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Find out what your peers are asking – based on real-life questions submitted to TechConnect.
By Scott Quinn, Senior Technical Services Manager
Q: Tim (age 71) has recently married Sarah (age 66). She has just sold her Australian investment property, which she owned for at least 10 years. Sarah lived in this property for the first 3 years. Tim has never lived in this property.
Can both Sarah and Tim qualify for downsizer super contributions?
A: Sarah satisfies all the requirements to make a downsizer super contribution (see checklist following).
One of the eligibility requirements for the downsizer super contributions is that the capital gain or loss from the sale of the property is at least partially disregarded under the main residence capital gains tax (CGT) exemption (or would be if it wasn’t a pre 20 September 1985 asset).
A spouse that doesn’t have an ownership interest may satisfy this requirement if they would have been entitled to at least a part main residence exemption if they did have ownership in the property. This requires the spouse to have lived in the property.
If we assume Tim did have an ownership interest in the property, he would not be eligible for any main residence exemption as he never lived in the property. Therefore, Tim does not satisfy the eligibility criteria for downsizer super contributions from the sale of this property.
As Sarah is less than age 67, the work test does not apply. She can make additional voluntary contributions to superannuation over and above downsizer contributions. These additional contributions might include non-concessional and/or concessional contributions subject to contribution caps; and in the case of concessional contributions, there should be a need for a tax deduction. If Sarah doesn’t satisfy the work test or work test exemption, any additional voluntary contributions would have to be made prior to her 67th birthday. The work test or work test exemption does not have to be satisfied to make a downsizer super contribution.
We provide a downsizer checklist in our Strategy Guide - Downsizer contributions available on Fast Fact Finder.
For the purpose of exploring this specific example, we have modified the original checklist. You should apply the checklist to each member of a couple to determine their eligibility to make a downsizer super contribution.
Using the downsizer Checklist:
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
DisclaimerThe information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.