What evidence do you need for downsizer contributions?

We recently received a question from a YourLifeChoices member asking what record they must keep and evidence they needed to provide in relation to downsizer contributions into their super.

We asked superannuation expert Michael Hallinan, from SUPERCentral, who was able to provide us with the following explanation.

Bill and Mary have just successfully made downsizer contributions of $250,000 and $290,000 to their superannuation fund.

They must provide proof that they had attained age 65 at the time the downsizer contributions were made to the fund – this would require a copy of a driver’s licence, age card or passport.

The age 65 requirement applies to the beneficiary of the downsizer contribution and not the maker of the contribution. However, as they are both beneficiaries of downsizer contributions, they must have attained age 65 before the downsizer contribution was made.

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If Bill were 10 years younger, he could still make a downsizer contribution for Mary as she was the beneficiary of the contribution and she had attained age 65 by the time the contribution was made.

However, Bill could not make a downsizer contribution for himself (too young) and also Mary could not make a downsizer contribution for him (again too young).

In the May 2021 Budget, the government has proposed that from 1 July 2022, this age 65 requirement will be replaced by an age 60 requirement.

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They will also need to provide proof that they have provided their tax file numbers (TFN) to their superannuation fund.

In general, a super fund cannot accept a contribution from a member or by a third party for a member (for example, a downsizer contribution made by Bill for Mary) unless the beneficiary of the contribution has provided their TFN to the fund.

They must also provide proof that the fund permits the trustee to accept downsizer contributions and that the ATO downsizer contribution form has been signed by the member.

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The form also contains space to include the amount of the downsizer contribution. If the amount exceeds $300,000 (the maximum amount of a downsizer contribution), the excess above $300,000 will be treated as a personal contribution.

Bill and Mary must also provide proof that the contribution was sourced from the sale proceeds of a qualifying Australian dwelling (one that satisfies the main residence exemption), which has been owned for 10 years or more and the contribution is made within 90 days of settlement of the sale.

Strictly, the downsizer contribution does not have to be sourced from the sale proceeds though, typically, it will be.

The legislative requirement is that the downsizer contribution must be made within 90 days of settlement of the sale of the qualifying dwelling and the amount of the contribution must not exceed the capital proceeds of the sale.

They must also provide proof that there has not been an earlier downsizer contribution made and proof that the contribution satisfies the various technical requirements of the rules.

Have you considered downsizing to take advantage of the downsizer contribution into super? Why not share your thoughts in the comments section below?

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben