The ATO has made it clear that individuals can only access the downsizer scheme for the part disposal of a home once, and that further part disposals of the same property will not be eligible for downsizer contributions.
ATO provides further clarity on part disposals and downsizer
Earlier this week, Accountants Daily sister brand SMSF Adviser reported that fractional property investment company DomaCom had received administrative binding advice from the ATO confirming that a part disposal of a home can be used for downsizer contributions.
The administrative binding advice means that a person can dispose part of their home under DomaCom’s Senior Equity Release platform and be eligible to make a downsizer contribution.
The downsizer scheme, which has been available since 1 July 2018, allows individuals who are 65 years or older and meet the eligibility requirements to make a contribution to their superannuation from the proceeds of selling their home of up to $300,000.
In order to be eligible, the contribution must be from the proceeds of selling a home which meets the partial or full capital gains tax exemption rule and the home must have been owned by the member or their spouse for 10 years prior to the sale. The home cannot be a caravan, houseboat or other mobile home.
Members must also provide their super fund with a “Downsizer contribution into super” form either before or at the time of making their downsizer contribution. The downsizer contribution must be made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
Speaking exclusively to SMSF Adviser, ATO assistant commissioner Sonia Corsini said it is important that individuals who are thinking about disposing a part interest in a property, and using the proceeds to make a downsizer contribution, are aware they can only access the downsizer scheme once.
“In general, where an individual disposes of an interest in their property, if it’s a part interest, they can make a contribution under the downsizer provisions. [However], if they later choose to dispose of the remaining interest in their property, they can’t then use the proceeds of that sale in the downsizer scheme. They’re limited to only accessing that scheme once,” Ms Corsini explained.
This is the case, she said, even where the individual has not fully utilised the $300,000 cap for downsizer contributions.
“If the value of the proceeds of the part interest are up to that $300,000, then that might be a moot point, but if, for example, the amount was lower and the sale proceeds were $100,000 and that’s what they contributed, they can’t then top up the remainder when they later sell the remainder of that property,” she said.
Where individuals access the downsizer scheme, Ms Corsini noted that they can make more than one contribution, but only from the proceeds of one disposal of a part interest.
“They can’t then go back and make further contributions where there’s a subsequent disposal,” she stated.