ATO finding “common mistakes” with Downsizer Contributions

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The ATO is finding some common mistakes with downsizer contributions, and warns that failing to meet the criteria means the contribution could be counted against contribution caps.

The downsizer contribution started on 1 July 2018, and allows older Australians to contribute up to $300,000 from the sale of their home into superannuation. Subject to meeting the eligibility requirements, downsizer contributions aren’t treated as non-concessional contributions and don’t count against contribution caps – though they still count for the member’s Total Super Balance and Transfer Balance Cap.

Government data has more than $1 billion being contributed into superannuation via downsizer contributions.

The ATO says it is seeing some common mistakes with the downsizer contribution, including where the individuals haven’t owned their home for 10 years or more before the sale, the date of the contract of sale isn’t on 1 July 2018 or after, and the proceeds aren’t “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”.

“It is important that your client knows they are eligible before making a downsizer contribution. If a contribution is found to be ineligible, it could be re-reported as a non-concessional contribution and your client may receive an excess non-concessional contribution determination. False and misleading penalties may also apply,” warns the ATO.

The ATO has more information about making a downsizing contribution on its website.

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