How to model downsizing contributions to superannuation (a workaround)

In the 2017-18 budget, a measure was introduced to allow contributing the proceeds of downsizing the family home into superannuation.  This measure has not been automated in Pathfinder, so if you would like to take advantage of the measure, you will need to do the following workaround (note that it only applies for retail or industry super funds, not SMSFs).


StepDetails
1Make sure the individuals are eligible to use the scheme.

See the Australian Tax Office website 'Downsizing contributions into superannuation' page.

(or search for 'Downsizer Scheme')

2Decide which super fund should receive the funds

This workaround only works if the contributions are made to a retail or industry super fund. If the contributions will be made to an SMSF, please submit the case to the Optimo Financial SDS, where we will be able to control in whose name the contribution is made.

3Set-up and run a scenario without the downsizing contributions
  1. Set up your scenario, including the home sale and the new home purchase or rental expense (for more, see Family home)
  2. Solve the scenario and check the results
  3. Later, you can compare these results with the scenario that uses the downsizer scheme to quantify its benefit
4Work out how much to contribute

The results of the scenario without the downsizing scheme should help you calculate how much is available to contribute after the home sale.

You may want to do a contribution for more than one individual.

Also remember that you need to be within certain limits (as listed on the the Australian Tax Office website 'Downsizing contributions into superannuation' page.)

5Copy the scenario so you can add the downsizer contributions to it.Once you are happy with the results, copy the scenario so you can add the downsizer scheme (for more see How to make another scenario for comparison)
6Add the downsizer contributions to the new scenario.
  1. Go to the Cash flows & action items  sub-step (under the  Results  step on the top menu)
  2. Under Income enter an expense with the following details (this is the fund receiving the contribution):
    1. Type: Non taxable
    2. Name: Downsizing contribution
    3. Owner: Super fund which will receive the contribution
    4. Amount: amount calculated in the previous step
    5. Frequency: One off
    6. Start year: Year the home is sold
    7. Customise: Set the 'Index by' field to 'None'
    8. For more details about entering income, see Income.
  3. Under Expense, add an expense with the following details (this is the contribution being made):
    1. Type: Other
    2. Name: Downsizer payment
    3. Owner: Individual who is making the contribution
    4. Amount: amount calculated in the previous step
    5. Frequency: One off
    6. Start year: year the home is sold
    7. Customise: Set the 'Index by' field to 'None'
    8. For more details about entering expenses, see Expense.
7Check the results
  1. On the cash flows report (at the Cash flows & action items  sub-step (under the  Results  step on the top menu) you will see the 'Downsizer payment' listed as an expense
  2. At the Detailed reports sub-menu (on the Results step (top menu)), you can see the contribution to the super fund. Note that the contribution will go to the acumulation phase (and Pathfinder will roll it over to the pension phase if required):
    1. On the left menu, select the individual, then their super fund, then their super fund name, then 'Transaction account (detailed)'
    2. In the 'Transaction account (detailed)' report, make sure you can see the year the contribution is made
    3. The contribution will be listed in the 'Revenue' section
  3. To check what happens to the contribution, check the 'cash flows and action items'. The contribution may:
      1. Stay in accumulation phase
      2. Be rolled over to the pension
      3. Be withdrawn as a lump sum withdrawal (if the contribution amount is withdrawn in the same year, then consider whether the scheme is beneficial.
  4. Note that as this is a workaround, the use of the downsizer scheme will not be listed in the action items or have special charts or detailed reports.
  5. You can also compare this scenario with the first scenario to measure the benefit (or otherwise) of using the scheme.