Second property meets downsizer 10-year rule

SMSF trustees whose property is acquired through compulsory acquisition can purchase a new property, classify it as their main residence, and still qualify for the 10-year criterion as per the downsizer contributions rules, according to an industry expert.

SuperConcepts SMSF technical specialist Anthony Cullen told attendees at the recent SMSF Association SMSF Expo in Melbourne that SMSF trustees and members can take the proceeds of their property that has been the subject of compulsory acquisition to purchase a new property and call that their main residence.

The downsizer contributions proposal was announced in the 2017 federal budget to address the housing affordability crisis. Under the measure, members can apply up to $300,000 of the capital proceeds from the disposal of their principal residence as a super contribution for themselves or their spouse.

One of the requirements is they must have owned the residence continuously for 10 years or more prior to the disposal.

Cullen said members must use the proceeds from the acquisition to buy another property before 30 June 2019 in order for the 10-year period of owning the main residence to continue.

“So I might have owned property number one for eight years, and then in a few years’ time when I’ve only held my second property for five years, I don’t make my 10 years,” he said.

“But if I take the first eight years from the first property plus the five years from the second property, I satisfy the 10-year rule.”

He also said while members must be 65 and over to make a downsizer contribution into their SMSF, they do not have to be 65 when they enter into the contract and settle the sale of their residential property.

“But you do have to make the contribution within 90 days of change of ownership, and we’re talking about settlement, which is normally seen as a change in ownership,” he noted.

“So as long as I turn 65 within 90 days of settling on that transaction I could potentially make the contributions if I satisfy all the other rules.”


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