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Super downsizer scheme: common errors

The super downsizer scheme started on 1 July 2018 and has allowed older Australians to sell their homes and contribute up to $300,000 of the proceeds from the sale into super.

Recent figures from the ATO show that more than 5,000 people Australia-wide have made this type of contribution, with 55% being made by females.

The ATO says it is seeing some common mistakes around eligibility for the downsizer measure. You can only make downsizing contributions for the sale of one home. You can’t access it again for the sale of a second home. Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension. If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

Existing contribution caps and restrictions do not apply to downsizer contributions. If you meet the eligibility requirements, a downsizer contribution will not be treated as a non-concessional contribution and will not count towards your contributions caps.

It will however count towards your:

  • total super balance when it is recalculated on 30 total super balance when it is recalculated on 30
  • transfer balance cap, and can limit the amount that you can transfer to and hold in your retirement phase superannuation accounts.

The ATO also reminds taxpayers that it can pay to make sure that:

  • you or your spouse must have owned the home for 10 years or more prior to sale
  • the date for contract of sale must be on or after 1 July 2018
  • the proceeds from the sale of the home must be either exempt or partially exempt from capital gains tax under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset.
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