Downsizer Contributions - eligibility age now reduced to 55!

From 1 January 2023, the age at which you can be a beneficiary of a downsizer contribution has been reduced to age 55 (previously it was age 60 and some years ago it was age 65).  This change has been implemented by Treasury Laws Amendment (2022 Measures No 2) Act 2022 (No 84 of 2022).

The eligibility age for downsizer contributions refers to the age of the beneficiary of the contribution, that is the age of the individual for whom the contribution has been made and does not refer to the age of the individual making the contribution.  For example, Bert and Jane are married and have just sold their family home which had been registered in Bert’s name.  As Jane turned age 55 on 15 January 2023, Bert can make a downsizer contribution for her.  As Bert is aged 52, he cannot make a downsizer contribution for himself as he does not satisfy the eligibility age.  However if Bert was aged 56 he could make a downsizer contribution for himself.

Downsizer contributions are not subject to the normal non-concessional contributions and are not subject to a maximum age limit.  Unfortunately, they are subject to other requirements, such as the contributions must generally be made within 90 days of the sale of the family home (or former family home), the family home (or former family home) must have been owned for 10 or more years and the total amount of downsizer contributions for any individual cannot exceed $300,000.

This change will give individuals and couples a greater period in which to downsize and transfer their wealth into the superannuation system. 

Before you make any downsizer contributions, you should consult with your advisers to ensure that all of the requirements to make the contributions are satisfied and that the benefits and negatives of making such contributions are understood.  One particular negative which must be considered is if the family home which has been sold was the current family home, then moving value from the family home into super will have an adverse impact on both the assets test and income test for the age pension.  This adverse impact arises as value has been transferred from an exempt asset (for age pension purposes) into an asset which is counted for asset test purposes and which will be subject to income deeming for income text purposes.

For any further information regarding this article please call SUPERCentral on 02 8296 6266 or email info@supercentral.com.au.