited access to the funds you contribute until you retire.

Superannuation can provide a very tax effective environment to grow your wealth and to fund your retirement however tripping on the rules can be costly. If you would like to learn more about strategies to maximise your superannuation and to ask any quesitons you have, sign up for our upcoming webinar below or give us a call 02 8013 5205.

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