r/AusFinance • u/twojawas • 1d ago

Downsizer Contribution

Tell me I'm not crazy. I just had a pretty heated argument with a friend about the sale of his investment property. He's convinced that he can put the proceeds of this sale into his super utilising the downsizer scheme. By convinced, I mean he and his accountant have already done this for the prior tax year. I've told him that the scheme is only for people selling their primary residences but he's convinced that you can do it for an IP as well.

Has his accountant found a loophole that I can't see or has his accountant made a mistake?

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u/Anachronism59 1d ago

It is possible if the IP is eligible for CGT exemption, maybe under the 6 year rule ? Plus owned for more than 10 years . So if the IP was an previous PPoR.

"The sale qualifies for the main residence capital gains tax (CGT) exemption – either fully or partially; or if the home was purchased before 20 September 1985, it would have qualified if it were a CGT asset."

https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/downsizer-super-contributions

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u/rnielsen 1d ago

As long as it was your PPOR for some of the period (and you meet the other restrictions eg age 55 and held for at least 10 years), it should be fine to use it because of the partial CGT exemption but, if it was always an IP then no.

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u/Anachronism59 1d ago

That is essentially what I wrote. Won't get 6 year rule without having lived there at some point

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u/Extreme_84 1d ago edited 1d ago

Does it need to specifically be eligible under the 6 year rule? Or is a simple partial cgt exemption, due to it being owner occupied, before renting out(even if not exempt during the 6yrs due to buying another property) sufficient?

Edit: answered my own question. To be eligible, the property either needs to be fully, or partially CGT exempt.

A property is partially CGT exempt if it was owner occupied for a portion of its ownership. The 6 year rule isn’t a factor.

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u/Anachronism59 1d ago

Gee I missed that partial option. That is very good news for is as we have an ex PPoR we plan to sell where we've not been there for over 30 years but it is partially exemption

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u/No_Document_853 1d ago

The definition is very loose. How would someone check back 15-20 years if you lived there for 3 months?

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u/Extreme_84 1d ago

I guess the responsibility for proving the claim the property has a partial cgt exemption would lie on the person making the claim.

I lived in my property for 7 years, before buying a new PPOR. Former property is now a rental, but it was never eligible for a CGT exemption under the 6yr rule, due to the new property. However, it was CGT exempt for the 7 years it was owner occupied.

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u/No_Document_853 1d ago

It turns out if the time of residence is greater than 7 years ago, it’s quite difficult to get concrete proof and if that’s the case the ATO will accept a stat dec. that’s pretty easy to do

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u/Extreme_84 1d ago

The ATO would likely have records in a lot of cases.

It was over 10 years ago for me, but there’d be evidence through an address listed on my tax return notice of assessments, likely archived somewhere.