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Treatment of Downsizer Contributions

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Are Downsizer Contributions made to the "Tax-free Component" or "Taxable Component" of the target Super account?

There seems to be a lot of detail about the eligibility, responsibilities, backing out of errors but no simple statement about this most critical action.

The relevant Act says Downsizer Contributions are definitely not Non-concessional Contributions but are appropriately dealt with through the non-concessional contribution "framework" which is not  transparent for ordinary people to review or to consider the consequences of.

Does this question have a single and simple answer for ALL eligible contributors or are there some individual factors that determine the appropriate Component to add it to?    And if so, can some examples be given (like other examples in the overall Downsizer pages)?

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Hi @Russell222,

 

Thanks for your patience whilst we received specialist information regarding your query.

 

In effect the downsizer contribution is a personal contribution but it does not count towards the concessional or non-concessional contribution caps for the purposes of the downsizer legislation only.

 

It is confirmed as a personal contribution by the following facts:

  • If a downsizer contribution does not meet the eligibility requirements, the fund assesses whether the contribution could have been made as a personal contribution under the contributions acceptance rules and re-reports the amount as a personal contribution.
  • The downsizing measure only allows non concessional contributions; and a deduction for personal super contributions is not allowed for the downsizer contribution because that would make the contribution concessional. (See Treasury website at https://static.treasury.gov.au/uploads/sites/1/2017/08/c2017-t200724-Downsizers-fact-sheet.pdf)

The tax you pay on your super contributions generally depends on whether the contributions were made before or after you paid income tax.

 

At the point of withdrawal from your fund the amount will be treated as a personal contribution. These withdrawals are usually tax-free. You can find information about how your super withdrawal will be taxed can be found on our website.

 

Thanks, JodieH.

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Hi @Russell222,

 

Welcome to our Community!

 

We're checking some information with a specialist area about your query and we hope to get back to you soon with a response.

 

Thanks, JodieH.

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Hi @Russell222,

 

Thanks for your patience whilst we received specialist information regarding your query.

 

In effect the downsizer contribution is a personal contribution but it does not count towards the concessional or non-concessional contribution caps for the purposes of the downsizer legislation only.

 

It is confirmed as a personal contribution by the following facts:

  • If a downsizer contribution does not meet the eligibility requirements, the fund assesses whether the contribution could have been made as a personal contribution under the contributions acceptance rules and re-reports the amount as a personal contribution.
  • The downsizing measure only allows non concessional contributions; and a deduction for personal super contributions is not allowed for the downsizer contribution because that would make the contribution concessional. (See Treasury website at https://static.treasury.gov.au/uploads/sites/1/2017/08/c2017-t200724-Downsizers-fact-sheet.pdf)

The tax you pay on your super contributions generally depends on whether the contributions were made before or after you paid income tax.

 

At the point of withdrawal from your fund the amount will be treated as a personal contribution. These withdrawals are usually tax-free. You can find information about how your super withdrawal will be taxed can be found on our website.

 

Thanks, JodieH.

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Newbie

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Oops – looks like we’ve made this more complicated than it was before.  And I was looking for a simple rule that would apply to all Downsizer Contributions.

You are telling me:  “At the point of withdrawal from your fund the amount will be treated as a personal contribution.  These withdrawals are usually tax-free.”    But the super fund would be obligated to record such “personal contributions” and they must make such records clear to me ongoing to honour my right to that information.

Normally, the “Tax free Component” and “Taxable Component” are very clearly defined and are reported by every superannuation fund to give a clear position to members on these Components of their accounts.  My original question was quite specific and concerned these clear words from the normal superannuation glossary. 

In fact, the last link you have provided in your response tells how tax is paid on super and the third link in that page details taxing of super withdrawals that is totally dependent on the Tax free and the Taxable Components of your account.  There is even a clear statement on that page:  “To understand how your super payment will be taxed you need to know whether the money in your super account is tax-free or taxable when you withdraw it.”  Here’s the specific link:

https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/withdrawing-your...

Maybe you are continuing to receive specialist information on this topic and this is not the end of your response.  I hope so because many people must be keen to get an answer to this simple question and are wondering about an apparent reluctance to be specific:

Are Downsizer Contributions made to the "Tax-free Component" or "Taxable Component" of the target Super account?

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Newbie

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Good question. I will be also be waiting for an answer. 

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At last the ATO web site has been updated to answer this question.

https://www.ato.gov.au/Individuals/Super/Super-housing-measures/Downsizing-contributions-into-supera...

says:

Downsizer contribution amounts

If eligible, you can make a downsizer contribution up to a maximum of $300,000 (each). The contribution amount can't be greater than the total proceeds of the sale of your home.

The downsizer contribution would form part of the member's tax free component held in the fund.     (my emphasis)

Great - at least the super fund internal treatment is now clear to everyone --- Thank you.