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Downsizer contributions top list of adviser queries
The new ‘downsizer’ contributions strategy that allows clients to top up their super from the proceeds of the sale of their home, was the top adviser query in the September quarter with close to 3,000 enquiries received, according to BT Financial Group’s technical team.
The interest comes off the back of the introduction of the downsizer strategy which has been available since 1 July 2018, BTFG said. The strategy allows clients aged 65 or older to contribute up to $300,000 or $600,000 combined, if a member of a couple, from the sale proceeds of their main residence into their super.
BTFG Advice technical consultant, Tim Howard, said one of the key areas to note when considering this strategy is timing.
“The client must make their downsizer contribution within 90 days of receiving the proceeds from the sale of their home to their super fund. Generally, this would mean 90 days from settlement,” he said.
Howard said that clients can make multiple contributions from the sale of the primary residence, provided it doesn’t total more than $300,000 each.
Also, downsizer contributions form part of a client’s tax-free component within super and will be taken into account for determining eligibility for the Age Pension, he said.
Importantly, Howards said a client’s contract of sale must have been entered into from 1 July 2018 and the property must also have been owned by the individual or their spouse for 10 years or more prior to the sale.
“Interestingly you don’t have to have lived in the home for the entire ownership period. So long as you are claiming at least a partial exemption from capital gains tax under the main residence exemption, your property meets the main residence criteria for a downsizer contribution,” he said.
“Given there is some complexity involved in determining eligibility and applying this strategy, it makes sense to seek professional guidance for help and peace of mind.”
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