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Can A Downsizer Contribution Strategy Assist Australian Expats? – Returning to Australia and looking to play catch up on your super balance? Here’s what you need to know about the Downsizer Contribution strategy.

 

What is a Downsizer Contribution & How Can Australian Expats Benefit?

 

The downsizer contribution allows individuals who meet certain eligibility to contribute up to $300,000 (or $600,000 for couples) from the sale of their existing or previous main residence into superannuation, and the contribution does not count towards their contribution caps.

This may be useful if you’ve already contributed up to your contribution caps recently, for example the non-concessional contribution cap of AUD$110,000 per financial year, or AUD$330,000 under the bring forward arrangements.

It also allows you to contribute to super even if your total super balance exceeds $1.7M, which might otherwise be prohibited.

To be eligible to make a downsizer contribution, you must answer yes to all the following:

  • You have reached the eligible age at the time you make a downsizer contribution. From 1 July 2022, this is 60 years old or older.
  • Your home is in Australian and was owned by you or your spouse for 10 years or more prior to the sale.
  • The proceeds from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption. This means you would need to sell the property as an Australian tax resident and cannot be an investment property that was never your main residence.
  • You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making your downsizer contribution.
  • You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
  • You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.

 

Latest Update On Downsizer Contributions For Australian Expats

 

In the lead up to the Australian Federal election in May 2022, the previous government announced it would reduce the age eligibility further to age 55, which received support from the then Opposition.

Given the bi-partisan support, it is expected that Parliament will pass the Bill and it will be assented to take effect from 1 October 2022.

This proposed reduction in the age eligibility to 55 (after only recently being reduced from age 65 to 60 effective 1 July 2022) offers a multitude of planning opportunities for Australian expats returning home and beginning to prepare for retirement.

Superannuation is seen as one of the key retirement pillars in Australia. This is due to the concessional tax treatment of investment earnings when in accumulation phase (maximum tax rate of 15%), and exempt tax treatment of investment earnings when in pension phase.

If you’re returning to Australia after an extended expat stint with an underfunded superannuation balance, the Downsizer contribution presents a great opportunity for Australian expats to boost their super savings for both you and your spouse.

Careful planning should be considered when it comes to the timing of the sale of your existing or previous main residence, as well as meeting all the required criteria.

It is advisable to seek professional advice beforehand to ensure you’re eligible to utilize the strategy effectively.

 

https://www.ato.gov.au/General/New-legislation/In-detail/Super/Flexible-super—reducing-the-eligibility-age-for-downsizer-contributions/

https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Downsizer-contributions-for-individuals/

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