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Reducing downsizer contribution age to 55
Article published on: 04-08-2022
On 3 August 2022, the Government introduced legislation to reduce the downsizer contribution eligibility age from 60 to 55. It is important to note that while the original commencement date proposed during the election campaign was 1 July 2022, the Bill introduced to Parliament states that the change will take effect on the first 1 January, 1 April, 1 July, or 1 October after the Bill receives Royal Assent.
From a practical perspective, this means that the change (if legislated) may effectively facilitate downsizer contributions for individuals aged 55 or under during the 2022/23 financial year. Contributions should not, however, be made in anticipation of the passage of legislation, or before the commencement date, as determined above, or the contribution will be an ineligible downsizer contribution.
SIS Regulations will also need to be amended to give effect to this change, to amend the contribution acceptance rules. All other eligibility requirements for downsizer contributions will remain unchanged.
Advice considerations
Contributions must be made within 90 days of settlement. It is the individual’s age at the time the contribution is made that is tested. This means that the date the contract of sale is exchanged or settled does not need to have been after the commencement date of the measure.
While the ATO has discretion to provide an extension of the 90 day timeframe, it has explicitly stated that an extension will not be granted merely to enable the individual to meet the age-based eligibility rules. For clients wishing to make a downsizer contribution prior to the passage and commencement of new legislation, the eligibility age reduced from 65 to 60 from 1 July 2022.
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