On 21 July 2017, Treasury released draft legislation to implement the 2017-18 Federal Budget proposal to allow people aged 65 or over to make additional non-concessional contributions up to $300,000 from the proceeds of selling their home from 1 July 2018. The details are set out in the Exposure Draft – Treasury Laws Amendment (Reducing Pressure on Housing Affordability) Bill 2017.
Proceeds from sale of home
The measure will apply to capital proceeds received from the disposal of an ownership interest in a dwelling in Australia (excluding a caravan, houseboat or mobile home) that is a main residence (partial or full) for CGT purposes and has been held for a minimum of 10 years. Either the individual or their spouse must have owned the home for the 10 years up to the point of sale. If the person’s spouse is not on the title with them, both can still make a downsizer contribution.
Downsizer cap
This downsizer contribution cap of $300,000 will be in addition to the existing caps. It will also be exempt from the contribution rules for people aged 65 and older (work test for 65-74 year olds, and no contributions for those aged 75 and over), and the restrictions on non-concessional contributions for people with total superannuation balances above $1.6 million.
The maximum downsizer contribution is $300,000 per contributor (ie $600,000 for a couple) although the contribution must come from the capital proceeds of the sale price. For example, if a couple sells their home for $500,000, their combined downsizer contributions are limited to $500,000 (in any combination, but no more than $300,000 for either of them). If an individual sells a home for $250,000, her or his downsizer contributionis limited to $250,000.
The contribution (non-deductible) must be made within 90 days after the home changes ownership (generally the date of settlement). A person can make multiple downsizer contributions within the 90 days, provided that they do not exceed the $300,000 cap and met all other criteria. However, a person cannot make a subsequent downsizer contribution, even if they sell another qualifying house.
Note that a person is not required to make any subsequent purchase of another dwelling after selling their home and making a downsizer contribution. So a downsizer can move into any living situation suitable for them, regardless of its size or cost. See also the Treasury fact sheet, Reducing barriers to downsizing.
Social security implications
While the family home is currently totally exempt from the Age Pension assets test, any sale proceeds contributed to superannuation will count toward the assets test.
Date of effect
Subject to final legislation, downsizer contributions will only apply to home sales where the contract of sale is entered into on or after 1 July 2018.